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Supply chain – transportation – decisions impact –enablers and drivers
Supply chain scheme

Supply chain trends and need for innovation

Supply chains are an indispensable need in any global economy where worldwide sourcing and manufacturing have become the norm, even stronger after the revolutionary developments of Information and Communication Technology (ICT) and more recently of e-commerce (further strengthening worldwide sourcing).

At the same time the environmental burden of logistics and both freight and passenger transport requires drastic action to mitigate these effects. Supply Chains should become sustainable, where sustainability should be understood in a broad people, planet, profit sense, i.e. addressing both social aspects, ecological concerns and economic profitability. Sustainable supply chains typically result from a combined effort in the triple helix (research, industry and government) as they require new business models and paradigms, smart entrepreneurship, and infrastructural investments and governance. In order to highlight this further, let’s discuss some important trends that impact manufacturing and logistics. We distinguish:

Resource scarcity, which is an important driver for the transition from a fossil fuel based economy towards an economy based on renewable sources. With respect to energy, the advance of electric and hydrogen-based transport may help to make this transition. With respect to minerals scarcity, the development of lightweight material structures and even completely new materials (based on nanotechnology) marks important steps ahead. More general, the ecological footprint with respect to a variety of resources (energy, materials but also e.g. fresh water) has to pay a key role in redesigning supply chains.

Demographic developments: in most western countries in particular the population is ageing, resulting in developing working conditions that allow people to work longer, but also in the need to increase productivity through further automation. Another important phenomenon is the continuing urbanization (in 2007 we passed the point where more than 50 % of the world’s population is living in urbanized areas, in western countries we are already well above 70 %).

Market developments: product life cycles tend to become still shorter; but at the same time we see an advance of what is called the circular economy (re-use of products, components and materials, up to a cradle-to-cradle type of product design). Another important development is the rapid advance of e-commerce and its logistic consequences (e-fulfilment). Still another issue is the changing power of nations, with the rise of the BRICS countries (Brazil, Russia, India, China) as most important demonstration. At the same time, we now observe the reshoring of high tech industries back to western countries.

Technological developments: this concerns the design of new and lightweight materials (already mentioned) but also new production technologies such as additive manufacturing (3D printing), the rapid developments of sensor technologies and their application in remote monitoring, diagnostics and even repair systems. The Internet of Things (communicating devices) also depends completely on advance sensor and information technology and architectures.

Business Information Systems / Architectures, including Decision Support Systems: although many scholars view this as part of technological developments it is more than that. The multi-stakeholder and multi-decision maker environments we deal with, require adequate mechanisms to respond to their requirements, including distributed architectures, cloud computing solutions, cognitive computing, agent-based decision support systems and the like. Organizational innovations are indispensable to fully exploit the potential of advanced information and Decision Support architectures. Increasingly, real time and large datasets become available that can support making better decisions.

The development of after-sales markets and servicization: many asset owners start to realize that they basically need the functionality of systems and equipment, rather than the equipment itself, resulting in outsourcing all maintenance, modification and upkeep activities to either OEM’s (Original Equipment Manufacturer) or specialized service providers. In addition, new business models are developed showing the benefits of re-using products, components or materials in a closed loop supply chain. Needless to say that all these trends and developments have a profound impact on the design, planning and operation of supply chains, and thereby are important drivers for innovation.

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This article is from the free online course:

Supply Chain Innovation: How Technology Can Create a Sustainable Future

University of Twente

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