SCDigest Editorial Staff

SCDigest Says:

There are still many islands of automation out there that will open up new opportunities for process automation when connected with other systems – and though disappointing thus far, RFID in the end can be a key technology to make this happen in consumer goods and retail. What do you say? Send us your comments here

We’re always interested in what the bright consultants at McKinsey have to say, and found its list of Eight Technology Trends to Watch for 2008 intriguing. Several have direct linkage to supply chain and logistics strategies, and for each of the others the thinking behind them has some supply chain applicability.

The list is summarized below:

1. Distributing co-creation: Using web-based technologies to harness the power of suppliers, consumers, and others in product development. “Technology now allows companies to delegate substantial control to outsiders—co-creation—in essence by outsourcing innovation to business partners that work together in networks. By distributing innovation through the value chain, companies may reduce their costs and usher new products to market faster by eliminating the bottlenecks that come with total control,” McKinsey writes. It cited the interesting example of Loncin, a Chinese motorcycle manufacturer, which sets broad specifications for products and then lets its suppliers work with one another to design the components, make sure everything fits together, and reduce costs. Hmmm…

2. Using consumers as innovators: Related to point 1, companies are leveraging so-called “web 2.0” concepts in increasingly innovative ways. One t-shirt company, for example, successfully solicits ideas for designs from its customers. “Companies that involve customers in design, testing, marketing (such as viral marketing), and the after-sales process get better insights into customer needs and behavior and may be able to cut the cost of acquiring customers, engender greater loyalty, and speed up development cycles,” the article notes.

4. Extracting more value from interactions: Companies have increasingly automated or offshored transactional and routine interactions. Thus, what is increasingly left is employees involved primarily in negotiations and personal interactions internally and with suppliers, customers, etc. But we don’t have good models or metrics for understanding effectiveness in these interactions. In a switch from the past, management will be more about improving this effectiveness, rather than focusing on traditional efficiency. This will require investment in tools that facilitate information sharing and context “such as wikis, virtual team environments, and videoconferencing, which may become no less ubiquitous than computers are now.”

5. Expanding the frontiers of automation: We’ve automated the basics. “Now, systems are becoming interconnected through common standards for exchanging data and representing business processes in bits and bytes. What’s more, this information can be combined in new ways to automate an increasing array of broader activities, from inventory management to customer service.” There are still many islands of automation out there that will open up new opportunities for process automation when connected with other systems – and though disappointing thus far, RFID in the end can be a key technology to make this happen in consumer goods and retail.

6. Unbundling production from delivery: More companies will make their assets and technology available to others to create or deliver products. “Technology helps companies to utilize fixed assets more efficiently by disaggregating monolithic systems into reusable components, measuring and metering the use of each, and billing for that use in ever-smaller increments cost effectively.” Amazon.com is already doing it with a series of web services that allow anyone to jump into ecommerce at very low entry costs. Those with the assets, including manufacturing plants, can use this approach to increase utilization and their return on invested capital/assets. Could be part of a sea change in the way we think about supply chain.

7. Putting more science into management: Technology is helping managers exploit ever-greater amounts of data to make smarter decisions and develop the insights that create competitive advantages and new business models. While analytics and decision-support systems are as advanced in supply chain as in any area of the corporation, we’ve still probably only scratched the surface here. “The holy grail of deep customer insight—more granular segmentation, low-cost experimentation, and mass customization—becomes increasingly accessible through technological innovations in data collection and processing and in manufacturing.”

8. Making businesses from information: There are almost a limitless number of possibilities to identify information “asymmetries” to create new businesses, such as seeing disconnects in supply, demand, pricing, etc. Or, information gathered for one purposes might be used for another. An example: “A retailer with digital cameras to prevent shoplifting, for example, could also analyze the shopping patterns and traffic flows of customers through its stores and use these insights to improve its layout or the placement of promotional displays. It might also sell the data to its vendors so that they could use real observations of consumer behavior to reshape their merchandising approaches.”

An interesting set of opportunities to ponder for 2008 and beyond.

What is your take on the McKinsey trend list? How can you see applying them to the supply chain? Let us know your thoughts at the Feedback button below.