Supply-chain executives want to invest in powerful new technologies and business innovations to improve their supply chains, but are hampered by a shortage of qualified talent and pressure to cut costs, according to a new study by MHI and Deloitte Consulting LLP.
The study, titled “Innovations That Drive Supply Chains – The 2014 MHI Annual Industry Report,” found that the top two strategic priorities of executives are supply-chain analytics and multichannel fulfillment. The two major barriers preventing innovation in the supply chain are a talent shortage and a continuing focus on cost reduction.
Three emerging innovations are not yet top-of-mind for executives, but may be soon: sustainability, mobility/machine-to-machine technology, and 3-D printing.
“For more than 60 years, MHI has been working to improve global supply chains … The findings of this study have significant implications for how companies design and manage their global supply chains,” says George Prest, CEO of MHI, a Charlotte, N.C.-based international trade association that represents the material handling, logistics, and supply-chain industry.
Scott Sopher, a principal at Deloitte Consulting and the leader of its supply chain and manufacturing operations practice, says, “Respondents clearly identified the need to rethink their approach to supply-chain management.”
“In the past, organizations addressed supply-chain challenges primarily through cost reduction and operational efficiency efforts,” Sopher says, adding, “Today’s global supply chains require a new focus on technology and innovation as well as a willingness to invest in these areas for the long term. A true commitment to innovation will help organizations better prepare for the future, manage supply-chain risks, and stay ahead of the curve.”
As global supply chains become more complex and expansive, companies are keen to leverage analytics that produce insights to improve customer service and reduce costs and risk. Nearly 80 percent of survey respondents said supply-chain analytics is a “very important” or “moderately important” strategic priority.
Another strategy is multichannel fulfillment. Today’s consumers want to shop for what they want, where they want, when they want—and then have all of their purchases delivered consistently and quickly, whether their timeline is the next day or even the same day. Although most retailers now do a decent job on the front end handling orders through their various channels –retail, wholesale, and online—many still are struggling to adapt their back-end fulfillment processes, the study sponsors assert.
Retailers who were surveyed said they plan to make significant investments to build their multichannel fulfillment capabilities: Nearly three-fourths of respondents said they expect their investments in multichannel fulfillment to increase during the next three years.
Companies need supply-chain talent with the right skills, experience, and mindset to harness the value of supply-chain innovations, the study sponsors say. Unfortunately, the right kind of supply-chain talent is difficult to come by these days. More than 65 percent of respondents indicated that process, technology, and skillset gaps exist within their companies.
The supply-chain field is expected to add 1.4 million new jobs by 2018, according to MHI’s recently published report, “The U.S. Roadmap for Material Handling & Logistics.”
Cost reduction is still the No. 1 priority for many supply-chain executives, the survey found. More than 70 percent of respondents across industries said that controlling costs is a top priority for their companies and their customers.
However, many suggested that emerging innovations are promising.
The traditional focus on cost-cutting in the supply chain is squeezing out innovations in sustainability, even though executives believe these investments are important, study findings suggest. Nearly four out of five respondents felt that sustainability was at least “moderately important.”
More than 60 percent of respondents indicated that significant capability gaps exist in their companies and in clients that might prevent them from effectively implementing sustainability programs.
Mobility and machine-to-machine (M2M) technologies can improve responsiveness and customer service by providing supply-chain workers with the information they need when and where they need it, industry representatives say. Nearly three-fourths of survey respondents said their companies will continue to invest in this area, with nearly half planning to increase their investment during the next three years.
Additive manufacturing, popularly known as “3-D printing,” is receiving significant attention as an innovation that could revolutionize production processes and have far-reaching future implications for product supply chains. However, supply-chain executives in the study didn’t see immediate potential for the innovation.
Only 17 percent of respondents said they view 3-D printing as a strategic priority. Seven in 10 said 3-D printing is not a key consideration.
MHI is an international trade association that has represented the material handling, logistics, and supply chain industry since 1945. Members include material handling and logistics equipment and systems manufacturers, integrators, consultants, and third-party logistics providers.