December 26, 2014      
Forecast: $10 billion market for robots that can handle materials better than humans.
?Allied Market Research

?Today?s complex global supply chains are poised to be dismantled,? read the headline a year ago at GigaOM. The article beneath it was a guest editorial by Paul Brody, an IBM VP in IBM?s Global Business Services unit.

Basically, the article?s core stated: ?Thanks to the growth of 3D printing, intelligent robots, and open-source hardware, tomorrow?s supply chains will be faster, smaller, cheaper, and local.?

For most anyone running a global supply chain, that headline must have given considerable pause for thought, maybe even relief. Global supply chains are, at best, difficult to run. They are vulnerable to a host of potential problems, foremost of which is their cost.

bastian unloader

That there is an alternative brewing somewhere out there that mitigates some or all of a supply-chain?s headaches should be cause for joy with embattled supply-chain managers who have to contend 24×7 with these awkward, problem-prone and wildly expensive behemoths.

A year on, with similar headlines having popped up consistently over all sorts of media, and with the new tools for change rapidly arriving on the scene, industry, for the most part, has been slow to react and to begin early adoption of this ?New Supply Chain? movement.

Strangely, some 70 percent of the supply chain leaders IBM spoke with were clueless about this new supply-chain concept, and most admitted that they had no plans to change things for the ?rest of the decade.?

?If it ain?t broke, don?t fix it,? seems to be a prevailing mindset. With many organizations still in recovery mode from the Great Recession, such reactions are quite understandable. But the churn of business is not so kind; many supply-chain leaders?who fail to pay attention and react?stand to be blindsided by a revolution they never saw coming.

However, a small but growing number of early adopters, from SMEs to huge multi-nationals, have appeared on the scene and are pioneering these new-look supply chains into what is ramping up to be a paradigm change in the manufacturing, shipping, storage and distribution of just about anything.

Brave new world

The need for speed plus?

Behind it all is the need for speed. Global supply chains are being pushed to the max to deliver ever faster from manufacturer to consumer. Former Tesco CEO, Philip Clarke (ousted in July of 2014), said he?s seen nothing like this demand for speed in his over forty years in the business.

Interesting that Clarke?s replacement with Unilever?s Dave Lewis, who will arrive in the fall of 2014, hails from a multi-national that ranks fourth on Gartner?s Top 25 best supply chains for 2014, just behind Apple, Amazon, and McDonald?s.

Couple the need for speed with head-spinning discounting from Wal-Mart and its low-price brethren Carrefour and Tesco, who are also pushing the envelope with omni-channel retailing, and it is easy to see why automation is headed into a brave new world where speed and instant inventory availability are all that matter.

Telling as well, and more to Clarke?s comment on the churn of supply chains, is the recently released 25th Annual State of Logistics Report from the Council of Supply Chain Management Professionals (CSCMP), which reveals that ?total U.S. business logistics costs in 2013 rose to $1.39 trillion, a 2.3 percent increase from the previous year. Logistics as a percent of U.S. gross domestic product (GDP) declined for the second year in a row [emphasis mine], indicating that the logistics sector is not keeping pace with the growth in the overall economy.?

In 2012, it was $1.33 trillion or nearly 8.5 percent of GDP. ?That $1.33 trillion in total logistics spend,? says Dan Gilmore of Supply Chain Digest, ?is 21 percent above the 2009 bottom, but still below the 2007 peak of $1.39 trillion.?

Well, here in 2014, logistics has matched its 2007 peak, yet still lags behind the growth of the overall economy, according to the CSCMP. That, in effect, implies that Gartner?s Top 25 are all lagging the economy. So, if the Gartner Top 25 are lagging, where does that put all the others?

The bottom-line concern is that no matter how hard present-day logistics? systems work, they will never catch up. A situation worse than Alice in Wonderland who had to run as fast as she could just to keep in place: with logistics?running as fast as it can?means always lagging behind.

With us already

Many of the new-world robot logistics systems are with us already. For example, see below for the video from Bastian (2011):

For an in-depth view of what’s in store for supply chain transformation:
See Special Report: Robotics and the ?New? Supply Chain: 2015-2020

What happens when the economy shakes off more of the Great Recession and breaks into a sprint? What happens when a supply chain hits a snag like a natural or geopolitical disaster?even a small one?and the supply chain slows or even momentarily stops?

What?s at stake?

Charles Darwin was correct: ?It?s not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.?

What?s at stake? As Darwin put it: Survival. Change is coming lightning fast to supply chains, pushed seemingly in femtoseconds from online transactions.

By 2016, reports the Boston Consulting Group, ?there will be 3 billion Internet users globally?almost half the world?s population. The Internet economy will reach $4.2 trillion in the G-20 economies. If it were a national economy, the Internet economy would rank in the world?s top five, behind only the U.S., China, Japan, and India, and ahead of Germany.?

Mobile devices?Smartphones and tablets?will account for four out of five broadband connections by 2016, every one of which will be capable of making an online order. What will happen when a full 50 percent or 75 percent of the world?s population is dialing orders from a Smartphone or tablet?

Online retail will comprise 10 percent of all retail sales by 2017, reports Forrester Research, up from about 8 percent today. That relatively small-sounding increase is actually a 9 percent compound annual growth rate (CAGR) from $231 billion in 2012 to $370 billion in 2013.

Exponential growth is taking place and traditional supply chains cannot keep pace.

Robots, already an emerging fixture in this frenetic landscape, are now, according to Automation World, ?gaining traction against traditional automated-guided-vehicle (AGV) and fixed-conveyor solutions.? Additionally, robots have also now become ?true options for small- and medium-sized businesses with limited automation skills and budgets.?