For the past several months, supply chains have received more press than they have in a long time — maybe ever. And it hasn’t been good news. Supply chains are in trouble. There are resource shortages, clogged ports, rising shipping costs, unfilled job openings, slowed production, empty shelves, and the list goes on. Marcus Jeffery, Territory Manager, UK and Ireland, at Ivanti Supply Chain, observes, “Global supply chains have been under immense pressure over the past year. Unprecedented demand for online goods, critical medical supplies and more, coupled with worldwide stock shortages, has left supply chains struggling to keep up with ever-increasing customer needs and expectations. Indeed, recent research suggests that the pandemic disrupted more than three-quarters (78 percent) of supply chains.”[1] As a result, there has been more and more talk about the need for supply chain transformation. Challenging times always highlight organizational pain points as well as reveal new business opportunities. Any supply chain transformation effort worth undertaking should address organizational hurdles and position a company to take advantage of emerging opportunities.
Supply Chain Transformation Hurdles
Change is never easy. Centuries ago Niccolo Machiavelli, in his classic The Prince, wrote, “There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things, because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new.” It should, therefore, come as no surprise that an article in Express Computer reports, “The top barrier to a digital supply chain today is culture, followed by legacy tech, usable data and legacy processes.”[2] Writing about the latter, Dan Weinberger (@DanMorpheusCEO), CEO of Morpheus.Network, writes, “Organizations that are still employing traditional methods will struggle to streamline end-to-end supply-chain processes. Obsolete practices will only increase the complexity and difficulty of the task.”[3]
Another “legacy” problem, according to Nick Foy (@nickfoy), Founder and CEO at Silverdale Technology, are siloed supply chains. He explains, “Siloed supply chains can slow down the process, causing frustrated customers to take their business elsewhere, resulting in lost revenue, resources, and time.”[4] Silos — be they process silos, data silos, or supply chain silos — are vestiges of the Industrial Age and are anathema to the Information Age.
Michael Gravier (@Michael_Gravier), a Professor of Marketing and Supply Chain Management at Bryant University, reminds us, “The Ever Given’s blockage of the Suez Canal reminds us of how interconnected the world really is, and that can’t be undone.”[5] He also believes a lack of strategic connectivity is another barrier to supply chain transformation. He explains, “It isn’t really accurate to say that we’re terrible at connecting — we do it a lot, and we’re very good at connecting. The problem is that we aren’t strategic about it. The mere ability to connect is powerful. It allows ‘combinatorial’ solutions, meaning we can mix and match capabilities until we find a workable solution. But … not putting thought into how to connect your supply chains can land you in avoidable trouble.” Some of the most important supply chain connectivity involves visibility and transparency.
Many, if not most, supply chains struggle to gain the visibility and transparency they need to operate in today’s volatile environment. A lack of visibility can result in unexpected disruptions. Whereas, a lack of transparency can adversely affect corporate reputations when and if corruption, inhumane labor practices, and/or unsustainable practices are discovered in any tier of a supply chain. Michael Horn, a solicitor and Legal Director at Pinsent Masons, observes, “The impact of Covid-19 on supply chain delivery and logistics has demonstrated that establishing greater resilience should be a priority. Achieving a structure which provides the necessary agility and dependability has its challenges. However the potential cost of not doing so, in terms of business survival and loss of market position, is now starkly apparent — which makes the effort of meeting those challenges all the more worthwhile.”[6]
The Way Ahead
Jeffery asserts, “The pandemic brought awareness to the supply chain industry that agility is no longer a nice-to-have but a necessity to manage changes in consumer demand, constantly evolving technologies and unexpected disruption.” Mike Burkett, a vice president analyst with the Gartner Supply Chain, agrees with that assessment. He notes, “Chief Supply Chain Officers are tasked to design a supply chain organization that fits into this new era. While in the past, a good supply chain was efficient and powerful, it must now be agile and fast.”[7] To achieve more agility and speed, companies are looking to emerging technologies, like artificial intelligence, the Internet of Things (IoT), and fifth-generation telecommunications (aka 5G). Mark Stanton, General Manager for supply chain with PowerFleet, insists, “It’s going to be paramount for industry supply chains to adopt new technologies that improve efficiencies and combat potential roadblocks going forward.”[8]
Weinberger adds, “Equipped with blockchain, IoT-based data management, machine learning and A.I. analysis, supply chains can move toward on-demand and agile operations. They can employ dynamic planning and advanced applications that work in real time to identify factors both internal (such as machine malfunctioning and degradation) and external (such as traffic, weather and regulation).” As Machiavelli warned, however, change is not easy — and “transformation” is even harder because so much (some pundits say everything) is required to change. 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.”[9]
If “creating a new system, new cadence, new mindset” is not difficult enough, supply chain managers also need to contend with challenges associated with new technologies. The IoT still has security and standardization challenges. Blockchain is difficult to work with and also has standardization challenges. And trying to update legacy processes can be disastrous if not done correctly. Bill Gates (@BillGates) once noted, “The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.”
Concluding Thoughts
Organizational excellence requires focusing on people, processes, and technology. Too many articles about digital transformation concentrate solely on technology. Weinberger concludes, “The need for human intervention in the supply chain will lie in building and maintaining high-tech and digitized systems. There will be an increasing need for machine learning and A.I. experts, blockchain developers, data specialists, IoT technicians and robotics engineers. These will be the new major players who will make up the human aspect of supply chains. Next-generation supply-chain management requires insightful data collation and management. In addition, IoT sensors and scanners can increase the value of available data. Smart products and automated services, with the help of physical sensors and internet connectivity, will create data sources like never before. Businesses will be able track and record the real-time status of products throughout the supply chain.”
Nevertheless, it is easy to understand why most articles stress technology when discussing digital transformation — technology is the sine qua non of the digital enterprise and digital supply chain. Stanton concludes, “The stresses put on the supply chain in 2020 revealed some of the weaknesses of industries that have been in a state of evolution for decades. With an increase in demand and projections for further growth in the years to come, now is the time for the supply chain to embrace the transformational potential of the technologies available, to increase efficiency and safety and ensure that the supply-chain industry is prepared to handle it.”
Footnotes
[1] Marcus Jeffery, “What’s next for supply chain processes?” ITProPortal, 1 May 2021.
[2] IANS, “Culture, legacy tech top barriers for future of supply chain,” Express Computer, 12 October 2020.
[3] Dan Weinberger, “Do or Die: A Guide to Scrapping Obsolete Supply-Chain Practices,” SupplyChainBrain, 2 February 2021.
[4] Nick Foy, “3 Signs of a Siloed Supply Chain—and How to Fix Them,” Inbound Logistics, 20 September 2017.
[5] Michael Gravier, “Connecting with the Future of Supply Chains,” Supply Chain Management Review, 19 April 2021.
[6] Michael Horn, “Barriers to supply chain improvement,” Pinsent Masons, 7 September 2020.
[7] IANS, op. cit.
[8] Mark Stanton, “5G, IoT and the New Supply-Chain Challenges,” SupplyChainBrain, 1 April 2021.
[9] Trevor Miles, “Let’s be clear: Digitization is not the same as Digital Transformation,” Kinaxis Blog, 8 December 2017.
