How the Digital Supply Chain Will Change the Future of Manufacturing

A transformation of manufacturing supply chains is ushering in the fourth modality of logistics. To ground, air, and ocean, manufacturers can now add digital. The move to the digital supply chain—the power source for Industry 4.0—creates multiple opportunities for every company in every industry.

But every revolution needs exemplars to help lead the way, and the Fourth Industrial Revolution technologies present a massive opportunity: a chance to redesign supply chains so they are no longer constrained by the physical limitations of transportation and logistics.

Imagine a day when the supply chain never sleeps.

The Transformation of Manufacturing

That’s the message I shared at the World Economic Forum’s Annual Meeting in Davos, where I participated in the Future Factories 4.0 discussion with fellow executives from Groupe Renault, Tata Group, Robert Bosch, and other leading companies. The group explored how the future of factories will influence business strategy and overhaul global supply chains to fuel the on-demand economy.

Manufacturers will always need to move goods from point A to point B. But how those goods through integrated networks will transform not only the world of logistics but also the nature of manufacturing itself.

Large inventories and slow-moving pallets of goods will become a distant memory. Manufacturers will build that spare airplane part on demand, for example, tailoring it to the customer’s exact demands, and ship it out—all within hours.

You’ll see more products driven by customers’ individual needs and specifications produced in a customer-driven factory, not a product-driven factory. In corresponding fashion, digital supply chains powered by advanced technologies—including the Internet of Things (IoT), artificial intelligence, and machine learning—will bring greater visibility, control, and reliability to the manufacturers that invest in them.

These factories will be more predictive, more autonomous, and more efficient. As “what’s possible” changes in manufacturing, everything changes in the supply chain downstream, as well. In this way, the digital supply chain accrues power to the companies that control the information, not the assets. It becomes the digital and physical thread connecting products from birth to death—and then to a new life through recycling.

Here’s the key point: It’s not just about efficiency. It’s about tapping into new business models, using Industry 4.0 technologies to create fundamentally better solutions for people around the world.

Making a Better World

For instance, a number of leading-edge companies are using the 3D-printing capabilities of Fast Radius at UPS’s global air hub in Louisville, Kentucky, to offer greater product customization and shorter lead times.

But the virtual inventory solution UPS is offering with Fast Radius isn’t just about a new need— for example, the need for a replacement part. It’s about how that need is satisfied. If you can print the part on-demand regionally or locally, it’s a fundamentally better business model. Manufacturing doesn’t happen until it’s needed, saving energy, materials, and time. Goods aren’t shipped until they’re needed, reducing transportation and warehousing costs, not to mention cutting down on greenhouse gases and product obsolescence.

There are also societal benefits. Some countries today are virtually locked out of manufacturing, a key driver of prosperity. But when a manufacturing economy becomes democratized and distributed, then local and regional players are better able to compete against the “mass production” business model of the past century.

In terms of collaboration, public-private partnerships offer great opportunities to accelerate adoption of additive manufacturing and other Industry 4.0 technologies. A great example is the recently announced Singapore Centre for 3D Printing, which will pair the academic community with private companies on long-term research projects.

Another area ripe for collaboration is the reskilling of the labor force. Siloed efforts will not bring about change at the speed required. Universities, governments, and companies must work together to accelerate learning.

Customer-Driven Factories of the Future

In addition to Fast Radius, UPS has introduced Ware2Go, a technology company and digital platform that matches available warehouse space and fulfillment services with merchants who need to expedite online orders to customers.

Supply chains of the not-too-distant future will deliver new opportunities for manufacturers, greater control and convenience for consumers, and some formidable challenges for companies making and distributing the products they want to buy.

A consumer-led, on-demand revolution is happening, and history shows that revolutions seldom move in reverse. And just as some industry boundaries are beginning to blur (for instance, is Tesla a car company or a tech company?) so, too, is the line between manufacturing and supply chain.

Challenging the Status Quo

According to Bain, 70 percent of executives say digital innovation will have a significant impact on their supply chains during the next five years. Those companies expect that integrating digital technologies into their supply chain will quickly improve service levels while significantly lowering costs. Just as important are the opportunities for new business models and new strategies that digital technologies enable.

But all those benefits won’t come without challenges to the status quo. For many companies, especially for those that are not digital natives, the speed of change is overwhelming. Maybe the biggest challenge to the merger of manufacturing and supply chain is the people needed to lead the revolution. There’s a lot of history—read: reluctance to change—tied up in these traditional industries.

To integrate robotics and IoT and machine learning and build a business model around distributed-manufacturing practices, manufacturers will need an updated go-to-market skill set. For many, it will be not only a matter of learning what’s new but also unlearning what’s old.

In Pursuit of Better, Faster

Consumers bring none of that baggage to the revolution. They want only what’s better, faster, cheaper, and they don’t care what legacy processes are transformed in the process. Innovation will help bridge the gap.

With companies increasingly embracing advanced manufacturing to upgrade their factories and business models, a new paradigm for production is emerging—one that is blurring the lines dividing traditional industry sectors and informing the design of future business strategies.

The decision is not whether to embrace the change; it’s how to take advantage. But I believe industry is on the cusp of a new day for logistics providers and manufacturers whose goods move faster around the world than ever imagined—the supply chain will truly never sleep.

Article by Scott Price. A version of this article first appeared on UPS’s thought-leadership blog.