Supply Chains in 2030: Connected, Intelligent, and Autonomous

Last decade, the explosion of data and acceleration of e-commerce brought disruptive progress to supply chain management. Supply chains evolved to better serve global markets and disintermediated channels through improved planning and automating physical processes. Contemplating how supply chains will transform over the next ten years, these shifts emerged as the most likely to have a long-term impact.

[Editor’s Note: When this blog post first came to be, no one could have foreseen what the world is enduring with the novel coronavirus pandemic (COVID-19). Yet as we look towards the decade ahead, we believe that the observations below remain valid. Some developments will take longer; others will be here much sooner because that’s when they’ll be needed. Ten years out, life will have long returned to what we will call “normal.” For these reasons, we stand by this forecast and publish this post as written.]

Solving last-mile delivery profitability

To satisfy ever-increasing customer expectations, companies remain focused on last-mile delivery—piloting deliver-from-store, in-store pick-up, and locker solutions. Post and Parcel estimates that parcel packages will exceed 200 billion by mid-decade, up from 87 billion at the end of 2018 So it’s fair to say this is the supply chain challenge of the decade.

To compete, 3PLs may need to blur the lines between white glove, LTL, and parcel. But last-mile is too expensive without the route density of the leading three players: FedEx, UPS, and Amazon. The solution will likely be a combination of options. First, high-density players like UPS will capture market share to deliver last-mile profitably. Second, autonomous, compact delivery vehicles will perform last-mile deliveries in moderately populated areas. Finally, customer pick-up replaces last-mile delivery in urban areas.

Eco-consciousness and the high cost of last-mile delivery may also lead to the creation of super-compact, high-density delivery centers on city blocks. These are autonomous, vertically-aligned spaces where retail deliveries are sorted overnight and made available for customer pick-up and will eventually include restocking services to ease return order strain. In response, companies will need to reconfigure supply chains to move smaller loads over shorter distances as opposed to traditional bulk long-distance hauls.

Warehouses will become multi-faceted to serve all types, sizes, and speeds of order

Physical retailers have only recently explored the use of their stores as mini-warehouses that can quickly and cheaply serve nearby customers. Over the next decade, retailers should rely on local stores to fill same-day orders, manage returns, and last-mile deliveries. However, achieving this seamless experience requires warehouses to carry inventory varying from watches to refrigerators and handling orders ranging in size from parcel to full truckload. In some cases, they may need to become light manufacturing facilities that produce and package products.

One vehicle for achieving this flexibility is the increased use of robots and cobots. As robotic capability to “hand-off” goods to fixed automation grows, MH&L expects that cobot operations to replace large-scale materials handling automation in more than 50,000 warehouses by mid-decade Autonomous mobile robots (AMR) will work collaboratively alongside humans to restock inventory and fill orders. As warehouses become entirely autonomous, supply disruptions caused by labor disputes will all but disappear.

Logistics networks must adapt to circular business models

The servitization of products and the push towards zero waste will force companies to forgo linear supply chains for dynamic, circular operations. Companies with “product-as-a-service” offerings like Dollar Shave Club and HP will be required to dynamically manage reentered inventory and fill orders from any stocking locale. Zero waste initiatives will drive high-volume, consumer goods companies like Coca-Cola to recycle packaging back into their system for reuse. Companies must invest in robust, trackable packaging solutions to maximize package reuse within a closed distribution loop. 

Automation will reshape manufacturing and distribution networks

Across the supply chain, artificial intelligence (AI) will continue to replace human intervention. As supply chains become less labor-dependent, cheap labor markets won’t justify offshore manufacturing. Facility and transport costs become the deciding factors. The growing desire for supply chain risk mitigation may also affect some companies’ decision to source more products domestically.

Self-driving trucking will remain semi-autonomous, and drones relegated to the outskirts

Autonomous trucks—boosted by 5G and edge computing to make them safer—have the potential to single-handedly end the driver shortage and double the distance a vehicle can travel in a day. However, to make this possible, these trucks must reach level 4 automation – the point where the tractor drives unassisted even though a driver is present. Newly redefined regulations have enabled self-driving cross-state trips and eliminated the associated driver limits on hours-of-service. However, safety concerns are still too high. Over the coming decade, semi-autonomous long-haul trucks will supplement, not replace, drivers. Look for early success with yard management vehicles whose controlled, repetitive routes make them a perfect fit for autonomous technology.

Drones/UAV technology will have a similar trajectory this decade. The FAA expects the uncrewed aerial vehicle market to grow 44 percent over the next five years. However, drones won’t reshape most supply chains. GPS is not accurate enough to consider UAVs a viable last-mile delivery option in developed, urban areas. However, there may be more substantial growth in underdeveloped regions of the world with limited logistics infrastructure.

It almost goes without saying that in order to achieve broad transformation in each of these areas, there must be widespread adoption of several enabling technologies like: 5G, edge computing, plug and play analytical tools, artificial intelligence (AI) and machine learning (ML). Together these technologies will improve the speed, processing power, decision-making abilities, and predictive capabilities of future supply chains.

As the decade unfolds, executives and supply chain leaders alike must ensure corporate goals stay aligned with more autonomous and connected supply chains. Companies will need to invest in infrastructure to capitalize on the dynamic and actionable insights coming from their supply chains. These capabilities should also drive corporate ethics policies that examine and define acceptable business practices and determine operational boundaries. Talent requirements must also shift to those who can understand supply chain dynamics, adapt to changing environments, and decide the best way to leverage new technologies.

Change is an opportunity for growth—if you seize it. Chainalytics’ combination of top supply chain talent, proven methodologies, and proprietary market intelligence consistently puts our clients ahead of the curve. Reach out if you want help minimizing the growing pains or seizing new opportunities related to these trends and technologies.

Mike Kilgore is the founder and CEO of Chainalytics.