It took years of wandering for the supply chain to end up in the morass in which it currently finds itself. Although portions of the supply chain are functioning well, many consultants believe a true transformation is needed in order to make the global supply chain more resilient. Such a transformation will take time, effort, and, of course, money. Too often, discussions about supply chain transformation focus on emerging technologies forgetting that true transformation involves people and processes as well as technology. As analysts from TECSYS explain, “Digital transformation of supply chains must extend beyond IT to become an enterprise-wide initiative, where every department has skin in the game.”[1] Nevertheless, the fact that we’re discussing “digital” transformation means technology plays a central role in future-proofing supply chains. Keith Pickens, General Manager at UST, insists, “The solution requires a move away from linear supply chains to digitally integrated supply chain networks.”[2] Obviously, these supply chain ecosystems extend well beyond corporate boundaries, which means the greatest challenge may be getting all stakeholders to pull in the same direction.
Rise of the Agile Supply Chain
Talk to any supply chain professional and they will tell you these are trying times. Today’s challenges, however, underscore what Lora Cecere (@lcecere), founder of Supply Chain Insights, pointed out nearly a decade ago. She wrote, “The supply chain IS business, not a department within a business.”[3] Analysts from Netscribes observe, “It has been anything but easy to keep operations running across sectors during the COVID-19 pandemic.”[4] They add, “Supply chains play a significant role in responding to an unprecedented crisis with resilience. However, a recent survey of retailers and CPG companies indicates that many feel the need to allocate more than twice the average resources required to increase their supply chain’s flexibility.”
Articles about the need for flexible or agile supply chains abound. And most of those articles point out that agility begins with improved supply chain visibility. Pickens reports, “A recent study found that organizations that adopt digital technology can reduce supply costs by 50% and increase revenue by 10% through enhanced visibility and data. These networks draw on tools with seamless, real-time communication between manufacturing, logistics providers, suppliers and applications for enterprise resource planning (ERP), warehouse management (WMS), transportation management (TMS) and order management (OMS). Companies can integrate traditional silos by feeding data into a ‘control tower’ that generates valuable insights for the entire enterprise.”
My only nitpick with that observation is that Pickens insists reductions in costs and increases in revenue come from visibility and data. Those are inputs, not outputs. The benefits described are achieved when data is analyzed and actionable insights are generated. During the pandemic, the Enterra Solutions® team honed our analytics platform and created the Enterra Global Insights and Decision Superiority System™. The System not only lets an organization know what is happening but helps decision-makers explore options to improve future performance. Companies become more agile when they can look at a multitude of options and select the best alternative. As Bain analysts, Michael C. Mankins and Lori Sherer (@lorisherer), report, “Companies that make better decisions, make them faster and execute them more effectively than rivals nearly always turn in better financial performance. Not surprisingly, companies that employ advanced analytics to improve decision making and execution have the results to show for it.”[5]
Netscribes analysts believe agile supply chains are intelligent supply chains. They explain, “An intelligent supply chain leverages the latest technologies and incorporates data-driven insights to facilitate optimal processes. It brings together product, service, and process innovation to deliver on customer preferences.” By definition, an “intelligent” supply chain leverages some type of cognitive technology. At Enterra® we employ the Enterra ADS® platform — a system that leverages the latest Autonomous Decision Science™ and can Sense, Think, Act, and Learn®. According to Netscribes analysts, the key features of an intelligent supply chain include:
• Increased process transparency with real-time responses — facilitating collaborative insights and greater stock control.
• Incorporating customer feedback to adapt to their needs.
• Quickly responding to changing market dynamics with intelligent technologies.
• Automating processes for improved inventory turnovers.
They report, “A recent analysis indicates that large CPG firms developing an intelligent supply chain could grow revenues by up to 3% through improved product availability and enhanced customer service. Plus, they can increase profitability through cost reductions. By leveraging technologies such as blockchain, IoT, and AI, intelligent supply chains are changing the game for traditional warehouses and retailers.”
