The next generation of supply chains: Still a distant goal for many companies

Company leaders often ask: “What will the next generation of supply chains look like?” A good way to start answering the question is with an analogy—the evolution of navigation.

People began finding their way by remembering landmarks and following the stars. Then came paper maps, which were eventually replaced by digital GPS systems and apps. Guided navigation factoring in traffic and weather conditions soon followed. Ultimately, people will reach their destinations by self-driving, almost emission-free vehicles.

In supply chain terms: Future supply chains will autonomously adapt to the conditions a company finds itself in.

Tomorrow’s supply chains

More precisely, the next generation of supply chains relies heavily on generative AI and advanced machine learning to enable autonomous decision-making, advanced simulations and continuous improvements.

This level of maturity will be reflected in seven supply chain domains.

1. Agile design. The organization practices concurrent design and uses model-based approaches. These approaches digitize the creation and testing of prototypes to put products in the hands of customers more quickly. The design process involves external stakeholders such as clients, users and recycling partners throughout the product lifecycle. Generative AI and large datasets of client feedback, surveys and trends help propose highly optimized design alternatives.
2. Smart procurement. This entails AI-powered portals through which business users can conduct source-to-contract transactions without having to involve the procurement team. Purchases are executed automatically when predetermined conditions are met. The organization has visibility up to the fourth and fifth tier in near-real-time.
3. Flexible manufacturing and autonomous operations. Factories and plants perform tasks autonomously, such as planning and scheduling reconfiguration and product change. A remote-control center supervises the facilities. Production uses a fully demand-driven system with very short changeover times. The organization can balance products, semi-finished products and components from one facility to another. Workers are augmented with AI-enabled co-pilots.
4. Fast logistics. The organization’s logistic network optimizes and rebalances network resources and planning decisions continuously with AI or generative AI. An omni-channel fulfillment system allocates orders dynamically, enabling the organization to deliver to the customers through any channel of their choice. Transportation processes are widely automated, supported by modern tools such as route planning, load optimization and real-time tracking. They run on a shared platform that includes external partners and suppliers.
5. Predictive services. Organizations products for serviceability, with features such as predictive maintenance and over-the-air product or service upgrading, and sell subscriptions rather than physical products. The full focus is on uptime and output. Customers can perform self-service without the need for a field technician on-site, supported by a central remote center with product experts for live instructions.
6. Sustainability by design. Sustainability, including Scope 1, 2, and 3 risks, is fully embedded from product design to supply network, recycling and end-of-life. Product and parts returns are holistically managed with a wide range of potential reuse of every component.
7. Integrated supply chain. Two things are at the heart of this domain: 1. A supply chain network simulation that is based on a complete digital twin of the organization’s operations, which uses interconnected data across all functions. 2. A cross-supply chain network control tower, providing visibility across different tiers of the supply chain network, generating prescriptive recommendations, or directly launching an action without people having to intervene.

Supply chain maturity lacking across the board

At 36%, companies’ average supply chain maturity score is alarmingly low. Three in four companies lack advanced and next-generation supply chain capabilities.

Today’s supply chains: Paper maps and first-gen satnavs

While several of these capabilities already exist today, not many are widely used yet. On the contrary: Going back to the navigation analogy, today the average supply chain runs on a mix of paper maps and first-generation satnavs. When we analyzed more than 1,000 companies, we found that the average maturity of supply chains across the board is at an alarmingly 36%.

In other words: Many companies still have two-thirds of the way ahead of them—a distance they must start crossing quickly given today’s new economic reality. Gone are the days of a simple “low-cost versus high-cost country” calculus and the traditional supply chain triangle of cost, quality, and delivery.

In this perma-crisis mode, supply chains that adapt fast and almost automatically to changing conditions win the day.

Digital technology is crucial to this effort. Without AI and generative AI, in particular, companies won’t achieve what the next generation of supply chains needs to deliver: faster product design, predicting issues with any given supplier and their suppliers, and the ability to change production in any given facility on short notice.

Companies operating their supply chains with a paper map mindset must catch up fast,
or there is a real risk they won’t survive.