What are the Future Technologies in the Supply Chain?

Next-gen technology is revolutionizing consumer goods supply chains, offering CPGs and retailers unprecedented visibility and predictive insights to proactively address challenges and capitalize on supply chain technology trends. In fact, 24% of grocers plan to implement supply chain automation in the next 12-18 months, according to RIS News and Progressive Grocer.   

How technology is transforming supply chain

Technology is helping supply chains evolve by enabling companies to receive more visibility into their operations, as well as make predictive bets about obstacles that could occur. In doing so, CPG companies have the ability to proactively head off issues before they occur (or become too damaging to manage). 

However, although companies are investing extensively in technology, digital transformation plans for many supply chain planning leaders are lagging because teams are not adopting the new tools — in part because of a lack of trust, according to Ingrid Gonzalez McCarthy, senior director analyst, Gartner. This skepticism can be attributed to a variety of reasons, including data limitations or a lack of clarity about data sources  

“Planners may also test the tool and find discrepancies between its output and those of the legacy tools they are comfortable using, such as spreadsheets,” she says. “These discrepancies can erode confidence in the reliability of the output of the new tool they are being asked to use.”

Which technologies will have the biggest impact on supply chain performance? 

The list of technologies that will impact supply chains is lengthy, but there are a few that stand out as holding particular potential in the CPG industry. Here, we identify the three technologies that are reinventing the supply chain: 

Digital twins: Digital twins serve as virtual models of systems, processes, physical items, or even consumers, and are instrumental in preemptively identifying disruptions in the global supply chain. In the consumer goods supply chain, they are especially valuable for their capability to proactively detect interruptions, thus mitigating risks.

Artificial intelligence: A well-functioning entire supply chain involves handling vast volumes of data from multiple origins and stakeholders. With supply chains becoming increasingly complex at top CPG companies, AI and machine learning offer the capability to rapidly detect data patterns — beyond human speed — allowing organizations to act preemptively. Additionally, for consumer goods companies contending with myriad regulations, such as sustainability and ethical labor standards, supply chain technology serves as an essential tool for maintaining transparency.

IoT: Although the Internet of Things (IoT) is not a new concept, it continues to see increasing adoption throughout the supply chain due to ongoing technological advancements. It has been enhancing supply chains with tracking and tracing capabilities for years, but recent significant improvements in miniaturization and accuracy have led to a surge in data generation for monitoring items in transit, according to Lindsey Peters, retail and consumer goods lead at Celonis. 

In addition to these technologies, the digitization of consumer goods is expected to have its own impact on supply chains. This could prove to become a challenge as simpler chips become more difficult to secure since chipmakers are financially motivated to build factories with state-of-the-art equipment, rather than prior-generation equipment, says John Harmon, senior analyst at Coresight Research, which could in turn potentially create shortages of these simpler chips as the electrification of consumer goods grows. 

“Some manufacturers actually are adding older-generation manufacturing equipment, and leading-edge factories are adding capacity and constantly developing smaller feature sizes, which means more chips on a wafer,” he notes. 

What are the predictions for 2023 supply chain? 

In placing bets and looking at the role of technology in supply chain management, we tapped a number of industry experts, and there were a few common themes.   

Mike Graziano, consumer products senior analyst with RSM US LLP, notes that, pre-pandemic, supply chains were often an afterthought for businesses given the consistency in price and timing for receiving goods. Times, of course, have changed — quite a bit — and more companies are re-evaluating their supply chains and are expected to continue to do so to mitigate single-source risks and shift production closer to the end consumer in order to shrink time to market. 

“Although the pandemic appears largely behind us, it has left a higher degree of volatility in its wake,” he adds. “The U.S.-China tech rivalry is likely to also add volatility to supply chains, as a great deal of electronics manufacturing and assembly is performed there. Manufacturers and retailers need to keep a closer eye on their suppliers and their suppliers' suppliers so as not to get caught flat-footed in future supply chain shortages. The subsidies in the U.S. CHIPS act and Intel's move into the foundry space could ensure that more chips are available domestically.”

“Given recent events, supply chains are likely to place a significant emphasis on resilience – trying to adapt to factors such as pandemics, natural disasters, geopolitical events, and supply chain bottlenecks,” adds Sourav Banerjee, Infosys SVP and industry head, consumer retail and logistics. “As customer demand continues to evolve, supply chains might become more capable of delivering hyper-personalized products and experiences. We already have the technology expertise to do that.”

How technology will change supply chain in the future 

In short, leveraging technology in supply chain operations will result in a supply chain that’s more resilient and collaborative, enabling retailers and manufacturers can better meet consumer and retailer needs. It also has the potential to increase sustainability, as properly leveraging technology can increase efficiency and reduce waste.  

Indeed, in looking at the future of supply chain, Banerjee notes that a focus on sustainability is likely to intensify. “We might see more localized and agile production reducing the need for extensive inventories and increasing responsiveness.”