One third of the world’s economy is the supply chain from raw materials through manufactured products and go-to-market logistics. Continuous digital communication will add the ability to work together instantly both within and across companies. The world has become today’s supply chain and the economy’s efficiency will be transformed by turning it continuously digital.
You’re ready to leap ahead in your meeting. It’s time to show this team a new future for a large part of the economy: What’s a digital supply chain?
Eighty percent of global trade is part of global value chains. (1) That’s $12 trillion out of $15 trillion in annual world trade. Since world GDP is about $63 trillion, the international value chain is 19% of world GDP. (2) For developing countries it’s crucial: Value added trade contributes 28% of their GDP. (1) Developing countries also receive most of the world’s Foreign Direct Investment, more than the developed countries. (4, 5) This is a historic turning point because it shows clearly that business has left behind national borders and shifted to worldwide sourcing — from the lowest cost or best suppliers for each type of need — whether components, products, employees or services. (4, 5) Then to move everything, the logistics industry contributes about 14% of world GDP. (3)
Combined, these are a third of the world economy and one of the biggest providers of jobs and employment. They include jobs that start with the raw materials and energy the world needs, then go through manufacturing, warehousing, transporting, marketing, selling and servicing. They include the related services at each step, plus building the infrastructure for all these activities.
The world has become today’s supply chain. It will be transformed by turning digital.
The Future of Business Processes: Continuous Connections Across Companies
You turn quickly to the large teleportal at the front of the room and say, “Let’s start with our manufacturing and logistics teams.” Pressing a pre-selected focus on the teleportal tablet in your hand, the large teleportal displays a split screen with four live views:
• In the left half the digital manufacturing team is working together online from their multiple locations, above their manufacturing dashboard that shows the company’s production pipeline.
• In the right half the digital logistics team is working together online from their multiple locations, above their dashboard that shows the worldwide flow of products.
“Both of these teams look well connected,” you say while pointing to them. “They’re not. They connect mostly with each other and a few key people at their primary contractors.
“The manufacturing team is stuck with a 6 to 8 week lead time. All they see is the first step in the chain — the orders they enter with their prime contractors — and last step in the chain, the finishing products. They don’t see or work with the subcontractors. Their orders are guesses and they’re often partly wrong. Sometimes customer needs change and they’re very wrong. The logistics team is always trying to pick up the pieces, by sending what’s available to where it’s needed most.
“Instead, let’s get visibility and add connections,” you suggest. “First, we could put cheap sensors in our appropriate products, starting early in manufacturing.” (6) Your hand swipes across the tablet and the large teleportal’s screen dissolves into a world map with millions of lights, mostly in clusters at about 100 locations. The lights are in five color-codes for five product groups, so it’s clear what’s made where. You turn slightly toward the large teleportal and point at the map.
“You’re seeing a simulation. During manufacturing all the products will have sensors that communicate so they can be used to track their current stage in manufacturing. We’ll have a map of our product pipeline and what’s at each stage of manufacturing or inventory, so we can start managing the supply chain at a finer level.”
Your hand swipes your tablet. It adds an overlay to the map on the large teleportal. Colorful curved arrows match the five colors of the five product groups, showing the main flows of product shipments between different regions of the world.
“The sensors also feed the logistics team. During shipment our products will have GPS sensors so our inventory will tell us where it’s located in warehouses, on ships or trucks.” (6)
You press an overlay control on your tablet. On the large teleportal, the world map fills with colored dots, simulating the visibility of your products in millions of offices and homes. “So we can deliver Active Knowledge during product use, we can connect with each of our customers while they’re using our products. That tells us how well they’re used, as well as giving us two-way communication with our customers.”
When you press another control those lights fade but remain in the background. A new set of bright white dots appear over the world’s major cities.
“Next, we will add the continuous involvement of our big customers, the retailers who sell most of our products. They know how much of our products they need to re-stock every day. For the first time we will include that in guiding our subcontractors’ manufacturing, and close the loop between demand and supply. How will that work? All our subcontractors will be added to our manufacturing team’s Shared Spaces so they’re working together all the time. We’ll even include the subcontractors’ key managers with mobile teleportals and wearables — we’ll have minute-by-minute continuous connections everywhere.”
