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The supply chain plays a vital role in American business, yet the decline of manufacturing has led to the reshaping of services like cloud computing and enterprise software and the evolution of former large manufacturing companies into service organizations.
Traditionally, the US supply chain has been a driver for industrial innovation - generating new businesses and an abundance of jobs. However, as major firms gravitate away from manufacturing, it's now services that are the innovators and growth drivers.
So, what do these changes mean for supply chain organizations that are looking to innovate?
According to researchers Mercedes Delgado and Karen Mills, writing in the Harvard Business Review, the business-to-business supply chain is responsible for 37% of all US jobs – 44m in total.
Jobs in the supply chain traded services - a sub-sector identified by the researchers as those sold across regions like engineering, design, software, logistics etc - increased by around 40% from 1998-2013. Over the same period, supply chain traded manufacturing jobs declined more than 30%.
This change toward more service jobs, where average wages are higher, the researchers add, reflects the increasing importance of new service industry sectors like data, design and marketing, logistics and software. What's more, it's a great indicator of the type of technologically-minded and tech-savvy employees that supply chain businesses need to bring into the workforce.
Downstream links to multiple industries, say Delgado and Mills, allow innovation created in the supply chain to spread through the wider economy. This is reflected in the type of service workers now being employed in the supply chain and the higher salaries.
“The intensity of Science, Technology, Engineering and Math (STEM) jobs - a proxy for innovation potential - is almost five times higher in the supply chain economy than in the B2C economy. Patenting is also highly concentrated in supply chain industries," they say.
At HERE, we like to think our expertise is helping supply chain services to foster innovation . Our leading software and data solutions contribute significantly to the development of critical supply chain services, perhaps most notably those that help optimize and refine the supply system itself and the solutions we supply to the transport and logistics industry to supply businesses on the move.
Support of supply chain services is likely to lead to greater industrial innovation and an increase in well-paid jobs within the sector, but what kind of support do businesses need to prosper?
According to Delgado and Mills, economic policy should support development of supply chain services through investment in skilled labor, the encouragement of regional industrial clusters and access to capital.
These incentives would likely help drive innovation. Additionally, we think that businesses themselves should make use of technologies that help exploit the trend for service growth and added profitability could encourage even more innovation and revenue generation.
That's why HERE is helping to apply location intelligence across multiple industries. If, amongst others, we can help the automotive industry, internet and media, telecoms and utilities, transport and logistics and the public and infrastructure sectors, we're well on the way to creating additional value and innovation right across the supply chain economy.
To find out more about how HERE is helping innovate supply chains, please click here.