Last month, Lux attended the Supply Chain Asia Forum 2019 in Singapore hosted by Supply Chain Asia, a networking community for the supply chain and logistics industry supported by the Singapore Economic Development Board. The focus for the conference centered around two primary themes: the digital transformation of supply chain, and the outlook for global trade amid geopolitics and trade wars. Featured presentations were given by IBM, Dematic, Jabil, JDA Software, and a host of emerging startups targeting logistics and warehouse management.
Below are the four key takeaways from the event:
SUPPLY CHAINS CONTINUE TO STRUGGLE WITH PERENNIAL PROBLEMS AMID SLOWDOWN IN GLOBAL TRADE:
Unanimously, speakers at the forum agreed that supply chains still struggle with the conventional issues of visibility (ability to track goods), flexibility (ability to adjust to demand fluctuations), and agility (ability to timely deliver goods), despite various organizational initiatives, processes, and software in place. However, these issues are getting magnified with concerns of an impending slowdown in global trade for 2020. According to the International Monetary Fund (IMF), global trade grew at 2.3% in 2019, one of the slowest growths since 2010, and although it forecasts an uptick in 2020, organizations are concerned due to trade wars and economic slowdowns in emerging markets like India and Indonesia, with the former's auto market experiencing a 30% drop in sales in the month of August 2019.
DIGITAL TRANSFORMATION SERVES AS A POTENTIAL AVENUE FOR TACKLING THESE ISSUES, WITH SUCCESS STORIES ALREADY IN PLACE:
Speakers from Jabil discussed how supply chains as business units have no option but to undergo digital transformation, like other aspects of an organization, as more and more companies now view digital as part of their corporate strategy for growth. This, however, is a blessing for tackling the industry's perennial problems, one of which is managing supply chains during natural disasters. For example, during the 2011 tsunami in Japan, Jabil lost track of a host of suppliers and customers from the country, taking close to four weeks to truly visualize the damage its supply chain had suffered. Today, the company incorporates a digital supply chain centered around its InControl platform that visualizes all suppliers, distributors, and customers Jabil works with. Furthermore, the software integrates seismic and weather data so Jabil can preemptively prepare for natural disasters far in advance.
BLOCKCHAIN FINALLY FINDS A PROBLEM IT CAN TRULY RESOLVE; HOWEVER, ECOSYSTEMS SERVE AS BARRIERS:
During their presentation on blockchain, speakers from IBM cheekily called out that every time a customer comes to them with a problem, 70% of the time blockchain, is overkill for that particular business case (a view similar to that in Lux's "Trust and Efficiency" report). However, logistics and, in particular, shipments are one area where blockchain truly has a role to play. Presenting their work with Maersk under TradeLens, IBM presented a case study of avocado shipments that traveled from Mombasa, Kenya, to Rotterdam. The transit involved close to 30 participants, including container companies, vessel operators, port forwarders, customs officials, and last-mile delivery players, who exchanged 250 invoices. The process is highly paper-centric, with a lack of trust and regular payment issues. By deploying blockchain for such a scenario, a single source of truth can be established, and the paper trail can be eliminated, reducing any costs associated with verifications, audits, and even prints. While IBM and Maersk are convinced around the value blockchain holds for shipping, building an ecosystem remains a barrier. The blockchain can only function when every participant in the supply chain agrees to use it and considers the first block as the single source of truth. While a host of shipping companies have already joined TradeLens, IBM claimed that the majority of port forwarders, customs, and last-mile players have yet to buy into the technology.
DIGITAL LOGISTICS AND WAREHOUSE AUTONOMY ARE THE TWO GROWING AREAS FOR STARTUP ACTIVITY:
The forum also showcased a startup innovation section that included short pitches and product demonstrations. While many startups hailed from Asia, they chiefly focused on digital logistics or warehouse automation. Notable names for digital logistics included VersaFleet, an analytics platform to optimize last-mile delivery routes; Haulio, which considers itself the Uber of haulage; and Locus, which offers a holistic platform for optimizing routes, tracking fleets, and shipment sorting. Warehouse automation saw a strong impetus around forklift innovations, with BYD presenting a lithium-iron phosphate battery forklift that takes 2.5 hours to fully charge and lifts close to a ton in weight, and Singapore-based startups xSquare and Botsync exhibiting autonomous forklifts.
While the conference highlighted the impact digital technologies like analytics and robotics are having on warehousing and logistics, Lux considers an equal opportunity in areas like vendor selection and enterprise resource planning for AI and analytics to penetrate. While the activity of startups here is currently limited, companies like Infor and Esker are bringing in novel solutions like cloud computing to the market for optimizing supply chain planning. Infor in particular has taken a step further here by introducing its Coleman AI, a conversational UX decision-making support system for supply chain professionals.
As Lux investigates the digital transformation of the supply chain industry in the coming months, please do not hesitate to reach out to us for feedback and discussions around the subject.
- Report: Trust and Efficiency: Finding the Right Applications for Blockchain (Members Only)
- Analyst Insight: Comparison of the Leading Blockchain Frameworks (Members Only)