How Disruption is Accelerating Digital Supply Chain Transformation

The spotlight is on the supply chain right now as organizations around the globe work to stabilize their supply networks in the midst of an ongoing pandemic and a litany of related, negative impacts. From labor constraints and chip shortages to the latest shutdowns in Shanghai and the ongoing transportation capacity issues, it’s starting to feel a bit like the hit movie trilogy The Hunger Games right about now.

With no immediate end in sight to the pandemic-driven supply chain challenges, more companies to turning to technology for help. According to the 2022 MHI Annual Industry Report, Evolution to Revolution: Building the Supply Chains of Tomorrow, supply chain disruption is in fact one of the biggest drivers of technology investment right now.

Who’s Adopting What?

Nearly 80% of supply chain leaders say their digital transformation has accelerated due to the pandemic. Based on the report findings, MHI predicts that investment in supply innovation will rise dramatically over the next two years. 

“Supply chain leaders have never been in a better position to drive impactful and lasting change for the industry,” said MHI CEO John Paxton, in the report. “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.” 

Here are some of the other key findings from the MHI survey: 

• Of the 64% of survey respondents that are increasing investments, two out of three say they will spend more than $1 million over the next two years. 

• Tech 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. 

• All technologies covered by the survey (artificial intelligence, IoT, cloud and predictive analytics, among others) are expected to achieve an adoption rate of 66% or higher over the next five years. 

• 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. 

• 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%). 

• Predictive analytics, currently at 22% adoption, is expected to grow to 82% over the next five years. 

• The Industrial Internet of Things (IIoT), currently at 21% adoption, is expected to grow to 80%. 

• Robotics and automation, currently at 28%, is expected to reach 79%.

Transform or Die?

Disruption now tops the list of supply chain challenges, with the talent shortage coming in at a close second, according to MHI, which says 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,” said Thomas Boykin, supply chain specialist leader at Deloitte, which collaborated with MHI to produce this year’s report. “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.”