In Praise of the Digital Supply Chain

Stephen DeAngelis

May 19, 2016

Most analysts agree that in order survive and thrive in the years ahead industrial age organizations need to transform into digital enterprises. As I noted in a previous post, however, transforming an industrial age company into a digital enterprise can be daunting; but, everyone must start somewhere and that place could be with a digital supply chain.[1] Ken Corless (@kfcwork), a principal at Deloitte Consulting LLP, briefly explains the objective of becoming a digital enterprise. He writes, “‘Digital.’ ‘Digitization.’ ‘Digitizing the business.’ These terms are a popular rallying cry inside IT organizations these days. Deloitte Consulting LLP describes a digital enterprise as one that integrates people, processes, and capabilities to deliver an omnichannel experience, enabling organizations to reimagine how profits are made and to reshape how work gets done.”[2] He adds:

“Digital means more than cloud, mobile, social, and analytics. These technologies are growing dramatically in popularity and will almost certainly underpin many digital business solutions. But renaming a reporting platform ‘analytics,’ moving a few applications to the cloud, or optimizing an existing application to run on a smartphone will not be a game changer. For CIOs, enabling digital business is less about selecting and implementing particular new technologies than about applying those technologies in new ways to align with business objectives. Digital is shaping up to be the next great wave of business transformation.”

I’m not alone in the assessment that a digital supply chain is a good place to start digital transformation. Patrick Burnson reports, “According to a study by Capgemini Consulting and GT Nexus, an Infor company, 70% of [surveyed] executives have started a digital supply chain transformation.”[3] The problem, according to the study, is “only 5% are very satisfied with progress so far.” The survey also revealed why transformation is hard. Executives identified key technology enablers for digital supply chain transformation such as: “Supply Chain Visibility Platforms/Tools (94%), Big Data Analytics (90%), Simulation Tools (81%) and Cloud (80%).” Nevertheless, “48% of respondents admit that right now ‘traditional’ methods such as phone, fax, email are still the dominant ways to interact with supply chain partners.” The fact that executives are finding challenges isn’t surprising — change is hard but worth it. Burnson adds:

“The expected benefits of Digital Supply Chain Transformation include, but go well beyond cost reductions for logistics, inventory and maintenance, improvements in customer service and higher overall equipment effectiveness. Perhaps more importantly, Digital Supply Chain Transformation is expected to dramatically improve an organization’s agility. Agility is necessary to respond to changing market conditions, to new market entrants that can threaten existing business models or to unexpected supply chain disruptions. Such disruptions have already caused major harm to the financial performances and reputations of countless organization over the years.”

Analysts from the Boston Consulting Group (BCG) agree that digital supply chain transformation is important. “For years,” they write, “companies have used digital supply chain technologies to improve service levels and reduce costs. But the inability to connect disparate systems, provide end-to-end visibility into the supply chain, and crunch massive amounts of data, among other issues, has prevented many companies from achieving the full potential of their supply chains.”[4] Adam Robinson (@TweetsByARob) reports that a study conducted by Supply Chain Digest agrees with the conclusion that organizations are falling short in their attempts to implement a digital supply chain. One of the reasons, the report concluded, is that “many supply chain partners are somewhat out of touch with the best way of leveraging data, analytics, KPIs, and the digital supply chain.”[5] Even though progress towards digital supply chain transformation has been halting, as noted above, making the effort is worth it. Robinson suggests five benefits of having a digital supply chain. They are:

1. Becoming more forward-looking. “Supply chain entities have created bad habits when it comes to maintaining a backward-looking approach. In fact, 40.1 percent of supply chain entities work almost exclusively in this manner.”

2. Connecting and relating data resources. “The Internet of Things (IoT) has become a fundamental aspect of a successful, modern supply chain. The IOT is responsible for many improvements in processes, preventive maintenance, and identification of better ways to move products. … As a result, a more connected system will naturally lead to more connections and sharing of such data.”

3. Generating data-driven plans through data visualization. “As data becomes more available, this data will be applied to advanced analytics opportunities. Additionally, the use of data visualization capabilities will make applying data simpler.”

4. Improving collaboration. “Since data visualization tools help make changes in both the digital and physical aspects of the supply chain, collaboration will be improved. ”

5. Entering the world of digital products and services. “Modern services and products are not necessarily physical. Apps, Netflix, Pandora, and Uber represent real enterprises that are based on the Internet. Some apps, such as Etsy, go a step further by directly linking the creation of goods with customer-generated designs. As a result, the need for embracing change is essential.”

Capgemini analysts Martin Raab and Belinda Griffin-Cryan put it succinctly, “Digital supply chains … have the capability for extensive information availability, and enable superior collaboration and communication across digital platforms resulting in improved reliability, agility and effectiveness.”[6] Bruce Jacquemard, a member of One Network Enterprises’ Executive Staff, adds, “The distinguishing feature of digital supply chains is their ‘connectedness.’ Rather than siloed and fragmented, data, visibility, workflows, etc., are seamlessly integrated.” What hasn’t been mentioned to this point is that the technology that will likely form the foundation on which to build a digital supply chain is cognitive computing. Cognitive computing systems can gather and analyze both structured and unstructured data. They can integrate data from varied sources in numerous formats. And they can make sense of and find insights from the myriad data sources found in today’s complex supply chains.

The BCG analysts suggest that entering the waters of transformation is not for the timid. “Immerse yourself in the possibilities,” they write. “Companies should put their best people to work scanning the landscape of digital supply chain management. This ‘digital immersion team’ can collect innovative ideas from outside the company — even from other industries — about ways to innovate and disrupt their business rather than simply improve existing processes.” They conclude:

“Digital supply chain management has matured and is generating substantial value. Organizations need to move quickly to apply the highest priority opportunities to their business and industry context. They must find the right mix of fixing performance gaps, innovating business processes, and disrupting the supply chain. Companies cannot afford to wait. The competition is already making moves, and the leaders in digital supply chain management are building a financial advantage that will be more difficult to overcome with each passing year.”

In other words, jump in, the water’s fine if a bit turbulent.

Footnotes
[1] Stephen DeAngelis, “Digital Enterprise Transformation and the Supply Chain,” Enterra Insights, 22 December 2015.
[2] Ken Corless, “The CIO’s Digital Mandate,” The Wall Street Journal, 28 April 2016.
[3] Patrick Burnson, “The Current State of Digital Transformation across Extended Global Supply Chains,” Supply Chain 24/7, 8 April 2016.
[4] Amit Ganeriwalla, Gideon Walter, Libor Kotlik, Robert Roesgen, and Stefan Gstettner. “Three Paths to Advantage with Digital Supply Chains,” bcg.perspectives, 1 February 2016.
[5] Adam Robinson, “The Rise of the Digital Supply Chain Begets 5 Huge Benefits,” Cerasis, 5 February 2016.
[6] Martin Raab and Belinda Griffin-Cryan, “Digital Transformation of Supply Chains,” Capgemini, 2011.