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Supply Chain Disruption Fuels Investments in Technology

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Supply Chain Disruption Fuels Investments in Technology

87% say the pandemic has altered the strategic importance of supply chains and 64% are increasing tech investments.
Charlotte, NC – Nearly 80% of supply chain leaders say their digital transformation has accelerated due to the pandemic, according to an industry report released today by MHI in collaboration with Deloitte.
As a result, investment in supply innovation over the next two years is expected to rise dramatically, according to the 2022 MHI Annual Industry Report, “Evolution to Revolution: Building the Supply Chains of Tomorrow.” The report provides new insights into trends and technologies that are transforming supply chains and the priorities of the people who run them.
Of the 64% of respondents increasing investments, two out of three say they will spend more than $1 million over the next two years. Investments are particularly growing in the middle ranges from $5 million up to $100 million – where 41% say they spend more than $5 million and 18% say they will spend more than $10 million.
“Supply chain leaders have never been in a better position to drive impactful and lasting change for the industry,” said John Paxton, CEO of MHI. “With the white-hot media spotlight chronicling the after-effects of the pandemic, the importance of supply chain is finally coming into focus in boardrooms across the world.”
The 2022 report, the ninth in a series of annual industry reports published by MHI and Deloitte, provides updates on the innovative technologies that have the most potential to transform supply chains, including projected adoption rates of the next five years for each of the 11 categories of technology covered in the report and an analysis of common barriers to adoption.
The technologies covered in the report are:
  • Artificial Intelligence
  • Predictive analytics
  • Inventory and network optimization
  • Robotics and automation
  • Wearable and mobile technology
  • Driverless vehicles and drones
  • 3D printing
  • Internet of Things
  • Cloud computing and storage
  • Sensors and automatic identification
  • Blockchain
Supply chain technology adoption predicted to rise sharply
According to this year’s respondents, all technologies covered by the survey are expected to achieve an adoption rate of 66% or higher over the next five years. Cloud computing, which is now the standard platform for most supply chain software, continues to have the highest current adoption rate at 40%. Inventory and network optimization is expected to rise to the top over the next five years, with an expected adoption rate of 87% (in a statistical tie with cloud computing at 86%). However, artificial intelligence is expected to see the most accelerated growth – rising from 15% to 73% over the next five years, a nearly five-fold increase.
Additionally, Predictive Analytics, currently at 22%, is expected to grow to 82% over the next five years. Industrial Internet of Things, currently 21%, is expected to grow to 80%. Robotics and automation, currently at 28%, is expected to reach 79%.
Robotics and automation continue to top the list of innovations that survey respondents believe have either the potential to disrupt the industry (17%) or to create competitive advantage (39%). However, a handful of other technologies are very close behind, including: predictive and prescriptive analytics; sensors and automatic identification; autonomous vehicles and drones; and AI technologies.
“Supply chains are becoming more and more a technology-driven industry. While firms have not adopted some technologies as quickly as they thought they would back in 2014 or 2015, what we are seeing now is a big jump in these investments. Where we used to say evolve or die, what we now say is transform or die,” said Thomas Boykin, Supply Chain Specialist Leader, Deloitte.
Disruption now tops list of supply chain challenges, talent shortage a close second For the past nine years of the survey, hiring and retaining qualified workers was consistently the top supply chain challenge. However, in this year’s survey supply chain disruptions and shortages rose to the top at 57% – presumably due to the ongoing effects of the global pandemic. Talent issues (54%) and customer demands (51%) remain top challenges but must now be addressed in the context of avoiding future supply chain disruptions.
This shortage is spurring companies to invest in technologies that not only improve agility and efficiency but also reduce the need for repetitive, manual labor. These investments create the kind of advanced technology environment that results in more rewarding supply chain jobs that appeal to today’s top talent.
