Transforming Supply Chains

Sean Monahan, a partner with A.T. Kearney, leader of the firm’s Operations & Performance Transformation Practice in the Americas region and an expert in supply chain across the consumer products, retail, agricultural, pharmaceutical, chemical, automotive and high-tech sectors, talks to Global Finance about how technology is impacting corporate logistics.

Global Finance: What is happening with supply chains?

Sean Monahan: We are accelerating into uncertainty. We still can’t really predict where the future is, but whatever it is, we’re getting there faster. New technologies are changing the way we live and the way we work.

GF: What is the digitalization of supply chains?

Monahan: There’s this question about how technologies like artificial intelligence, 3D printing and augmented reality will impact production from how materials are originated, transformed, distributed and consumed by customers, along with how they work their way back in the supply chain and the impacts on the individual worker. Looking at the Internet of Things and sensors, these can monitor where things are, what’s happening, and capture data in real time on performance. The ability to monitor the performance and what’s happening to anything, anywhere, at any time, is a big transformation. Eventually, sensors are almost going to be free—the costs are going to be inconsequential; I can sense anything anywhere and make better decisions on my consumer wants and needs, and the status of my products.

You’re already seeing virtual reality used as a training mechanism. With augmented reality, people can follow the instructions that pop up on the glasses. I can use these to drive productivity because now, an unskilled worker is just as productive as someone who’s been doing that work for years.

GF: How is ecommerce changing global manufacturing?

Monahan: Retailers in other countries are looking to expand their ecommerce reach. The big strategic question is around the future of production [in an ecommerce world]. If a country’s entire path to economic development is doing low-cost labor that another country is spinning off to work up the economic ladder, robotics, artificial intelligence, 3-D printing will change the cost curves. Given the needs of personalization and localization, consumers wanting products in the next 24 hours will drive all of that to being close to the consumer’s location.

GF: How does a country’s consumer base play into the digital supply chain?

Monahan: [Reshoring] will work well for countries that have a consumer base that they can feed. Countries without a consumer base will have to figure out what’ll be made for its people. If a country has a large enough consumer base, maybe they just need to focus on what they currently import and use technologies to make these products. Developing countries that don’t have a built-in consumer base will maybe have to think much more regionally. Maybe those countries need to build a trading bloc in order to sustain themselves.

GF: What about globalization?

Monahan: It’s been declining for a number of years. If left to its own devices, we envision there will be this bifurcation of the economies: the haves and the have-nots. There might be some countries with a lot of money but not a lot of production that might be able to leapfrog and just start 3-D printing things and be fine. But those middle countries that don’t have a consumer base, manufacturing infrastructure or money could be left behind. The world has to figure out how to protect these countries.