5G: Supply chains are transforming faster than you think

From AI to port operations, 5G promises to transform supply chains in the coming years

From AI to port operations, 5G promises to transform supply chains in the coming years

Shopping has seen a remarkable transformation over the turn of the century. From being a monthly or weekly ritual, shopping habits have transformed into a ‘just in time’ activity for both individual and business customers. The size of the individual cart has reduced while the volume of shipments has increased manifold. Pitney Bowes estimates that global parcel volume surpassed 100 billion in 2019 and is forecast to reach more than 200 billion parcels by 2026.

We are now living in the era of the ‘Supply Chain-of-One’ where consumers demand personalized products and services delivered with minimal lead times, at lower costs to a location of their choice. This has been driving organizational requirements for real time information, decentralized decision making, integrated systems and capabilities focusing on customer experience rather than just product functionalities. Additionally, supply chains need to reduce their impact on the environment.

This has disrupted traditional supply chains which had optimized based on economies of scale, batch processes and rigid organizational structures. The hyperconnected supply chain of future needs to pivot based on two main dimensions:
• building organizational capabilities based on new processes, governance, and ways of working
• leveraging existing and emerging technological capabilities most suited to the organization.

Technology ecosystem driving the supply chain of the future
Leveraging technological capabilities is easier said than done as the technology landscape itself is rapidly evolving. In 2001, Ray Kurzweil, an American computer scientist and futurist, highlighted that technological change is exponential, and new technology ecosystems will replace aging ecosystems even before the latter’s growth has plateaued.

Technology advancements seen over the last two decades reaffirm Kurzweils’ statement. Not only are new exponential technologies emerging, they are also converging at an unprecedented pace. We are entering a futuristic cyber physical world where the Industrial Internet of Things (IoT) and Industry 4.0 will enable seamless communication between machines unconstrained by geographical boundary.

The exponential growth in sensor technology, Robotics, 3D Printing, Machine Learning (ML), Artificial Intelligence (AI), Big Data Analytics, Service Virtualization, Cloud Computing and Edge Computing will help flexible automation of operations and meet customized supply chain needs.

The rapid evolution and convergence of these technologies has resulted in the creation and consumption of massive amounts of data at every node within the supply chain. This data needs to be analyzed and leveraged to draw actionable insights.

Organizations need to build capabilities in the four fundamental building blocks to support a ‘hyperconnected’ supply chain. 5G and other adjacent technologies providing fast, reliable, low latency communications will form the ‘connectivity’ backbone to achieve the ‘hyperconnected’ supply chain.

Take the case of autonomous vehicles. For vehicles to operate autonomously, a considerable number of onboard sensors and IoT devices will collect significant amounts of data (to illustrate the volume of data, a typical LIDAR sensor captures about 1.3 million data points per second) and make some rapid decisions using edge computing technologies.

While some parts of the data might be instantly sent via 5G for deeper analysis through secure channels leveraging ML and AI based on which quick decisions are made and communicated back to the vehicle through high speed and low latency networks.

Wireless convergence
The goal of wireless communication has been to provide high quality and reliable connectivity like that of wired communication; each new generation (G) of the technology represents a big leap towards this dream. This has in turn been leveraged by supply chains to find innovative solutions to some of its traditional and ‘sticky’ problems.

Each generation has improved over its predecessor in terms of speed, latency, capacity and reliability. The evolution of fast and frequent communications capability has enabled improvement in supply chain operations. In the last decade of the twentieth century, with the emergence of 3G, it became much easier to collaborate across the supply chain. Faster delivery became the norm and huge investments were made using the mobile network to improve fulfilment speed and accuracy.

From a speed and latency perspective, the quantum of change that we witnessed from 3G to 4G itself has been monumental. 4G brought with it much needed boost in data speeds, which led to the development of a new breed of applications. Mobile-based ecommerce became the norm and ‘mobile first’ started to become the key application strategy.

The emergence of cloud technology with improved ML and AI capabilities was able to use the large volume of (new) data in remote cloud servers to enable intelligent supply chain applications.

With the advent of 5G, we are aiming for speeds up to 10 gigabits per second; and in a decade, with 6G, we will be able to achieve a speed of 1 terabits per second. Another aspect to consider is the speed at which these technologies mature and reach the ‘Slope of Enlightenment’ and the ‘Plateau of Productivity.’

While 5G took 7 to 8 years to get widely adopted and mature for industrial use, some industry experts are predicting that wide-scale adoption of 5G could happen in just 5 to 6 years. It is in this environment that many organizations have embarked on a journey of Industry 4.0, which is the ongoing automation of traditional industry and supply chain practices, using modern smart technology.

