SCRS Conference Day 1 Session #11
Embracing Industry 4.0 for Recovery Excellence: Strategies for Successful Supply Chain Digitalization
By Prof. Goh Puay Guan, Associate Professor of National University of Singapore (NUS)
Key Message: With the introduction of Industry 4.0, businesses now recognize the importance of digital transformation as a key element in enhancing the efficiency and effectiveness of their Supply Chain operations.
Prof. Goh Puay Guan showing the statistics of Product Stockouts during the COVID-19 in US
How Macroeconomic Forces and Technology Disruption are Revolutionizing Industries
The Electronics and Food sectors are two industries that experience the largest impact from the issue of product stockouts said Prof. Goh Puay. In the Electronics sector, stockouts can have significant consequences on the supply chain and customer satisfaction. When electronic products are out of stock, it not only leads to lost sales but also affects the brand image and customer loyalty. Similarly, in the Food sector, stockouts can result in food shortages and compromised food safety. This can be particularly detrimental for perishable goods, leading to wastage and financial losses for food retailers and suppliers. Therefore, addressing the product stockouts issue is crucial for both the Electronics and Food sectors to ensure smooth operations and meet customer demands.
- Inflation Soars, Squeezing Consumer Wallets and Threatening Economic Stability
Prof. Goh Puay Guan highlights inflation as a significant consequence of disruptions in the supply chain. Over the past two years, there has been a drastic surge in inflation, following a period of historically low inflation. This sudden increase can be attributed to the disruptions experienced within the supply chain, which have led to higher costs and reduced availability of goods and services. As a result, consumers have been faced with rising prices, impacting their purchasing power and overall economic stability.
2. Logistics Companies Breathe a Sigh of Relief, But Face New Challenges
High shipping rates and volatility have been a major concern for logistics and shipping companies in recent years. However, over the last two years, there was a significant decrease in shipping rates, bringing them back to pre-COVID levels. A chart presented by a professor shows that between 2019 and 2023, freight rates were projected to increase 5 to 10 times, but they have now returned to normal levels. While this may seem positive, it creates challenges for companies in terms of productivity and operational planning. Typically, companies prefer long-term contracts to secure shipping arrangements, but with the unpredictability of rates, they must develop strategic plans to mitigate risks even within these longer-term contracts.
3. The Ukraine War’s Devastating Impact on Global Supply Chains
The ongoing war in Ukraine has had a significant impact on the global supply chain, particularly in terms of food and energy prices. As one of the largest exporters of agricultural products and a major player in the energy sector, Ukraine’s conflict has disrupted the production and transportation of goods, leading to price hikes and volatility in the international market. Additionally, Ukraine’s role as a transit country for natural gas and oil pipelines has also been affected, leading to concerns about energy shortages and increased prices. The repercussions of the Ukraine war on the global supply chain continue to be felt, highlighting the interconnectedness of the world’s economies and the vulnerability of the system to geopolitical conflicts.
4. Setting Sustainability Goals to Combat Climate Change and Drive Responsible Business Practices
Climate change has become a pressing global issue, prompting companies across various industries to set their own sustainability goals. Recognizing the need to reduce their environmental impact, many companies are implementing measures to mitigate climate change and promote a greener future. These goals often include reducing greenhouse gas emissions, adopting renewable energy sources, optimizing resource consumption, and supporting conservation efforts. By setting their own sustainability goals, companies are not only addressing the urgent need for environmental action but also showcasing their commitment to responsible business practices.
5. Industries Face Uncertainty as Technology Shatters Norms
Technology disruption is causing significant issues for industries, as new competitors emerge from unexpected places outside the traditional boundaries. This phenomenon has instilled fear in the management of well-established companies, who now face disruptors that come from diverse sectors and do not conform to the industry norms. These disruptors challenge the status quo, blurring the lines between different industries, and creating a sense of uncertainty among traditional players. As technology continues to evolve, it is crucial for industries to embrace innovation and adapt to the changing landscape to stay competitive in this increasingly interconnected world.
Embracing Digitalization: The Key to Business Resilience and Future Preparedness
The Covid-19 pandemic has undoubtedly heightened the importance of digitalization across various industries. According to Proh Goh, there are four categories of companies in terms of their digital adoption. First, there are the companies that haven’t embraced digitalization at all. Then, there are those who had doubts about digital transformation. Additionally, there are companies that have experimented with other projects but haven’t fully embraced digitalization. Finally, there are companies that have implemented digital initiatives and scaled them across different locations. Interestingly, it has been observed that companies that had adopted digitalization were better equipped to handle the disruptions caused by the pandemic compared to those that hadn’t fully embraced digital initiatives. This highlights the significant advantages of digitalization in navigating challenging times like Covid-19.
Prof. Goh displays his perspective on the framework and how he perceives the landscape.
Digitalization plays a crucial role in ensuring business resilience, as it enables organizations to adapt to microeconomic changes and harness the power of technology. By leveraging technology, businesses can enhance their responsiveness, streamline operations, and even create new business models. “…most of us we will always think of technology as tra transformational and creating new business models but that’s also the low hanging fruit of the operational and productivity gains that we can achieve by using technology to improve operational efficiencies” said Prof Goh.
In his presentation, Prof. Goh highlighted the framework of the technology adoption curve, which depicts how technology progresses through a cycle of adoption. “…technology takes you to some extended 15-20 years cycle to accelerate and really be transformational ..” as per Prof. Goh This provides us with a valuable opportunity to prepare ourselves for the future. However, the downside is that people often fail to recognize the significance of technology until it’s too late because its effects are not immediate. This is the reason why companies are hesitant to rush into adopting new technologies. Prof. Goh stressed the importance of striking a balance between embracing technology and keeping a close eye on emerging trends in order to stay ahead of the curve.
Another framework by Prof. Goh emphasizes the importance of holistic perspectives in the process of transformation. This framework focuses on three key components: understanding and knowing the business process, as well as taking care of three pillars – business process, technology, and people within the organization. To achieve connectivity and automation, AI requires data and the ability to learn from that data in order to make predictions and forecasts. In order to facilitate this, integration of operations is necessary.
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About the Speaker
Prof. Goh Puay Guan Associate Professor of National University of Singapore (NUS)
Prof. Goh Puay Guan is an Associate Professor at NUS, Academic Director of the multi-disciplinary MSc in Industry 4.0. He teaches Masters level classes and executive education courses in supply chain management and technology innovation. He has helped to start the multi-disciplinary MSc Industry 4.0 program in 2019. Goh Puay Guan is also a book author, commentator, and industry guest speaker. He was also a Board Director at Flyoro; Advisor at Matex International, Bdata Inc and Log-hub AG; Mentor at Plug and Play APAC.
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