Software AG (Frankfurt TecDAX: SOW) today announced that it’s top ten predictions for the manufacturing and supply chain industry in 2016 have proved remarkably accurate. From the strength of the Internet of Things to an explosion in automation and a severe shortage of operations talent, the predictions indicated the industry would reach a tipping point in 2016.
Sean Riley, Director of Industry Solutions - Manufacturing, Software AG, observed: “The Internet of Things and digital technology will continue to take center stage due to the increasing need for demand responsiveness and ever-faster execution.” He further noted the following five critical trends that manufacturers need to embrace in order to achieve success in 2017.
By 2020, 90 percent of Supply Chain Execution Systems expenditure will be for Cloud-based applications, while Supply Chain Planning applications will remain on-premise, according to Gartner. Additionally, new technologies will appear such as blockchain for gross weight verification, the Internet of Things (IoT) and advanced (predictive) analytics for condition analysis and prediction. Moreover, Digital Transformation will become a key focus to capitalize on the available value of these technologies in the supply chain.
Short-term forecasting will all but disappear due to ‘Demand Sensing’ and robust supply chain visibility. However, this will not occur for manufacturers that do not have a supply chain resiliency program in place.
Do Not Disrupt
Manufacturers will begin in earnest to pursue a resilient supply chain as disruptions, such as the Hanjin Shipping issue, will have a much larger effect on supply chains pressed for spare capacity and inventory. A resilient supply chain becomes critical thus identifying, managing and mitigating external and internal supply chain risks will become paramount.
Smaller is Better
Manufacturers, taking note of Amazon’s logistics network, will begin examining the feasibility of using a Micro-Logistics network in 2017. Much of this depends upon the ability to work with third party logistics providers (3PL’s) and shift from a dedicated- to a shared-facility supply chain model, but the benefits of the Micro-Logistics model cannot be ignored.
Shrinkage may Occur
Trans-ocean container shipping, third party distribution services and ‘Over the Road Carrier Services’ (trucks) will consolidate due to either financial difficulties or the need for strategic capacity. The consolidation will result in contract rationalization, rate fluctuations and will create a lever for 3PL agreements to be more value- than price-focused. This will require manufacturers to examine their current agreements and re-evaluate their current supply chain network with preparations beginning in 2017.
According to Sean Riley, “2017 promises to be a year when supply chain practitioners must become technologically fluent in order to meet their business goals due to the opportunities available and the upcoming business environment changes. These changes will be driven by manufacturers having to be as nimble and agile as their smaller counterparts.”
The digital transformation is changing enterprise IT landscapes from inflexible application silos to modern software platform-driven IT architectures which deliver the openness, speed and agility needed to enable the digital real-time enterprise.
Software AG offers the first end-to-end Digital Business Platform, based on open standards, with integration, process management, in-memory data, adaptive application development, real-time analytics and enterprise architecture management as core building blocks. The modular platform allows users to develop the next generation of application systems to build their digital future, today.
With over 45 years of customer-centric innovation, Software AG is ranked as a leader in many innovative and digital technology categories. Software AG has more than 4,300 employees, is active in 70 countries and had revenues of €873 million in 2015.