At a high level 5G has the following characteristics:
High Speed
5G will enable extremely high data transmission rates up to 10 gigabits per second, a 100X improvement over 4G. This would revolutionize consumer media consumption, support immersive entertainment through Augmented (AR), Virtual (VR) and Extended Reality (XR) solutions and significantly improve productivity.

Ultra-Reliable Communication Networks
5G will be able to connect to networks with a reliability equivalent that of wired networks which is essential for life-saving applications like tele-operated robotic surgery. 5G promises to deliver five-nines reliability i.e., 99.999%,  which translates to less than 5.26 minutes downtime per year which is similar to that of wired networks.

Low Latency Communication
5G will deliver extremely low sub 1 millisecond latencies, an improvement from 200 milliseconds for 4G. This will support solutions where ‘time criticality’ is of essence like Vehicle-to-Everything (V2X) communication, autonomous vehicles, remote surgeries and immersive VR gaming to name a few.

Massive Machine Type Communication (mMTC)
5G supports extremely high device densities supporting the plethora of connected and IoT devices in dense urban environments. 5G will enable one million connected devices per square kilometer and a network capacity of 10 terabits per second per square kilometer. This is a 10X improvement over the hundred thousand connected devices per square kilometer as promised by 4G.

Energy Efficiency and Service Deployment
5G network equipment and devices will consume only 10% of the energy consumed by 4G network equipment and devices, and specialized services that will operate on the 5G network will take much less time to implement. This will allow for connected devices to operate for months without the need for human intervention.

These characteristics are further enabled by solutions like network virtualization and network slicing which will enable the service provider to use the same physical infrastructure to support multiple use cases.

While it would be naive to assume that emerging wireless connectivity improvements would independently drive all future supply chain transformations, the widespread adoption of 5G, enabled by other emerging technologies brings several ‘hitherto impossible’ supply chain uses cases within the realms of possibility.

External communication through 5G can be supplemented by the internal communication supremacy offered by Wi-Fi 6 to offer seamless connectivity across the supply chain. This data when coupled with the Edge Computing and the Telecom Edge provides computation and data storage resources as close as possible to the end users.

The widespread adoption of Cloud Platforms with greater flexibility, lower costs and higher service availabilities are now enabling organizations to process this data to enable real time decision making by leveraging AI and ML. These converging technologies will form the basis for a new generation of technology ecosystem.

While there are still concerns that these technologies need to iron out, especially in the terms of security and costs, the focus should be to identify and expand on relevant industrial use cases and to transform the enterprise architecture to handle the new ecosystem.

5G use cases
The initial use cases pertaining to the rollout of 5G have all been in the consumer media consumption domain. However, as 5G adoption becomes more widespread and its enabling technology ecosystem matures, the industry and supply chain use cases for 5G will become increasingly prevalent.

For global supply chain managers, 5G will help unlock transparency, visibility, and efficiency for the entire logistics process from start to finish. These use cases can be broadly classified into three categories based on the use case characteristics.

Low Latency driven use cases
5G will be rapidly adopted by processes and functions where time sensitivity and fast response times are of the essence. Use cases such as transportation (varying from Autonomous Vehicles on the streets to Automated Guided Vehicles in a factory setting), Digital Twins to remotely support key operations as being tested in smart factories or port 4.0, AR/ mixed reality to support issue identification, resolution and training in the field, human robot collaboration, etc. will become increasingly feasible. Ports, generally the major bottleneck in global supply chains, will receive a significant boost to its end-to-end logistics performance with the use of these transformative technologies.

Data Volume and Reliability driven use cases
5G will also help enable use cases driven by the need to reliably capture vast amounts of data generated by extremely high densities of IoT devices all connected securely to a common infrastructure. This will help establish faster and effective advanced predictive maintenance supported by developments in IoT and automation. Better actionable insights can be generated supported by Digital Twins, AI and advanced analytics to improve operational efficiencies, reduce defect rates and increase production volumes.

Supply chain visibility will also improve drastically aided by these connected devices. This will also bring a much-needed boost to the demand sensing process which is still managed using traditional IT systems.

Enterprise Communication enabling use cases
5G would enable pureplay enterprise communication use cases where normal human interactions will be aided by device-to-device communications. As the solution adoption matures, 5G coupled with 4G and Wi-Fi 6 has a potential to create an ecosystem of wireless connectivity that can ensure that every component in the supply chain can always be in a connected state.

In a hypothetical scenario, let us assume that a Stock Keeping Unit (SKU) gets marked as out of stock at a retail outlet. This information is automatically sent to a warehouse, where the SKU auto picked, and loaded for delivery in the next shipment. The entirety of this information can be tracked by the retail outlet and an alert is received on the arrival of the SKU. This entire flow could happen without any human intervention, reducing resource requirements and avenues for errors.

