Supply Chain Matters provides another deep-dive perspective on the ten outlined 2018 Predictions for Industry and Global Supply Chains unveiled in mid-December.
In this installment, we dive into 2018 Prediction Five: A Shifting of Priorities for Supply Chain Digital Transformation, Data Management, and Technology Enhanced Business Relationships. 
Context
With accelerated adoption of the online buying economy, many industry supply chain organizations have acknowledged needs to transform processes towards digital transformation. The challenge up to now, has been readiness, resources, and timing.
We predict that in the coming year, digital timetables will accelerate because of the compelling business forces accelerating such changes. One relates to the current speed and scope of multi-industry industry disruption. The second relates to comprehensive United States corporate tax reform measures that could either accelerate or re-focus process or technology areas of supply chain transformation.
We predict that this acceleration in digital transformation will continue to take on two dimensions in the coming year. One will be customer-facing, namely all digital processes supporting multi-channel customer fulfillment and service’s needs. The other will be supplier-facing, the digital linking of many supply network processes among existing B2B Business or Industry network processes. In some cases, leading edge innovative supply chains will begin to consider added interlinking of both to bolster network response to changing customer needs, support new digitally-enhanced business models or improve end-to-end network resiliency and response.
As we publish this prediction in mid-January, the U.S. Congress has passed significant corporate tax reform legislation. Among the tenets of the final legislation will be incentives for businesses ability to be able to return foreign cash reserves to the U.S. at a lower current tax rate and allow corporations to deduct the full cost of capital equipment investments from taxes in the year of purchase.
Depending on how individual firms begin to modify overall tax and financial planning will determine the acceleration of the transformation noted in this prediction. If companies are inclined towards favoring added capital equipment purchases, we foresee manufacturing, customer logistics and fulfillment automation as the likely recipients including more autonomous material handling, robotics-enabled manufacturing assembly and movement equipment investments.
In terms of implications to size of business, we predict that these shifting priorities will have a broader positive impact on small and mid-sized businesses because that will likely not have the legacy of older processes and supporting systems along with the ability to move toward digital transformation with fresh thinking and a quicker pace.
Industry and Supply Chain Network Clouds Accelerate in Adoption
The acceleration of digital transformation likely adds to the attractiveness of public or private Cloud based platforms and supporting IT infrastructures. Supply chain and line-of-business transformation teams know full well that attempting to rip and replace existing legacy applications and technology is far too disruptive and expensive. With global supply chain activities reaching historic highs, now is not the time for businesses to risk a systems related disruption.
Industry and Supply Chain Clouds afford ubiquitous connectivity and data exchange among customers and suppliers and allow the cost burden to be amortized over multiple time windows. Cloud platform providers have the ability to leverage overall network participation while investing in the latest advanced technology and data security tools and processes. In industry environments that remain highly sensitive to reducing costs and accelerating process efficiencies, the ability of industry supply chain and IT teams to recommend Cloud adoption strategies will further resonate in 2018.
The above stated, 2018 will likely feature additional M&A activities among large enterprise, industry-specific and specialty best-of-breed Cloud technology providers. The strategy among Cloud technology providers in 2018 will be about building scale and market influence.
We further anticipate one or two high profile Cloud technology providers to stumble in 2018 because of a flawed business model or a market misstep. Customers have become much more-savvy to being locked into proprietary and overly expensive platforms and that will likely lead to such a stumble.
Pause in Internet of Things (IoT) Investment
Our sense is that IoT investments will encounter some setbacks in 2018 for two specific concerns.
The first, as noted in Prediction Four, will be increased emphasis on cyber security in the coming months, and specifically for addressing ongoing perceptions that current IoT platforms are not addressing concerns for data security or vulnerability. Technology providers will have to prioritize ongoing development, deployment, and product management efforts toward higher levels of protecting IoT operational data and not allowing IoT portals to be the conduit of cyberattacks or to compromising the safe operation of physical equipment. IoT platforms will therefore have to demonstrate to prospective business customers their ability to pass rigorous data security audits and standards.
