Software-Defined Supply Chain: Digitization of design and manufacturing
After software-driven compute virtualization, we all have been witnessing software-driven virtualization of storage and networking. While corporate IT departments have been now finding ways to implement software driven data-centers, hyperscale data-centers (Amazon, Google Facebook etc.) have been already successfully driving commoditization of hardware, enabled by software. Hence, it was only a matter of time before other business areas would start seeing the value in driving their value-chain using software.
Now according to latest research from IBM, hardware-driven supply chain is going to give way to software-driven supply chain.
Any company that has to deal with supply chain management knows how painful a task it is. It is enormous, complex, elaborate and absolutely important and unavoidable. Everything from timely manufacturing of products to the cost per product will relay upon proper supply chain management. Any mistake (however small they might be) in the management of supply chain can trigger a butterfly effect that could have a catastrophic result for the company. This is why companies that have major supply chain operations take utmost care in this. To do this properly, these companies had to spend an enormous sum of money on to the process, an enormous constraint on the company (both financially and otherwise), but all these are about to change.
What will be the change and how will it help?
According to IBM, following three technologies are driving the future software-based supply chain.
- 3D printing
- Intelligent Robotics
- Open-Source Electronics
These new technologies are creating a manufacturing environment that is driven by digital data.
These technologies will enable a reconfigured global supply chain. It will radically change the nature of manufacturing in the Electronics industry, shifting global trade flows and altering the competitive landscape for both enterprise and government policy makers.
Today, the arbitrage of production costs almost always depends upon the scale of your production, i.e. the more you produce the cheaper it will be. Which was great for the giant MNCs, but what about the smaller players? The companies that do not have the luxury to manufacture hundreds of thousands or millions of products at a time, there wasn’t much they could do in terms of competing with the giants (A very unfair situation indeed).
But, according to IBM by leveraging the three emerging technologies (3D printing, intelligent robotics and open source electronics) and the ‘software-defined supply chain’ the smaller players will also have a better fighting chance. “On average, it will be 23 percent cheaper to make products in a software defined supply chain,” says the IBM’s paper.
To create a new product, companies need to manufacture new parts or components, and they cannot be made without creating new molds. This is a major constraint. But with 3D printing the need to create molds can completely be erased, the companies can directly print the components that they need, and as you can see this makes the process cheaper and faster. Intelligent robotics and open source electronics also bring similar advantages to the manufacturing process and all three of these technologies are software-defined.
The fact that is more fascinating than cost arbitrage is that to achieve this you do not need to have a very large scale of manufacturing. “Even more dramatic however, is the 90 percent decrease in the minimum economic scale of production required to enter the industry,” point outs the paper. Now, how awesome is that?
The final product, be it a television or a smart phone, normally travel thousands of kilometers from the manufacturer to the supplier to the consumer. This transportation cost, when we look at the giant picture, itself is enormous. If we are to move away from the old fashioned manufacturing and supply chain process to this newly proposed software-defined supply chain process this issue can also be solved to a large extend. As the software-defined model comes as a service and a company need not have to spend a lump sum on a manufacturing plant they will be able to make their product anywhere at any time.
With the astonishing results from their study the IBM is predicting a complete relocation from the traditional practices of supply chain management. The process can now be fully automated and be managed and controlled by intelligent software thus lifting many of the major constraints, making it significantly more financially viable and optimized.
The ease of supply chain management and manufacturing means that the barrier for entry into the industry, any product based industry will be much lower than what it used to be. Which means there will be many more players and the competition can raise to an unforeseen level, but that can be a positive thing for the customers and from and innovation standpoint. So, let us just say, may the best product win.
A cherry on top is that, according to IBM, the software-defined supply chain is ‘greener’ in comparison to the traditional one. Which, it is needless to say, is a very positive aspect in today’s changing world. All in all, the possibilities that this new vision is opening are enormous, as in, it has the potential to change the world. Will the industrial world adapt the software-defined infrastructure, if so how fast that will happen, these are all relevant questions! For the answers, we will have to wait.