10 Special reportGlobal supply chains The EconomistJuly 13th 2019
21counts of over 30% to sell.
Intel, a big manufacturer of comput-
er chips, estimates that it has already
saved $58m through better forecast
modelling. The firm uses so many bots
(software that runs automated tasks)
that it has created new bots to manage
the worker-bots. One executive says
that lawyers have been called in to de-
cide whether management is liable for
bad decisions made by boss-bots.
McKinsey estimates that 40% of all
procurement tasks (vendor manage-
ment, order placement and invoice pro-
cessing) can be automated today, and
80% soon; this could produce annual
cost savings of 3-10%. All told, it reck-
ons application of aito supply-chain
management and manufacturing could
create $2trn of value.Out for delivery
As for transparency, Adam Mussomeli
of Deloitte, a consultancy, says that an
age-old question still bedevils supply-
chain managers: “Where’s my stuff?”
This may seem surprising in an age of
personal connectivity, smartphones
and gps, but it is still true.
Pawan Joshi of e2Open, a supply-
chain-software firm, explains why. Be-
cause of widespread outsourcing, typical mncs do not make pro-
ducts (contract manufacturers do); they do not ship them (third-
party logistics providers do); they do not store them (warehousing
firms do) and they do not sell them (resellers and retailers do). So,
he says, “the data needed to make real-time decisions are not in-
side the ecosystem of the manufacturer.” Data inside firms are also
compartmentalised into specialised software used by different di-
visions. e2Open connects and makes sense of all these data.
In November 2017 a strike by German cargo-handlers stranded a
shipment of ibmmainframe computers at Frankfurt airport. Un-
able to track its precise location, the firm assumed the pricey cargo
was safe inside an airport warehouse. In fact, it sat on an icy tarmac
for nearly a month, exposed to blizzards. When it was eventually
located, the kit—reportedly sitting in four inches of water—was a
total write-off.
The rise of the internet of things (iot) will help. Sensors are
coming onto the market that track not only the location of goods,
but also the orientation of crates and factors such as temperature
and humidity. In February ibmlaunched a “track and trace” service
in partnership with Sigfox, an iotservice provider. Initially it will
track only containers travelling from suppliers to factories run by
Groupe psa, a big French car manufacturer, but the service is to ex-
pand across Europe this year.
Digital innovations from the top down and bottom up are mak-
ing shipping smarter too. Singapore is building a massive new port
that will expand its use of automated cranes and driverless vehi-
cles. It has also launched an international effort to digitise trade.
Tan Chong Meng, head of Singapore’s psa, a giant port operator, ex-
plains that “like the swiftcodes used in banking, we need com-
mon digital standards.”
ibmand Maersk are using blockchain to try to make shipping
paperless and transparent. Their TradeLens initiative got a big
boost in May when cma cgmand msc, two big European shipping
firms, joined. The consortium accounts for almost half the world’scargo-container shipments. Every par-
ticipant in the process, from shipper to
customs agent to auditor, will be able to
track shipments from start to finish by
inspecting the relevant parts of the
blockchain rather than ploughing
through lots of paperwork.
Standing at Flex’s Pulse command
centre near Silicon Valley, Tom Linton
looks every inch a commander-in-
chief. The system gives him access to 92
variables from his supply chain in real
time. Rather than hoard this intelli-
gence, he shares it with employees, sup-
pliers and clients on computers and
mobile phones.
His “data democracy” has decentral-
ised a lot of decision-making and
speeded up the flow of parts. In the first
two years of using Pulse, Flex reduced
inventory by 11 days and released $580m
of cash. “The theory of everything is
speed, and you need visibility to get ve-
locity,” says Mr Linton.
To deliver that speed, product design
is undergoing a transformation. Spen-
cer Fung is chief executive of Li & Fung,
an Asian supply-chain firm that has
helped Western mncs with sourcing for
over a century. Getting a new fashion
item from paper sketch to the high
street used to take 40 weeks, he recalls. Now it can take half that.
Ford’s Hau Thai-Tang says the use of 3dprototyping and digital
design shortened the development of the new Mustang gt500, a
sports car, by 18 months. Carbon, a Californian 3d-printing un-
icorn rumoured to be considering a public flotation, is now print-
ing parts used on production lines that produce hundreds of thou-
sands of Ford vehicles and Adidas running shoes a year.
Logistics innovators are harnessing platform technologies like
those pioneered by Uber and Airbnb. Warehouse Exchange, a start-
up, matches owners offering slivers of warehouses on short-term
contracts to firms with uncertain or highly fluctuating storage
needs. ups, a big American courier, last year launched Ware2Go, a
platform that connects firms with warehouse space, inventory
management and other logistics services.
Fast Radius, a Chicago-based unicorn, has an advanced manu-
facturing facility located at a big shipping hub in Kentucky run by
ups, one of its investors. Its secret weapon is a collection of 3d
printers from top manufacturers. An aerospace firm urgently
needed a tool to restart production. Making and shipping it using
normal manufacturing methods would have taken 45 days. Lou
Rassey, Fast Radius’s boss, says his firm got the digital file, printed
the tool and delivered it via ups, all within two days.
At a busy warehouse in Yantian, a port district in the southern
Chinese city of Shenzhen, Flexport, a Cali-
fornian firm, is digitising the freight-for-
warding business. As lorries arrive at the
loading bay, cargoes are measured digital-
ly, with no manual entries or paper forms,
to capture dimensions straight to hand-
held devices and the cloud. Every pallet is
barcoded and weighed on a digital scale.
Computer vision turns analogue forms
into digitally searchable ones, and mach-
ine learning (ml) optimises loading. Flex-“Digitisation will
have the impact
on supply chains
that steam and
electricity had on
manufacturing”