By Shani Calvo, MHI Solutions
Each year, the results of the 2021 MHI Annual Industry Report contain some surprises, almost like the running of the Kentucky Derby, where the winner oftentimes is not the horse you expected. This year’s report, Innovation Driven Resilience follows true. While some of the results are typical and much like previous years, there are a few surprises.
At the April 14 keynote, Thomas Boykin of Deloitte joined MHI CEO John Paxton in presenting the report findings. They were joined by Randy V. Bradley, associate professor of information systems and supply chain management, Haslam College of Business, The University of Tennessee, and Annette Danek-Akey, executive vice president, supply chain, Penguin Random House, to discuss the real-world significance of the report findings.
While the report is now in its eighth consecutive year, “from the beginning, we sought to gauge the extent to which companies have adopted these leading technologies or if they haven’t, when they project they will,” said Boykin. In terms of adoption, this year’s report logged cloud computing and storage at the top, and is currently being used by 57% of the companies surveyed. Of the 11 technologies explored, blockchain is still trailing the others, though potentially gaining steam. “Blockchain and artificial intelligence are very new technologies we’ve been tracking and are being used by 12%-16% of companies surveyed,” but rising to 40% within five years, said Boykin. “The top two technologies most used today are projected to be used by nearly 90% of companies within the next five years”: cloud computing and storage, and inventory and network optimization.
Danek-Akey shared some insight related to the barriers for adopting technology, based on her first-hand experience at Penguin Random House. “It is the ability to develop a compelling business case.” To achieve this, investigate and share some of the returns from implementing these technologies, she advised. Look at your core competencies and how they will be positively impacted. Then, look outside of your “area” and ask others to answer the question, “What is the business case for this technology?”
Because these technologies are growing so much in adoptions, respondents are beginning to see some of them as table stakes, added Boykin, and many companies are dramatically accelerating investment in these innovations. The survey points to about 45% of the companies surveyed planning to spend more than $1 million over the next two years. “An impressive 12% plan to spend over $10 million in the same time period,” said Boykin. Nearly half say they are increasing investment during the recover and drive phases post-COVID.
Bradley added that organizations are becoming aware that to advance your supply chain capabilities you have to be able to invest in your infrastructure that supports your supply chain operations. “We have always said that the supply chain is only going to be as agile, resilient and responsive as the infrastructure that undergirds it.” But, on the opposite end of that is companies that are rashly adopting some technologies. “A too early investment can be just as detrimental to your digital journey as a too late investment,” he said. There must be a readiness in an organization from a cultural standpoint and also from a human capital standpoint. “MHI and Deloitte doing this work creates a great platform to help those organizations navigate that chasm,” said Bradley.
Of the 1,000 manufacturing and supply chain industry leaders surveyed this year, 83% believe digital will become the predominant model within the next five years and 22% believe it is already here.
When it comes to challenges encountered by supply chain companies, “the results of this year’s survey are consistent with those from prior years…. Their greatest challenge is hiring and retaining qualified workers,” said Boykin.
Top 6 supply chain challenges:
52%: Hiring and retaining qualified workers
47%: Customer demands for lower costs
47%: Customer demands on response times
43%: Rising customer service expectations
39%: Supply chain disruptions
Because the digital technologies used in supply chains are constantly evolving, the skillsets required to support these technologies must also evolve. For this reason, many companies are targeting more general skillsets better suited for a dynamic work environment. “We like to call them supply chain athletes,” said Boykin. The survey showed that the skillsets companies are targeting are:
41%: Project Management/Leadership
40%: Strategic/Problem-Solving Skills/Critical Thinking
32%: Supply Chain Management (e.g. degrees/certifications)
When it comes to skillsets for leaders, resiliency is one of the top ones. “Resilience. We all built that muscle this year. I know we all did!” said Danek-Akey. She explained that there are three steps to building resiliency in leaders.
1. Read the MHI Annual Industry Report, Innovation Driven Resilience
2. Be prepared. Learning ahead of time and preparation. Go see what’s there and see what’s new. Go look at some technologies that you don’t know anything about.
3. Listen to John Paxton’s tips at the end of this video. He is not just going to tell you some things to do, I’ve seen him do these things in his leadership role at MHI, said Danek-Akey.
Leadership and the workforce are also experiencing some changes in diversity, equity and inclusion (DEI). “Another interesting finding is that the future supply chain is trending toward a more diverse and inclusive workforce,” said Boykin. For example, “we can predict that we will see a big jump in women in the supply chain workforce in the coming years,” based on results from the survey.
When it comes to new strategies organization are currently or plan to implement to protect their supply chain from global disruptions in the future, 45% said it would be flexible manufacturing or supply chain related services.
Bradley said for there to be a real possibility for an organization to thrive after a pandemic, you have to look at it a little differently. “If the focus is just on surviving it, then you look no different, your capabilities aren’t any better. You may have a better understanding of what you can handle, but didn’t necessarily shore up where there were gaps in your business continuity plan or your disaster recovery plan.” In order to be insulated the next time around, you have to be prepared. For organizations that had these plans in place, when disaster struck it was a shock. “But, it wasn’t a shock that paralyzed them, it was a shock that mobilized them,” said Bradley. “And if you are going to fail, fail forward.” Don’t learn from failure, learn in failure. Tweak things as you move along, so failure isn’t a setback but a setup to do better.
As far as actions to take in preparation for the changes in the next 10 years, 48% said it would be partnering with vendors to better understand apps and benefits. Digital innovations can drive competitive advantage, but only if you know how to use them. Surprisingly, the survey showed that the degree to which digital innovation can drive competitive advantage, though it is still strong, slightly decreased. Bradley explained that this is due to “reality is actually starting to set in. Though we might have possession of technologies, possession alone is not sufficient to give us that competitive posture that we are going to need.” He said he doesn’t think that is a bad thing. “I think it is a good thing. It is an industry that is now starting to mature and fully understand that these innovative technologies are intended to be strategic levers rather than just operational assets.”
According to Boykin, a key thing we hope readers will take away from this year’s report is that companies that embrace innovations and digital technologies can:
1. respond more quickly and effectively to the immediate challenges posed by disruption;
2. recover faster than their peers; and
3. create sustainable competitive advantage that enables them to survive in the post pandemic world.
Digital Consciousness Framework
The Digital Consciousness Framework was revisited as well by Paxton, who went over the various digital categories—Leadership, Talent, Customer Engagement, Workplace Environment and Innovation/Technology—and the degrees of engagement: elevated, heightened, developing and dormant. “This is a tool that you can use and you really should use to find out where you stand in the digital consciousness and the developmental process. 625 companies have used this tool and the results show that 71% of those companies are developing their digital consciousness tools and skills,” said Paxton. “Last year we introduced the DCI Toolkit, which gives you specific steps you can take to move your company from one step to the next.”
Visit mhi.org/dci to measure your Supply Chain Digital Consciousness Index (DCI).
Download the 2021 MHI Annual Industry Report, Innovation Driven Resilience, at mhi.org.
And, as Danek-Akey suggested, be sure to watch Paxton’s wrap up and suggestions at the end of the video, which can be accessed here.
Be sure to read the next issue of MHI Solutions, where we will feature more in-depth analysis of the MHI Annual Industry Report. If you’d like to be added to the email list to receive MHI Solutions, click here.
P.S. The 2021 Kentucky Derby is May 1, if you want to see if the favorites will win or if there will be some surprises!