Co-author: Art Wright
Digital Supply Chains: A Survival Necessity
Over the past few decades, successful companies have repeatedly demonstrated the centrality of supply chain excellence in gaining a competitive advantage. However, doing business in today’s world calls for supply chain excellence as a survival necessity. In fact, the role of the pharmaceutical supply chain in lifting the world from the hands of the pandemic demonstrates how literal the previous statement is. Going forward, digitization of supply chains will not be an “option” for enterprises – but will be a baseline requirement. In fact, supply chain digitization will open new avenues of cost savings, while building resilience and agility into what is currently a fragile ecosystem.
Was Harvard Business Review (HBR) Wrong about ‘the Death of Supply Chain Management’?
In 2018, HBR published an article titled The Death of Supply Chain Management, where they predicted that technology would increasingly replace people in supply chains. While other thought leaders have presented a different view of the digital supply chains - coining terms such as “bionic supply chains” - most seem to agree that the supply chain of the future must be resilient to disruptions, driven by data, and will leverage a digital core whilst retaining the benchmarks of today’s supply chains - namely speed, efficiency and reliability.
While the supply chain management function is far from obsolete, today’s supply chains are tech-thirsty and for the right reasons: the current business ecosystem calls for end-to-end visibility, agility, responsiveness, data-driven intelligence and flexibility. While a number of companies have piloted prototypes that digitize supply chain functions effectively, only few have managed to achieve a holistic impact on the business as a whole.
In the past year, the push to actually realize the holistic, next-gen global digital supply chain has strengthened. Global supply chain disruptions have once again brought the attention back to supply chain management, and optimizing for speed and efficiency, while still important, is no longer the million-dollar question. The new function of supply chain management is to reduce complexity, build agility, reliability and transparency, and to improve upon the critical KPIs - namely speed and efficiency in the long run.
Think Outside the Process: It’s about Technology and People
When enterprises begin to vision a supply chain transformation strategy, they often start looking in the wrong direction. While pilots and solutions targeted at key process improvements deliver promising results in a target area, these solutions tend not to scale horizontally across the supply chain functions. More importantly, while process redesign is a crucial part of supply chain digitization, it is a difficult change to manage.
To tackle today's key challenges, supply chains must leverage both digital solutions and people efficiently along the vector of business value. Over 90% of companies have faced supply chain disruptions in the past year. Although the COVID-19 crisis greatly contributed to this, more traditional disruption factors were still pervasive. This indicates that the overall system is broken by challenges like steep demand spikes and troughs, international trade restrictions, increasing customer expectations and manufacturing and production blackouts.
As function and process-oriented pilots are becoming a sunk-cost fallacy, systemic solutions are clearly the need of the hour.
Visualizing the Digital Supply Chain
The digital supply chain is the key to bringing end-to-end visibility, agility, intelligent planning and responsiveness in today’s business environment. But what does this look like at an enterprise level?
Integration is the keyword here. Market intelligence firm IDC has observed the vast majority of supply chain interactions are happening over cloud-based digital networks. While the need for remote collaboration with suppliers and third parties is clearer than ever, bringing efficiency to the digital supply chain calls for enterprise-wide integrations along with a solid data strategy that minimizes digital waste and feeds insights and process improvements into the operations of the enterprise.
So what does the future look like? Here are our views across three key dimensions – people, processes and technology:
- People – Cross-skilling is Key
Digital supply chains will be, as BCG had called them - bionic. The industry points to an increasing degree of process-ownership along functions end-to-end. These processes will be aided by innovations in AI (especially conversational), UI and ML, and will simplify workflows to accelerate the movement of both data and physical goods down the supply chain. These processes will inevitably be owned by new cross-skilled personas, and businesses will have to balance the talent repository to align to these new personas.
- Processes – Moving from Mitigation to Prevention
Digital supply chains will not only tap into intelligent automation on repetitive and low-touch processes, but will also assist with critical functions - which explains the crux of the reasoning behind the digital supply chain also being a bionic one. Where legacy supply chains took a mitigative approach to dealing with disruptions, next-gen supply chains will take a preventive one. Moreover, an integrated enterprise architecture in a networked supply chain will also make possible inter-organizational processes like supplier collaboration based on demand forecasts, quality, inventory, contracting and commitment to demand levels under multiple scenarios, and much more.
- Technology – the Shift to Real-Time
Developments in cognitive technologies, automation and augmented/virtual reality, along with a shift toward integrated, cloud-native enterprise architecture, are significant enablers of supply chain digitization. In fact, these technologies give a new definition to BI, planning, procurement, risk management and supplier collaboration. For example, digital supply chain solutions provide granular and birds-eye visibility into critical supply chain metrics in real-time. In fact, the shift from lag-synchronized cycles to real-time awareness, monitoring and action is a crucial highlight of the digital supply chain.
Stop Leaving Money on the Table
With supply chain digitization, a component manufacturer managing over 1 million moving parts daily was able to achieve $67 million increased earnings and over $70 million in cost savings through supply chain transformation. Thought leaders point to a potential 20-30% savings, but digital supply chains promise a lot more than just claiming the money that most enterprises are already leaving on the table.
Digital supply chains come with a range of business benefits:
- From Chains to Networks: As digital supply chains grow, businesses will be able to distribute risk, improve information quality that ultimately decides the quality of decision-making across the ecosystem, and experience central, access-anywhere, real-time control across inter and extra-enterprise functions.
- Always on: Most industries are already seeing rapid adoption of low-level automation. In sectors like manufacturing, critical ground-level processes are already being automated. With high-level automation and integration, digital supply chain participants will be able to oversee and exercise intelligent control over an always-on enterprise.
- Transparent, Connected and Agile: Digital supply chains, or rather networks, will not only increase visibility within the enterprise, but also outside of it. This visibility will enable novel models of risk assessment and reliability, and will be the new foundation of transparency and trust among suppliers. Interactions with critical suppliers will be based on continuous collaboration, and visibility beyond the organization will help to positively impact the level of production and inventory optimization, response timeframes and resilience.
- A New Definition of Business Intelligence: Digital supply chains will be geared toward minimizing digital waste, and thereby tap into every last data point while reporting metrics. This will not only enrich the information quality, but also enable enterprises to use new simulation and decision support tools to make the best decisions and spot issues across functions, before they happen.
Digitizing the supply chain is a bold move toward success in today’s business conditions, which are often marked by uncertainty, unpredictability and high competitiveness. Therefore, digital solutions and technology providers will be central to some of the high-impact partnerships in the supply chain industry. To successfully digitize the supply chains, it is crucial for companies to bring players and digital solutions that can help decode the multiple facets of the digital supply chain and leverage them effectively to bring money back to the stakeholders.