Digital Supply Chain Transformation

Stephen DeAngelis

February 2, 2016

There should be little doubt in any business leader’s mind that transforming their company into a digital enterprise is an imperative in the years ahead. “Organizations have little choice but to overthrow their traditional business models as digital technologies sweep through their industry,” writes Jessica Twentyman (@jtwentyman).[1] Of course, organizations need to understand how digitization is going to change their specific industry before they plunge headfirst into any transformation. Every industry is going to be affected a little differently by digitization and a failure to understand how things might change could result in activities that waste money and resources. Pursued incorrectly attempts to transform could end up making matters worse rather than better. Twentyman reports, “Dr. James McQuivey has three statements and a question for CIOs across all industries. [They are:] Digital disruptors are rewriting the rules of business. The barriers-to-entry for many established markets have all but vanished. And unexpected competitors are swarming in. So, what is your business doing about it?”

While you are trying to figure out how your industry is going to change, there are things your company can do to move it down the path towards becoming a digital enterprise. A good place to start is by developing a digital supply chain. David P. Storch, Chairman, President and CEO of AAR Corp., writes, “Global supply chain leaders in every industry are embracing digital practices that are setting new standards — and leaving companies with traditional supply chains in the dust. This new digital supply chain is opening a world of opportunities for a range of businesses with increased visibility and control, allowing them to be more flexible, responsive and efficient than ever before.”[2] Patrick Van den Bossche, global coordinator of the operations practice at management consulting firm A.T. Kearney, agrees that creating a digital supply chain is important; but, he cautions that digitization decisions should be based on sound business principles. “The key to applying these concepts to achieve business success,” he writes, “is ensuring that digital innovations in supply chain operations are maximizing efficiency — and, by extension, profits — instead of just implementing ‘tech for tech’s sake’.”[3]

To ensure that companies spend wisely as they digitize, Van den Bossche recommends they use something that A.T. Kearney calls “digital sprints.” He describes these as “events similar in spirit to hackathons where supply chain, manufacturing, and project managers collaborate intensively in competition with other teams to brainstorm digital initiatives that will enhance an organization’s supply chain.” Although I agree that competition generally leads to more cost effective approaches, it can also lead to turf wars and the establishment of siloed systems that could delay rather than advance a company’s transformation to a digital enterprise. To avoid that outcome, someone in the company needs to ensure that digital sprints result in complementary rather than competing systems. Van den Bossche writes, “One common approach to the digital supply chain is to hire or appoint a Digital Czar (aka chief digital officer) to keep track of and study the most recent digital tools and trends and translate them into potential opportunities.” I think the digital sprints approach has a lot going for it. Van den Bossche explains the process in a little more detail:

“Digital sprints within the supply chain space seek to come up with working prototypes of new products, new manufacturing processes, etc., under a ‘start small, fail fast, iterate and pivot, and scale fast’ model. Large organizations that are implementing these events, relying on both internal experts and collaboration with third parties like Internet consortia and government-sponsored organizations, are at the forefront of the digital industrial revolution.”

That model is very similar to one I recommend when talking to new clients. At Enterra Solutions®, we recommend a “crawl, walk, run” approach that involves prototypes or proof of concept projects that can demonstrate the value of the solution being proposed. As Van den Bossche notes, these kinds of approaches are both effective and efficient. Doug Caywood (@dougcay), Worldwide Industry Director for Consumer Goods at Microsoft, notes that digital supply chain transformation is becoming an imperative not just to improve internal processes but to improve customer relations as well. “Today’s digitally-connected world has drastically changed consumer expectations,” he writes. “That same connectivity, coupled with important advancements in technology, is poised to reshape the manufacturing industry, driving a fourth industrial revolution that many are calling industry 4.0. With consumer goods (CG) manufacturers historically topping the charts among the world’s most innovative companies, it’s no surprise that CG leaders are already looking at ways to harness this fourth era in business productivity to transform how they design, deliver and service products. And one of the biggest opportunities is in the supply chain.”[4] According to Caywood, the technologies that will fuel the next industrial revolution are the Internet of Things (IoT), unlimited computing capacity found in the cloud, and advanced analytical techniques. He then asks us to imagine the possibilities.

“What if you were completely uninhibited to recognize a problem, ask questions that answer specifically why this problem occurs, and model answers that solve it? What if all the people throughout the connected value chain were empowered to take intelligent action exactly when it matters most? Imagine the speed, the agility and the impact that could be delivered. Imagine the passion and creativity in your people to know they’ve directly contributed to the success of the company and customer satisfaction. THIS is the opportunity we now have across the CG industry today that is fueling supply chain innovation. With these new capabilities, demand is known and can be acted on. Effort can also be focused on where effort is valued: from new, connected devices such as smart shelving or smart coolers or intelligent end-caps. Decisions can be made that drive more sustainable results and increase the satisfaction of your customers.”

Much of what Caywood is describing includes future capabilities made possible by artificial intelligence (and, more specifically, cognitive computing). Smart systems aren’t smart because they are connected and generate data; they are smart because the data they generate can be mined for actionable intelligence and insights. Some of the actionable intelligence will create what Supply Chain Insights Founder and CEO Lora Cecere (@lcecere) calls the autonomous supply chain.[5] Storch concludes, “[The digital supply chain] affects every industry — from manufacturers and distributors to retailers and service providers — and transforms the companies that embrace it.”

Footnotes
[1] Jessica Twentyman, “The digital imperative: disrupt or be disrupted,” I – Global Intelligence for the CIO, October 2013.
[2] David P. Storch, “On the Flight Path to Tomorrow’s Digital Supply Chain,” Huffington Post The Blog, 10 December 2015.
[3] Patrick Van den Bossche, “How to Promote a Digital Revolution in Supply Chain,” CFO, 11 December 2015.
[4] Doug Caywood, “Transforming the Supply Chain in Today’s Digital Era,” Consumer Goods Technology (CGT), 12 October 2015.
[5] Lora Cecere, “Tell It Like It Is. What Will Supply Chain 2030 Look Like?” LinkedIn, 13 December 2015.