This could provide a new path to upskilling current employees and attracting new talent – creating a more modern, capable workforce that can quickly adapt and adjust to changes in the technology and market landscape.
“Supply chain automation and technology provide tools to mitigate disruptions, but the real solution goes much deeper, said Paxton. “It’s having the right culture and the right people in place to implement this technology and to bring it all together to exceed your customer demands and expectations – whether they are fast delivery, personalization, low cost, delivery transparency or ESG goals.”
Lack of clear business case is #1 barrier to adoption 
Company leaders understand at a theoretical level that their supply chains could greatly benefit from investing in innovation, but potential gains often take a back seat to short-term profit targets and concerns over the cost associated with new technology and the threat of disruption to day-to-day operations. For the first time since the inception of the MHI Annual Industry Report, ‘lack of a clear business case to justify the investment’ was cited as the leading barrier to adoption for all 11 technologies in the report.
Many companies are now using the MHI Digital Consciousness Index (DCI) toolkit highlighted in the 2020 and 2021 reports to understand their organizations’ digital mindset and evaluate their progress on the journey to becoming more digital. However, for every key investment decision on that journey, a robust business case is needed to provide the foundation for informed decision-making.
“Building a business case provides the roadmap to supply chain technology investment, but it’s so much more, Paxton said. “It tells the entire story of why change is imperative to delivering on-going value. It really all comes back to using these technologies to better serve the customer.”
The report also provides real-world case studies of digital supply chain technologies and recommendations for leaders for developing strategies to implement these innovations.
The findings of the 2022 report are based on survey responses from over 1,000 manufacturing and supply chain industry leaders from a wide range of industries at the end of 2021. Eighty-one percent of respondents hold executive-level positions such as CEO, Vice President, General Manager, Department Head or Engineering Management. Participating companies range in size from small to large, with 59% reporting annual sales of more than $50 million, and 13% reporting $1 billion or more.
The 2022 MHI Annual Industry Report is sponsored by 6 River Systems and Generix Group. Download the complete report at mhi.org/publications/report.
About MHI
MHI is an international trade association that has represented the material handling, logistics and supply chain industry since 1945. MHI members include material handling and logistics equipment and systems manufacturers, integrators, consultants, publishers and third-party logistics providers. MHI offers education, networking and solution sourcing for their members, their customers and the industry as a whole through its programming, events and WERC division.
The association sponsors the ProMat and MODEX expos to showcase the products and services of its member companies and to educate manufacturing and supply chain professionals on the productivity solutions provided through material handling and logistics. MODEX 2022 is being held at Atlanta’s Georgia World Congress Center from March 28-31.
About Deloitte
Deloitte provides industry-leading audit, consulting, tax and advisory services to many of the world’s most admired brands, including nearly 90% of the Fortune 500® and more than 5,000 private and middle market companies. Our people work across the industry sectors that drive and shape today’s marketplace — delivering measurable and lasting results that help reinforce public trust in our capital markets, inspire clients to see challenges as opportunities to transform and thrive, and help lead the way toward a stronger economy and a healthy society.
Deloitte is proud to be part of the largest global professional services network serving our clients in the markets that are most important to them. Now celebrating 175 years of service, our network of member firms spans more than 150 countries and territories. Learn how Deloitte’s more than 312,000 people worldwide make an impact that matters at www.deloitte.com.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the “Deloitte” name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see www.deloitte.com/about to learn more about our global network of member firms.
modex