The second is a carryover from our 2017 predictions, namely that equipment manufacturers and would-be services providers remain in industry related conflicts as to which entity ultimately owns end-customer data. This has pitted original equipment manufacturers against major component suppliers, and has led to M&A consolation efforts in some industries such as commercial aerospace and manufacturing equipment as to influence which constituencies will have ownership rights to end customer data and new digitally enabled services related business models. Some businesses have elected to accelerate IoT driven business transformation to gain first-mover advantage, but we fear that those efforts will pause if customer data ownership is not resolved.
Blockchain Technology
With the pause in IoT investment, we continue to believe that Blockchain technology initiatives will gain added interest and momentum in 2018 because this technology responds to the needs for added data security and trusted network partnerships. The notions of distributed, trusted ledgers and auditability available to supply chain partners has appeal in current data sensitive environment. High visibility pilots addressing challenges of food safety, transportation movements and new supplier certification have high appeal and potential for meaningful benefits. Government regulators have shown tendencies to openly support Blockchain technology efforts for the monitoring and management of regulated processes, and that will further open the door for more use cases and pilots to occur in the coming year.
Here again, the detriment to this technology remains the availability of generally accepted global standards related to either industry-specific or global electronic transactional ledgers. We therefore predict that the most important initiatives undertaken by Blockchain focused technology and services providers will be in cooperating on standards.
Further, technology providers that attempt to “lock-in” blockchain to an individual platform and use license will encounter market resistance and push-back.
Data Management
The year 2018 will provide a renewed emphasis on protections and safeguarding of customer related data. The motivations were noted in Prediction Four, namely the threat of more sophisticated cyber-attacks in the coming year. Also, the blowbacks from existing data breaches, in particular the Equifax breach allowing hundreds of millions of records related to sensitive customer data to be compromised.
We believe that this will force businesses and governments to re-double efforts to assure data protections, and that will conflict with ongoing beliefs that customer data is the new strategic asset for businesses. Thus, collecting customer data will need to be redefined into forms of selective data.
Since so many supply chain management processes interact and utilize direct customer data, such increased scrutiny and response will occupy initiatives and actions in the coming year. While marketing and supply chain management teams will clamor for the capture of all customer experience interactions, corporate compliance teams will be consumed with positioning and adhering to needs for protecting customer data.
The most near-term challenge is termed GDPR, short for the European Union’s General Data Protection Regulation. The Economist characterized GDPR as being the “Dodd-Frank of data.” The principle behind this legislation is that privacy and ownership of one’s personal data is considered a fundamental human right, especially when it pertains to online. The regulation not only applies to EU based activities but wherever personal data about EU citizens are processed.
GDPR is planned to be in-force in May 2018, and will in theory, strengthen the rights of individuals to control their personal data as well as stiffen the penalties against companies that misuse such data. The reality is that many EU and global companies are likely unprepared to understand and deal with the tenets of what will be required to be “GDPR compliant.”
Large organizations have indicated that the regulation will make it much harder to leverage customer data, particularly buyer related data, in online and physical customer intelligence capabilities. Small to medium-sized organizations fear that such a regulatory burden will prove to have severe financial impacts related to conformance. Some predict lots of confusion and litigation, as well as an initial curtailing of the direct use of customer data until GDPR is sorted out. In all cases, we predict that industry supply chain teams will be caught in the middle of such dynamics, with all sorts of initial confusing directives regarding how to collect and manage individual customer data. Some efforts toward enhanced customer intelligence and more predictive forecasting of expected customer demand may be temporarily derailed.
This concludes our latest 2018 Prediction deep-dive. Our full 32 page 2018 Predictions of Industry and Global Supply Chains research report is usually made available for complementary downloading in our Supply Chain Matters Research Center. At the present time, we have experienced a technical glitch in functionality, and hope to have the document available for downloading in the next several days. In the meantime, readers who desire the full report can send an email request to: info <at> supply-chain-matters <dot> com. Please include your name and return email address in the request.
Bob Ferrari
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