“Here’s the result.” With a new swipe across your tablet the large teleportal’s lights dissolve to a world map that’s titled “Current Inventory:” Red shows undersupply at retailers who need more inventory to meet demand. Blue shows oversupply available at manufacturers, distributors, in transit or other retailers — so they can be moved to meet demand. Yellow shows locations where demand and supply are balanced.
You pause so they can think about what they’re seeing. “We will constantly know our worldwide supply chain, and continuously collaborate with every part of it. We’ll be more accurate, faster and cheaper in both manufacturing and distribution — with happier customers. We’ll manage the crises and contingencies in real-time, and fix them immediately across all the different companies in our supply chain. Our product pipeline, from the first components through finished assembly, from warehouses to transportation, and from retailers to final customers will all be one continuously communicating supply chain. And our customers will have Active Knowledge so they use our products and services well. Together, this is a huge competitive win.”
“Let me show you the difference from today,” you say. A final swipe on your tablet dissolves everything on the map, leaving only the continents and oceans. Over a few seconds about a million small red lights fade in as pulsing beacons, with growing intensity.
“Suppose there’s a product recall. Our recalled product is the pulsing red dots everywhere. Suddenly, we face legal liability and costs everywhere. With this new digital supply chain we will have a new level of continuous connections and responses. Now everyone can be told what to do, so they can pull this product immediately, and do it the right ways. The logistics of disposal or return can be managed and coordinated instantly worldwide.
“If the product is owned by final customers, we will use Active Knowledge to tell them how to dispose of the product, or arrange any reimbursement required. That’s done,” you say, pressing a control on your tablet. About half of the pulsing red dots disappear from the map.
“What if the products are on the shelves at a retailer? They’re gone right away,” you say, pressing another control on your tablet. Another quarter of the pulsing red dots disappear.
“If the products are in a warehouse at a retailer or distributor, or on a ship or truck between them, they’re gone.” You press another control and almost all of the remaining red dots disappear.
“The few remaining products have sensors so they’re picked up and dealt with as they appear,” you say, pressing a final control and extinguishing the remaining red dots.
“No matter what we need to do, a digital supply chain will soon let us work together as a world to do it everywhere. We’re ready to build a new kind of world, one that has continuous digital connections and new abilities in every country and every part of the economy, even with every customer who owns and uses our products.
“The world has never had this kind of digital supply chain before, with the ability to work together instantly in countless new ways. We’re ready to take that step.”
“With bigger sales, happier customers and skyrocketing profits.
1. UNCTAD (United Nations Conference on Trade and Development), Global Value Chains and Development, 32 pages, p. iii. http://unctad.org/en/PublicationsLibrary/diae2013d1_en.pdf
2. World Economic Forum, The Global Enabling Trade Report 2012: Reducing Supply Chain Barriers, 405 pages, p. 110. http://www3.weforum.org/docs/GETR/2012/GlobalEnablingTrade_Report.pdf
3. O. Memedovic, L. Ojala, J.P. Rodrigue, T. Naula, Fuelling the global value chains: what role for logistics capabilities?, From: Int. J. Technological Learning, Innovation and Development, Vol. 1, No. 3, 2008, p. 358. http://people.hofstra.edu/jean-paul_rodrigue/downloads/IJTLID10306_Memedovic%20et%20al.pdf
4. UNCTAD (United Nations Conference on Trade and Development), World Investment Report 2013, 264 pages, p. ix. http://unctad.org/en/PublicationsLibrary/wir2013_en.pdf
5. Knowledge@Wharton, As Developing Economies Grow, Global Value Chains Reach a Turning Point, October 21, 2013. http://knowledge.wharton.upenn.edu/article/developing-economies-grow-global-value-chains-reach-turning-point/
6. MHL Roadmap, U.S. Roadmap for Material Handling & Logistics, 62 pages, Nov. 1, 2013, pp. 20-21. http://www.mhlroadmap.org/downloads/MHLRoadmapV2.pdf
Image credits: The first and second graphics are credited to Shutterstock. The third graphic is copyright Dan Abelow.
Dan Abelow is an American inventor, author, speaker and technology consultant. His latest patent-pending invention, the Expandiverse, is new technology to build an advanced Digital Earth now. His previous patents are licensed by over 500 corporations that include Apple, Google, Microsoft, Samsung Electronics and many other leaders. He holds degrees from Harvard and the Wharton School. Get connected with Dan at ImagineANewFuture.com/connect/