MODEX Day Two: Coronavirus Impacting More than Just Trade Operations

Day two for MODEX 2020 concluded with industry players addressing the now-notorious coronavirus and what this means for both domestic and international markets fortunate enough to continue operations without disruption. From what we learned during the session, “Coronavirus and Global Supply Chains” the wave currently felt in China, Italy, and beyond, will eventually make its way to the U.S. and companies have no reason not to be prepared.

Researcher Philip J. Palin, John Paxton with MHI, and David Shillingford with Resilience360 took the unsettling topic head-on and addressed concerns without hesitation. Traders be aware: for domestic and untouched international markets, the worst isn’t over. The coronavirus creates more than just health concerns. It impacts trade operations, legal concerns, and causes financial turmoil as we’ve already started to see.

“The virus is the primary cause of the supply chain impact but the secondary causes coming from the virus include financial, regulatory, compliance, and legal,” explained Shillingford. “Another risk to think about is workforce risk. How many of the workers that left for Chinese New Year have been able to come back, and for those that have returned, are they able to work with open factories or are they still under quarantine?”

“The good news is, the extraordinary supply and demand disruption we’re discussing in terms of China is being released. It’s slow but it’s happening and it’s giving us a benchmark of for how long domestic disruption will be,” Palin stated after announcing the first containership from China arrived at the Port of Los Angeles in almost 10 days on Monday.

Shillingford goes on to explain the shifting patterns in consumer behavior as well, noting that due to worldwide panic, demand is shifting and challenging the logistics sector. Buying habits have undoubtedly changed in recent weeks along with mindsets. Interactions are now limited to a fist-bump or elbow touch rather than a handshake and the numbers of public events cancelled are going up.

“Other things we are seeing involve personnel movement. It’s not just transportation impacted,” Shillingford added.

On the legal side of the crisis, Chinese suppliers are having an issue with certificates and contractual obligations. Shillingford urges industry players to understand the importance of knowing if suppliers have been issued force majeure slips.

“One thing supply chains hate is variance, and there’s going to be a lot of variance and volatility on the demand side,” he concluded.

What does all this mean for the U.S.? At the end of the day, it’s a matter of preparation and strategizing for the more fortunate markets without the disruption of a complete shut-down.

“There was a hidden, horrible problem in the Hubei province that required a draconian measure to prevent transmission of the virus. We should be ahead of that curve as well as the rest of the world, even with this very contagious virus,” explained Palin. “And even if we are behind that curve, we don’t have 300 million workers separated from their place of work.”

ProMat Day Three Combines Education, Awards, and Comedy

Thought leaders, exhibitors, and attendees kept the momentum going on day three of this year’s massive ProMat Trade Show in Chicago, despite chilly temperatures. Wednesday’s education seminars continued addressing some of the biggest industry challenges while identifying key differentiators that foster optimal results and competitive advantage.

One of the most talked about themes at this year’s conference is the major issue of labor shortages. Employee recruitment and retention are among the biggest concerns for industry players. As automation continues reducing unnecessary manpower, human involvement has become a complex role to balance. Topic leaders across multiple sectors have already made it very clear that humans in the workplace continue to be a critical component. Even so, some companies continue expressing uncertainty in how to approach tapping into the labor market.

OPEX Corporation’s John Sauer addressed these concerns head-on in a presentation on Wednesday. Sauer is the Senior Business Development Manager for OPEX and boasts 8 years of front line material handling management experience. In his presentation, Sauer confirmed some of the biggest issues among employees in warehouses are factors some might consider to be small – such as climate control, physical demands, consistent hours, and work independence. At the end of the day, employees nowadays are looking for more than just a salary – they want to feel some importance and pride in what they do.

In today’s technology-centric environment, these factors can be addressed through strategic implementation of the technology at-hand. By utilizing technology for optimizations in operations and creating an environment that supports a positive work environment for employees, retention and recruitment challenges can be alleviated.

MHI Industry Night

Wednesday concluded with a special networking event featuring comedian and actor Craig Ferguson following the announcement and recognition of leading companies for “Best Innovations” and Young Professional Awards. There were 108 submissions for the awards and only four finalists were selected for each category. Among the winners included:

Best New Innovations:

Fetch Robotics for CartConnect

Locus Robotics for Gamification

Attachments for Forklift Safety Device (FLSD)

CMC srl for Pick2Pack

Best Innovation of an Existing Product:

ProGlove for Mark 2 Smartglove

RightHand Robotics Inc. for RightPick: The Piece Picking Solution

Artitalia Group Inc. for Versatile Nesting Cart

Swisslog Logistics Automation for ItemPiQ

Best IT Innovation:

Yard Management Solutions for Eagle Eye Yard Management Software

LogistiVIEW for Vision Pick and Put Wall

Schaefer Systems for WAMAS Lighthouse

KNAPP Inc. for redPILOT