While the concept of digitally transforming a supply chain is not new, the recent economic downturn has made it more resonant than ever. The disruptions uncovered by market fluctuations have energized more companies to work toward a digital transformation that can offer long-term competitive advantages. In fact, the American Productivity & Quality Center (ASPQ) reported that 83% of supply chain organizations are undergoing a digital transformation.
While its name suggests a focus solely on technology, a successful digital transformation is broader than just moving processes from paper to digital. Since today’s supply chain affects every part of a business, from strategic planning to store operations, digital transformation requires re-engineering existing processes and creating a new culture with across-the-board buy-in from all internal and external stakeholders.
A successful digital transformation can provide real-time information about each step in the supply-chain process, from every supplier to the end customer, through more data access and data-sharing, collaboration and network-wide analytics. Achieving a digital transformation can be challenging, but the benefits can be worth the effort.
Benefits of Digital Supply Chain Transformation
Digitization can involve a variety of technologies, including artificial intelligence, big data, predictive analytics, the Internet of Things (IoT) and cloud-based platforms. These tools can provide real-time information about process management, material flow, supply and demand planning, resource planning and inventory.
With greater visibility into all links of the supply chain, digitization can offer businesses the data needed to make better, faster decisions. That visibility can translate to lower inventory costs, improved on-time delivery and lower production costs.
That was the case for specialty glass manufacturer Corning, which has aggressively pursued the digitization of its supply chain to include integrated planning, comprehensive data platforms, advanced analytics and next-generation tools such as 3-D printing and robotic process automation. When one of its suppliers was impacted by a flood, Corning was able to react quickly, ensuring that the product was received and all customer commitments were met.
That ability to turn on a dime can offer companies more resilience during shifting markets. According to Supply Chain Dive, global consulting firm Bain & Company predicts that advanced analytics can improve supply forecast accuracy by up to 60%, and 85% of their clients say they are investing in big data and analytics right now.
Digital supply chain transformation can help companies more easily meet customer demands, which adds up to increased satisfaction for customers and a competitive advantage for middle-market businesses.
Setting the Stage for Digital Success
While companies often start by using technology to solve a single business problem, a “big picture” review of the entire company’s supply chain is required to truly transform the process. Company leaders should consider ensuring digital solutions use an integrated approach aligned with company strategy to address multiple business problems rather than just implementing a single technological fix.
Supply Chain Quarterly outlines four suggested steps to launch a successful digital transformation:
1. Set a Digital Target
A cross-functional survey can help assess both the awareness levels and the perceived data, analytics, reporting and automation needs of supply-chain stakeholders.
2. Establish a Baseline of Current Digital Capabilities
Interview representatives from all core functions, listing ongoing and planned digital initiatives throughout the entire planning, manufacturing, sourcing and delivery value chain. Information gathered should also include the impacts of costs, service and working capital from each data element. This baseline could be used to measure—and ultimately close—the gap between your existing capabilities and your digital target.
3. Evaluate Technology Options and Create a Shortlist
Identify and prioritize your desired digital capabilities after taking into consideration your immediate needs and long-term strategic goals. A review of your options should also take into account how well your organization will buy into planned improvements and the required investments in facility and workforce upgrades that are needed for successful execution.
4. Prioritize Potential Projects and Create a Digital Roadmap
Compare each project's benefits versus the length of time it would take to implement in order to create the roadmap for your digital transformation.
Overall, a supply chain transformation goal should include four components: digitizing data and information, automating processes, applying analytics and improving collaboration between all parts of the supply chain so that it can be managed holistically with real-time information.
Roadblocks to a Successful Implementation
Just because a digital transformation of your supply chain addresses your needs for greater visibility into each link in your supply chain in the planning stage, doesn’t mean that it’s easy to implement.
While there is no one-size-fits-all template for companies to follow with a digital transformation, McKinsey research indicates that companies can encounter three types of roadblocks:
- focusing just on process rather than engaging all stakeholders;
- putting technology first by just digitizing current processes rather than looking for broader opportunities for improvement; and
- difficulties in scaling-up across the entire organization after a successful pilot.
To Avoid Pitfalls, Focus on People and Business Strategy
Culture change is the foundation of a successful digital supply chain transformation. That means a focus on the human side of the equation is critical. Ensure that your team is informed and engaged about what you are trying to achieve, and keep the following in mind as you launch your transformation efforts:
- Tie digital efforts to your corporate strategy. Digital initiatives should reflect your company’s strategy, addressing business problems and demonstrating clear quality, service or cost improvements.
- Engage stakeholders and align resources. Successful transformation requires engagement from organizational leaders as well as at every level along the supply chain. Ensure that the right resources are available and that digital projects are not competing with other large-scale initiatives. Encourage collaboration throughout your organization to avoid siloed decision making.
- Get the right talent in place. According to KPMG research, skills shortages are at an all-time high with 67% of technology executives reporting that they are struggling to find the right talent. The top three scarcest skills are big data/analytics, cybersecurity and artificial intelligence.
- Communicate, communicate, communicate. Digital transformation is powered by change management, and effective communication is an integral component of success. Explain the “why” of decisions and solicit feedback, not only internally, but also from suppliers and other stakeholders.
Take the Plunge to Prepare for the Future
Digitally transforming a supply chain is a process—often a difficult one. While companies should not expect to see immediate returns, SAP Insider reports that 59% of survey respondents named higher quality and better use of data, as well as lowered costs, as the top anticipated benefits of a supply chain transformation.
While digital supply chain transformation could appear daunting, moving forward with planning and implementation can help to better equip your company to reap the benefits of improved margins, enhanced customer service and maintaining a competitive edge in a tough economic environment.