The ability to communicate in real time will help dilute organizational boundaries, enabling better understanding and interactions across the value chain.

Looking at supply chains from a Supply Chain Operations Reference (SCOR) Model lens, it is easy to see that the Make and Deliver processes will be transformed by the emergence and maturity of 5G. The sourcing process can also be expected to see improvements, especially in the areas of collaboration and visibility.

As 5G and enabling technologies get increasingly ingrained in organizational processes, significant improvements in planning capabilities will emerge – an indirect benefit of well-established digital twins and a predictive and intelligent Sales and Operation Execution (S&OE) process.

By the same yardstick, the industries that will see the most benefits will be the ones where clear use cases exist on the parameters defined above. The supply chain functions in manufacturing and logistics will be the areas where these use cases are easiest to visualize and realize.

Recently, Ericsson Industry Labs conducted a survey of logistics decision makers on what technologies they felt are most important for them in next 3-5 years. Unsurprisingly asset tracking and wireless connectivity emerged as the most important emerging technologies from a logistics perspective.

Organizations need to prioritize visibility to build trust across the supply chain. Despite years of investments, there exists blind spots in the warehouse ecosystem and inventory and asset tracking is often a challenge. This issue becomes even more pronounced if we look at the examples of ports, yards or Container Freight Station (CFS) ecosystems. Thus, there is a strong imperative for organizations and supply chains to leverage the wireless connectivity coupled with adjacent exponential technologies to improve operational efficiency and reduce costs.

While 5G would be an ideal solution for several use cases, the biggest benefit for businesses will stem from using 5G in conjunction with technologies like Wi-Fi 6, Cloud and AI. It will be up to the pioneering businesses to identify the combination of emerging exponential technologies that would be right for its business.

Preparing for a hyper-connected world
Significant value can be created by the widespread use of converging technologies where the 5G connectivity will act as the catalyst. 5G use cases collated by World Economic Forum presents an exciting journey where the collaborations have started to set in between different ecosystem partners.

In the new hyperconnected world, 5G alone will not transform the business. Organizations need to define a new strategy and chart out a step wise journey to develop the functional and technical ecosystems that can maximize the benefits from these technologies.

Organizational strategy should focus not on stable technologies but on the changing technologies, as historical gains can dissipate quickly because of the rapidly evolving ecosystem. Data shows that the average life of the companies in S&P500 has declined from more than 50 years in 1950s to less than 20 today (Hunsaker & Knowles, 2020). In such a dynamic scenario, organizational design and preparedness will be essential to stay agile and nimble and support new operating model.

New operating models driven by the evolving human machine interactions and improved collaboration between organizations will bring significant operational efficiencies. A case in point is automoted ports which are seeing a paradigm shift moving from an asset operator model to a service orchestrator model where the port operations can be managed remotely.

This will also open new service specializations and outsourcing models making specialized resources and skills available even at remotest locations. Results from automated port pilots show that using this new model can reduce operating expenses by 25% to 55% and increase productivity from 10% to 35%.
For too long, IT managers were expected to understand the business. Now a business manager must understand the basics of IT to succeed. The terms such as ‘data is the new oil’, ‘data driven organization’ has become common parlance in organizational vocabulary. While there is a strong cultural shift towards becoming data driven, organizations are also building tailor made data strategies along business value chains.

When the six-decade run of increasing computational power, which was followed Moore’s law, seemed to slow down due to limitations posed by improvements to integrated circuits, quantum computing and ‘qubits’ are putting the Moore’s law on steroids. Data volumes are going to grow at an unprecedented level driven by technologies such as 5G and IoT which will act as a catalyst for digital transformation. But with more connected data will come more risk and a heightened focus on compliance and security.

Decision-makers should focus on educating themselves on how 5G and adjacent exponential technologies are going to be used and rolled out. This will help the decision-makers identify use cases relevant to their industry and function.

CTOs and CIOs should collaborate with their technology and service providers to build a roadmap for infrastructure changes and hardware upgrades all the while focussing on compliance and security.

Organizations and functions can start by focussing on limited proof of concepts. They need to understand and accept that the returns on the initial investments might be limited, but as the industry and organizational maturity increases, they will be at the forefront to realize the benefits from this technology ecosystem.

About the Authors
Anil Kumar, Digital Supply Chain Leader, TCS has 20 years of experience across supply chain functions and is currently leading global projects as a digital supply chain architect.

Rahul Justin, Digital Supply Chain Leader, TCS, began as a practitioner in the areas of manufacturing, strategic sourcing, and new product development in the commercial vehicle industry. At TCS, he has focussed on the areas of Supply Chain Strategy, Supply Chain Operations, and M&A/Divestments in the automotive, telecom equipment, medical device and consumer packaged goods industries.