How Digital Technologies Revolutionize Global Supply Chains

By Johan Aurik — And so from Berlin to Seoul. After a very productive and insightful session looking into how the digital revolution is entering the heart of the company, A.T. Kearney’s Digital Business Forum has traveled to South Korea.

Like Berlin, Seoul understands the value of digital sophistication. With the world’s fastest internet speeds already, the government has invested a further $1.5 billion in its infrastructure. It also has one of the fastest-rising startup ecosystems, which particularly favors mobile business-to-consumer startups given South Korea’s high mobile internet adoption.

Here, the conversation is also driven by the impact of the Fourth Industrial Revolution (4IR) on the ways that we are doing business now, and how they will change as new converging technologies exert an inexorable influence on company operations and supply chains around the world.

This is an area of global significance and of keen interest for us at A.T. Kearney. It is the focus of our multi-year research program in partnership with the World Economic Forum, together with companies, governments and thought leaders around the globe.

Collectively, production and supply chain management have been a source of economic growth for developed and developing nations alike, contributing 30% of global GDP, providing more than 850 million jobs for an increasingly skilled workforce, and contributing disproportionately to global innovation (more than 70% of patents) and exports (more than 80%).

That’s why production matters. It influences how we work, the nature of the work we do, how we skill (or reskill, or upskill), how we sell, how we compete, even how we partner with other organizations. It influences economic development and how we distribute wealth and opportunity as a global community. In short, it influences how we go about our daily lives.

As I mentioned in my last post, The Digital Revolution is Entering the Heart of the Company.

One of the challenges is that nobody has a crystal ball. The course for the future of production is profoundly uncertain, and it is being shaped by multiple forces that reach far beyond the technology itself. These include regulations and governance, the global economy, trade and investment, natural resources and sustainability, human capital and skills, and consumer expectations.

What it is possible to do though is examine the possibilities in all of these areas and develop potential scenarios. We see four potential scenarios for the future of production, and how companies can prepare. To give you a flavor:

• Disrupted — where economic activity is boosted and new economic opportunities are created; we see environmental protection, resource conservation and land protection advance; technology advancements and a focus on sustainability help globalization rebound.

• Damaged — where international cooperation breaks down and protectionism rises; economic growth and production are hampered; technology progress is limited, while R&D funds are diverted; companies seek to please protectionist sentiments; displaced workers see fewer opportunities.

• Deterred — where cyber-tension is a drag on economic growth as connected devices come under sophisticated intrusions and attacks, the potential for technologies like the Internet of Things and robotics are limited; military investments in deterring cyber-crime spill over into the commercial space; smaller businesses thrive as “local” takes favor, but they cannot fill the gap left by larger enterprises.

• Devolved — where extreme weather conditions spur sustainability actions like smart roads, new energy grids, battery storage resources and electric vehicles; middle-income countries gain by investing in workforce skills, but lower-income ones struggle as their low-cost advantage recedes; producers adapt their practices to focus on sustainability and localization.

Whichever way the wind blows, it is important to remember that we can shape strategies to prepare and adapt accordingly.

Sooner than we think, however, the watchword will not be “awareness”. It will be “readiness”. Within five years, it is estimated that 40% of the incumbent companies across twelve industries will be displaced due to rapid digital disruption. While the impact of digital on supply chains is often overestimated in the short term, its impact over the longer term is surely underestimated.

These issues and others will be explored in more depth at the Global Federation of Competitiveness Council’s 2017 Global Innovation Summit in Kuala Lumpur, Malaysia from November 29 — December 1 2017. A.T. Kearney Partner Mauricio Zuazua will be joined by other experts and practitioners to talk about this year’s theme, the Sustainable Future of Production, Consumption, and Work. Learn more and register here: http://gis2017.thegfcc.org/.

Johan Aurik is the managing partner and chairman of the board of the global management consulting firm A.T. Kearney. Johan is an active publisher and speaker and widely quoted in the global media. In addition to many business journals, his opinion has been featured in the Harvard Business Review, The Wall Street Journal, Financial Times, and The Washington Post, among many other publications. Johan is co-author of The Future of Strategy (McGraw-Hill, 2015) and Rebuilding the Corporate Genome (John Wiley & Sons, 2002). In 2013, he was named one of the “Top 25 Consultants” by Consulting magazine. You can find him on LinkedIn and Twitter.

(This piece was first published by Johan Aurik, Managing Partner & Chairman of the Board at A.T. Kearney on 22nd of June 2017 on LinkedIn. Link to the original post: https://www.linkedin.com/pulse/how-digital-technologies-revolutionize-global-supply-chains-aurik”)