Benefits of Digital Transformation
Before discussing the benefits of digital transformation, I want to emphasize that transformation is never easy. Gert Sylvest (@gsylvest), Chief Technology Officer and co-founder of Tradeshift, bluntly states, “Digitalization is difficult.”[6] Why? Because digitization is about more than technology. Tricia Wang (@triciawang), a self-described Tech Ethnographer & Sociologist, explains, “A lot of companies treat digital as if they are ‘doing digital’ — this is ‘digitization’ at its worst — as if it’s some checklist of things to do. It’s very transactional, and people are so busy doing digital they don’t even know WHY they are doing it in the first place! Whereas [some companies] embrace ‘being digital’ — this is ‘digital transformation’ at its best — it’s a total paradigm shift in the culture and operations — it’s not just about buying the latest digital tool, but about creating a new system, new cadence, new mindset.”[7] Get it right and great benefits result.
Sylvest notes, “Digital ecosystems mean businesses no longer have to spend 100% of their time onboarding and managing the 20% of their relationships that bring in 80% of their revenue. Instead, they can take a far more holistic view of their entire supply chain ecosystem, including ‘long-tail’ suppliers, without adding an unmanageable amount of extra work.” Supply chain journalist Elise Leise reports, “According to IBM’s Cognitive Computing report, CPOs report that their top three tech investment initiatives will be cognitive computing, cloud, and predictive data analytics. 56% of companies said that cognitive computing would transform their forecasting capabilities, 55% said that it would do the same for risk and security management, and 55% said that it could redefine the customer experience.”[8]
Technology writer Jenn Fulmer (@Jenn_ReadMySine) reports, “When introducing AI into their supply chains, 53 percent of executives saw an increase in revenue and 61 percent saw a decrease in operating costs.”[9] She explains there are a number of ways cognitive technologies can improve supply operations, including: Providing accurate inventory management; optimizing delivery logistics; reducing operating costs with demand forecasting; [and leveraging] supply chain management software that utilizes AI. She concludes, “Supply chains can be difficult to manage, but adding AI and ML can help you improve operations and keep things running smoothly. With AI, you can get better inventory management and delivery logistics while reducing operating costs.”
Concluding Thoughts
Supply chain expert Channa North-Hoffstaed observes, “The traditional elements of people, process, technology, and data continue to be relevant to digital transformations. … One of the fundamentals of successful digital transformations is to focus on value and not on cost, often the end goal. Digital transformations are significant investments, and the long-term objectives must emphasize business outcomes. It is important for organizations to celebrate cost reduction but focusing on the value provided must be paramount.”[10] Leise adds, “Right now, supply chains are in the midst of deciding how to best upgrade their visibility and agility. … As companies recover from the pandemic, artificial intelligence and machine learning may equip supply chain teams to cope with similar events. According to Gartner, this isn’t far into the future: by 2024, 75% of companies will transfer AI from pilot programs to their main operations.” Transformation efforts require a holistic approach that ensures people, processes, and technology advance together. Ignore any one of them and transformation efforts are likely to fall short.
Footnotes
[1] TECSYS, “The Journey to Supply Chain Digital Transformation: How to Factor Technology, People and Business Results in Your Overall Strategic Vision,” SupplyChainBrain, 1 December 2021.
[2] Keith Pickens, “The Hard and Soft Savings That Come With Digitally Connected Supply Chains,” SupplyChainBrain, 14 October 2021.
[3] Lora Cecere, “Sage advice? Only for turkeys.” eft, 1 February 2013.
[4] Netscribes, “How intelligent supply chains can help improve CPG resilience,” MENAFN, 26 August 2021.
[5] Michael C. Mankins and Lori Sherer, “Creating value through advanced analytics,” Bain Brief, 11 February 2015.
[6] Gert Sylvest, “Why digitalising the supply chain requires a fresh approach,” Supply Chain Digital, 17 August 2021.
[7] Trevor Miles, “Let’s be clear: Digitization is not the same as Digital Transformation,” Kinaxis Blog, 8 December 2017.
[8] Elise Leise, “The Integrated Supply Chain: AI, ML, and Human Intelligence,” Supply Chain Digital, 7 July 2021.
[9] Jenn Fulmer, “Where AI Can Improve the Supply Chain,” Baseline Magazine, 18 June 2021.
[10] Channa North-Hoffstaed, “Stay on pace for success with a supply chain transformation plan,” Kinaxis Blog, 7 July 2021.
