IDC’s 2020 predictions for the supply chain take a deep dive into digital transformation

Looking ahead to the future can be scary but it can also be exciting, too. When it comes to the supply chain, though, it falls into the latter category, especially when looking at the 2020 predictions for the supply chain, which were issued this week by Framingham, Mass.-based market research and consulting firm IDC.  

Now in its 15th year, this year’s predictions for 2020 take another deep dive into to frenetic pace of change occurring in myriad facets of the supply chain. In fact, Simon Ellis, program vice president, Global Supply Chain Strategies at IDC, explained in the report that the supply chain continues on its journey of almost unparalleled levels of change.

“Digital transformation is now the overriding priority for most manufacturers and retailers, with the adoption of digital technologies aimed to improving efficiency and effectiveness in the shorter term while providing the opportunity to either disrupt their market segment or be resilient to others that may try, "wrote Ellis.

IDC said that its 2020 predictions, which are listed below, for the supply chain cover investments in both the near term and the longer term, with the impact expected to be felt in the coming years:

• Prediction 1: By the end of 2021, half of all manufacturing supply chains will have invested in supply chain resiliency and artificial intelligence, resulting in productivity improvements of 15%;
• Prediction 2: By 2022, firms will dedicate 35% of their logistics business process outsourcing services budget to process automation, focusing on order, inventory, and shipment tracking;
• Prediction 3: By the end of 2020, half of all large manufacturers will have automated supplier and spend data analysis, resulting in a 15% procurement productivity gain;
• Prediction 4: By 2023, supply chain micro-application extensions will account for one-third of all new technology investments in manufacturing and retail;
• Prediction 5: By 2023, 65% of warehousing activities will use robots and situational data analytics to enable storage optimization, increasing capacity by over 20% and cutting work order processing time in half;
• Prediction 6: To lessen stress on the service supply chain, by 2023, 25% of OEMs will leverage blockchain to source spare parts, improving accuracy of usable parts by 60% and lowering expedite costs by 45%;
• Prediction 7: By 2023, 60% of G2000 manufacturers will invest in AI-infused robotic process automation to automate tasks through increased productivity and address supply chain skills deficit;
• Prediction 8: By 2024, 75% of all consumer-facing companies will have developed the ability to customize at scale within their supply chains, resulting in, on average, a 2–3 percentage point increase in market share;
• Prediction 9: By 2022, the number of companies offering flexible warehousing options will have increased by 50%, which can help address seasonal demand challenges and lower fixed overhead costs by over 20%; and
• Prediction 10: By 2024, for transparency and efficiency, 40% of customs agencies will join private blockchain and API-powered trade platform ecosystems to achieve a 50% increase in cross-border compliance.

Ellis said in an interview that the report’s overarching theme of digital transformation truly resonates with many of the key trends and themes in today’s supply chain, in the form of things like machine learning, AI, and block chain, among others.

“As I think about the supply chain in 2020 and beyond, it is about how do I use technology to advance my efforts and better solve business problems and to take advantage of new opportunities,” he said. “Whether it is AI allowing to make faster decisions or IoT providing me with different kinds of data I did not have before, or potentially things like block chain giving me a more reliable data set, not necessarily a more accurate one but certainly a more reliable one.”

Ellis said these factors, and others, lead to a notion of leveraging technology, not for the sake of simply doing it, but for use cases, solving problems, and positioning the supply chain to better take advantage of opportunities.

One question the analyst said he often gets is: what will differentiate the supply chain of the future, in terms of what will the top supply chains do that lesser ones will not do?

“I am always reluctant to play the next-generation supply chain game, because no matter what you do, you end up being wrong,” he said. “But what I do say is that in my view the better supply chains will be not better because they are using a certain TMS. They will be better because if they use data more comprehensively. So the supply chains that do a better job of leveraging the data available to them, I believe, will outperform the ones that do not. In a sense, data is the new oil, which we have said at IDC. In some ways, it is true. Those who use data better will have better supply chains.”

Ellis likened data usage to a journey, with nobody ever completing it, as there are constantly new strands of data and new business models that can be adopted and leveraged as new use cases.

“I view it as a journey that will never end, but being on the front edge of that journey is an advantage for companies,” he said.  “And that will be the case going forward, too, with companies leveraging things like social media data or data from a machine to a factory. Data is much better today than it was five years ago, but it is not perfect.”

A looming concern as it relates to digital transformation, cited by Ellis, is companies becoming too seduced by the “sexy” app or use case, with them losing sight of the fact that they need to pay attention to data quality.

“In a world of IoT and AI and advanced analytics, you run the risk of having really fast ‘garbage in and garbage out,’ so data quality becomes more important as you rely more on it that it ever did,” he said. 

While these predictions are not concrete, by any stretch, they do provide a very strong foundation for things to think about, not only over 2020, but also well beyond that, too. IDC’s Ellis strongly drove home the importance and relevance of data and the “digital transformation,” and it is fair to say that its importance will only grow for supply chain stakeholders as time goes on.