Digital Supply Chains Can Make the World Less Frightening

Stephen DeAngelis

November 17, 2016

Pundits toss around a lot of names for times in which we live — the Computer Age, the Information Age, the Digital Age, etc. Whatever you want to call the era in which we live, it’s different than previous eras because of information technology. David Padmos, EY’s global technology industry leader, observes, “The world is generating digital data at an unprecedented — and frightening — pace. Global supply chains are extraordinarily data rich and extremely complex.”[1] You might be wondering why Padmos would call data generation “frightening.” According to Patrick Burnson, a new EY study entitled Digital supply chain: It’s all about that data, “explains why exponential data growth is a fundamental problem that is continuing to overwhelm most businesses.”[2] The report goes on to note that data generation is accelerating and supply chain data is no exception to this trend. If your company doesn’t have a way to manage all of this data, that trend can indeed be frightening.

Supply Chains are Drowning in Data

Burnson writes, “The latest EY report explains that new digital business models are increasingly more complex, including an entire ecosystems of data. EY notes that the companies that are able to effectively manage that complexity will clearly maintain a competitive advantage.” Because good data management and advanced analytics can provide a competitive edge for companies, a person could be excused for thinking that companies are on top of the situation. According to Padmos, that’s not the case. “Nearly every company I speak with,” he writes, “tells me they are being held back because of their data or, more precisely, their inability to manage the rising oceans of data.” He continues:

“The impact is real, and the data, processes and systems they have today are not getting simpler. The reality is that many supply chain managers haven’t yet had time to develop proven methods for integrating their data and deriving better insights within their four walls, yet they are already finding themselves drowning in that ocean of data and complexity as they try to connect and do business with others in their ecosystem.”

The challenge will only grow more severe as the Internet of Things (IoT) matures. Not only will the amount of data being generated increase, so will potential vulnerabilities. Dave Lewis (@gattaca), a Senior Security Advocate for Akamai Technologies, is concerned that the smart “things” connected to the IoT will be vulnerable thanks to “fractured digital supply chains.” He writes, “I’m worried that with this dizzying pace of manufacture that miscreants and negative actors are inserting themselves into the supply chain. We have seen issues like this come to the forefront time and again.”[3]

How Cognitive Computing Can Help

Business leaders and supply chain managers should be concerned — if not frightened — by this situation. Humans alone can’t deal with the oceans of data being gathered by their companies. Fortunately, new technologies are maturing rapidly that can help. Foremost among these technologies is cognitive computing. I define cognitive computing as combination of Semantic Intelligence (i.e., artificial intelligence and natural language processing) and Computational Intelligence (i.e., advanced mathematics). A good cognitive computing system can handle (i.e., gather, integrate, and analyze) both structured and unstructured data. It can provide actionable insights to decision makers. It can automate processes and autonomously make rules-based decisions. Because cognitive computing systems learn as they work, they get better at what they do over time. A cognitive computer system can deal with many more variables than older computing systems (which is critical when complexity is increasing). The bottom is this: A cognitive computing system can make the business environment a less frightening place. Daniel Cavallin (@daniel_cavallin), CIO at Celistics, observes, “You have to empower the data through visibility and analytics. A new dimension of business is then created, based solely on information.”[4] He continues:

“If you are the collaboration pillar, and you can put together all of the data from your systems, as well as your clients’ and suppliers’ systems, then you have a new super power, the power of information. You have the potential to see the future by analyzing the past, you can manage risk, you can allocate inventory to the proper warehouses and channels. You can see patterns where others cannot. The supply chain platform of today is all about maximizing value across the entire chain.”

A cognitive computing platform can help you achieve those goals.

Why Digital Supply Chains are a Great First Step in Digital Transformation

Being able to manage and leverage data better are probably sufficient reasons to “go digital”; but, there are other reasons as well. The Strategic Sourcerer writes, “Lately, there has been a lot of talk about the future of the supply chain — with much of it centered on the many benefits of digitization. Different companies across various industries are maturing more rapidly than others when it comes to adopting new and cutting-edge technology, software and systems. But, regardless of where in the development stage organizations are — whether they have pioneered the transition in their segment or are lagging behind with manual, traditional processes — it is all but impossible to ignore the rising prominence of this trend. And whether a manager believes transitioning to a digital supply chain would help or complicate operations, the reality is that it is eventually going to happen one way or another.”[5] I agree that digital transformation is coming; but, I believe cognitive computing can help simplify rather than complicate operations. The Strategic Sourcerer goes on to explain that cost savings are another big plus of going digital.

“In a new research report conducted by the Center for Global Enterprise and CREATe.org, it was revealed that organizations that digitalize their supply chains can save as much as 50 percent in costs, Supply Chain Digital reported. According to the source, one of the biggest findings the study made was that enterprise supply chains have incredible value when digitalized, including:

  • 20 percent decrease in procurement costs
  • 50 percent decrease in supply chain costs
  • 10 percent increase in revenue

It is worth noting that these statistics were found to be true for businesses in various industries, even those that aren’t typically supply chain-focused, such as those in the financial sector.”

Most analysts believe the future belongs to digital enterprises and, because the supply chain touches all parts of an enterprise, it is a great place to start that transformation. Padmos suggests a three-step process for getting started. Those steps are:

1. Establish an Enterprise Data Strategy. “Make enterprise data management strategy a core foundational element of everything you’re trying to do in digital supply chains.”

2. Integrate that Data. “One approach is to choose one data analytics platform in which to aggregate data from the others. A more recent approach is to use advanced machine learning tools emerging now that automate data processing, alignment and visualization, enabling you to automate the process of aggregating and classifying data from all your disparate systems.”

3. Seek Focus, Simplification, and Standardization. “Use your enterprise data management strategy to instruct the development of classification taxonomies that focus and simplify the rest of the data management and analytical process. This serves to standardize data taxonomies across the organization, and enable more focused data acquisition and analysis. The highest value business insights are being achieved by organizations that thoughtfully classify and analyze their data in the context of key questions that matter most about their business.”

Padmos concludes, “Like it or not, modern digital companies must be prepared to continuously evolve their supply chains, business models, and operational processes concurrently with their customers and markets, in real time. With data volumes and complexity increasing exponentially, asking the right questions — questions that provide real value, questions that help define your business goals — is critical.”

Summary

The Strategic Sourcerer concludes, “Adopting a new management approach may be necessary with the digital supply chain. But, considering the tremendous cost-savings opportunities it presents for organizations, it will certainly be worth the investment.” In a world getting more complex, leveraging the capabilities of a cognitive computing system that can deal with that complexity will simplify the supply chain manager’s life and make the world a less frightening place. Companies wanting to survive and thrive in the decades ahead won’t wait long to begin their digital transformation.

Footnotes
[1] David Padmos, “Three Keys to Avoid Extinction and Realize Your Digital Supply Chain Dreams,” Supply & Demand Chain Executive, 18 October 2016.
[2] Patrick Burnson, “New Ernst & Young Report: Supply Chain Data ‘Overwhelms’ Businesses, Stunting Automation, Efficiency,” Supply Chain Management Review, 27 September 2016.
[3] Dave Lewis, “IoT and your digital supply chain,” CSO, 16 September 2016.
[4] Daniel Cavallin, “Smart Infrastructure for Supply Chain Management,” CIO Review, 11 August 2016.
[5] “How Much Enterprise Supply Chains Can Save By Going Digital,” The Strategic Sourcerer, 5 October 2016.