How to Get the Supply Chain Back to (Better than) Normal

If a chain is only as strong as its weakest link, today’s supply chain is in dire straits. A recent infographic from The New York Times shows all too clearly that the international supply chain is in upheaval, due directly or indirectly to the outbreak of COVID-19. At the same time, reams of data generated along the supply chain are going to waste. The internet of things (IoT) can’t single-handedly fix the supply chain, but IoT technology combined with the cloud, AI and automation has the potential to bring the supply chain (and society) back to something resembling normal—actually, something better than normal.

Indeed, even during “normal” times, the supply chain was stretched to the limit by the challenge of constantly reducing costs and improving margins, as well as optimizing delivery times for just-in-time (JIT) inventory. With that said, the last two years have been especially grim, with factories, stores and restaurants literally shutting down for lack of materials. Then there’s the computer chip shortage, which is doing nothing less than “dragging down the economy,” according to a White House briefing room document,

The problem is now multifaceted, so the solution is not going to be as simple as adding a better monitoring mechanism.

At a minimum, companies need better visibility into and transparency of their supply chains. This gives them more control over the entire manufacturing process, from sourcing raw materials to delivery of final products. Technologies like IoT, AI/ML, automation and edge computing can optimize supply chain management by providing visibility and metrics so companies can make real-time decisions.

In manufacturing, for example, IoT can bring greater visibility into the production workflow. Data from the digital twins of machinery—analyzed in real-time and fed back to control systems—can lead to improved levels of operational and business efficiency. When manufactured goods are ready to be shipped, IoT technology can guide the logistics and transportation of goods as they move from manufacturers to end users. In addition to managing supply, companies also need to get better at predicting customer demand so it’s a self-sustaining feedback loop.

However, companies adopting these technologies need to be aware that they will not be effective on their own. As with any digital transformation initiative, people and processes are as important as technology. To ease or even overcome today’s supply chain challenges, companies must not only agree on common data exchange formats and APIs across the supply chain but also dedicate themselves to ongoing cooperation and motivation to achieve the common goal of streamlining and hardening the supply chain. To these ends, open source will be critical to the ongoing development of common, industry-wide standards that enable companies to future-proof their solutions.

For example, carmakers such as Tesla are simplifying their supply chain by using a higher-end processor that can perform multiple functions rather than using dozens of dedicated microcontrollers for each function, with updates pushed out over the air. Organizations need to think along similar lines when it comes to their IoT architecture. Developers have historically thought about IoT applications in a discrete way—creating custom frameworks for creating apps for low-power devices. Rather, developers should be considering IoT applications as an extension of their application portfolio—using the same languages, frameworks and tools for IoT apps that they use for cloud applications.

Post-Pandemic Supply Chain Issues

As we move into the next phase of the pandemic, it might be tempting to believe that all will be right with the supply chain world. However, beyond COVID-19, there are several macro trends that will affect the supply chain, including climate change, cybersecurity and the changing dynamics of global trade.

To combat climate change, for example, companies will need to reduce their Scope 3 emissions. The EPA defines Scope 3 emissions as the result of activities from assets not owned or controlled by companies themselves but by their supply chain (or value chain). Scope 3 emissions are often the majority of a company’s greenhouse gas emissions. To reach sustainability goals, companies will need better resource management of their supply chains.

Supply chains also are increasingly being used as a cyberattack vector. This includes both physical entities, like building operations (such as the hack of Target systems via a third-party HVAC vendor) or the software supply chain (such as the SolarWinds hack). In fact, it’s no longer a matter of if an organization gets attacked, but when.

The war on Ukraine has magnified the intricacies of our hyperconnected global economy. The U.S. government and its allies have imposed severe sanctions on Russia, a move that will have widespread repercussions. The New York Times reported that the “response that U.S. officials have promised could roil major economies, particularly those in Europe, and even threaten the stability of the global financial system.” The same could be said for the global supply chain, if Russia responds by, for example, cutting off shipments of materials needed to build semiconductors or mounting new cyberattacks.

Conclusion

COVID-19, a steady and stealthy rise in cyberattacks, trade barriers, war … None of these factors caused the problems we’re seeing with both physical and technological supply chains; rather, they have exposed existing weaknesses for all the world to see—and experience. Organizations must work together to increase resiliency and security through the use of key technologies such as IoT, AI/ML and edge, as well as a commitment to open, standards-based solutions.