For years supply chain consultants have urged companies to digitize their supply chains. As supply chains have lengthened and become more complex, digitization has been viewed as a way to reduce paperwork and increase visibility. Progress, however, has been both uneven and slower than desired. Brian Belcher, Co-founder and Chief Operating Officer of Vector, asks, “When will supply chains finally move on from paper?”[1] Good question. Besides being a pain in the neck, Belcher believes paper is bad for business. “In an industry inundated with paper,” he writes, “it’s a mystery how operations will continue to efficiently expand. … Paper costs the supply-chain industry upwards of $3 billion every year (not counting the additional price tag of paper, ink and printing). In addition, paper results in a lack of visibility, efficiency and sustainability, as well as undermining the safety of drivers. With the cons of paper more than outweighing the pros, it’s time the supply chain underwent an industry-wide transformation.” Shawn Muma, Director of Supply Chain Innovation and Emerging Technologies for CGE’s Digital Supply Chain Institute (DSCI), agrees. He insists, “Doubling down on digital transformation is a requirement.”[2]
Progress Report on the Digital Supply Chain
Wolfgang Lehmacher (@W_Lehmacher), a member of the Logistics & Supply Chain Management Society (LSCMS) Advisory Board, writes, “We hear it everywhere: Covid-19 has accelerated digitization — but I have several questions! Is this true for the supply chain industry? What is the speed of progress specifically there? Is there real evidence that supports the impression that digitization is truly and durably accelerated?”[3] When it comes to digital progress in the supply chain arena, Lehmacher asserts we are at “the beginning of the beginning.” Like Lehmacher, Christopher Holmes (@drchrisholmes), Managing Director for IDC Insights Asia Pacific, heard people claim that the pandemic sped up digital transformation efforts. From his perspective, companies with digital transformation strategies in place fared better than those that didn’t. He writes, “For many organizations, this change was forced upon them so they could continue to run their businesses. The impact was across manufacturing plants, transport networks, warehouses, and retail outlets. Digitalization has impacted every part of the business. Those that were already on a digital path had clear roadmaps in place. Those who made investments in the underlying technology and [saw] their businesses thrive during 2020. Unfortunately, those without [a digital transformation strategy] have suffered.”[4] To underscore that point, Holmes reports, “[During the pandemic, organizations] that are digital suffered a smaller loss, and non-digital organizations effectively saw the last five years of growth erased.”
One reason some organizations are digital laggards is because they have yet to adopt the right corporate culture. 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.”[5] Lehmacher warns business executives not to underestimate the importance of what Wang calls “a total paradigm shift in the culture and operations.” He explains, “The digital transformation journey starts with adapting a mindset that the digitization of supply chain networks has become inevitable, at the top but also throughout the company. This corporate mindset is required to establish a favorable cultural context. Why is this important? ‘Culture eats strategy for breakfast,’ explained Peter Drucker, the management consultant. ‘In preparation for the reset in a post-coronavirus-world, supply chain leaders seek to exploit the benefits of digitalization to an even greater degree,’ writes Gartner. While the need for change and digitization is evident, the awareness about the cultural prerequisites may be more of a question mark.”
Since many of the challenges associated with supply chain paperwork are, in fact, transactional, most organizations begin their digital journey trying to eliminate paperwork and breakdown information silos. Muma explains, “Companies have long talked about tearing down silos. Organizations are now doing just that, only not stopping at corporate borders. They are building a Digitally Integrated Value Chain, one that connects the front-end of the business to the customer, links all departments and processes across the enterprise, and integrates the back-end ecosystem of suppliers and partners that constitute the supply chain.” At the heart of these efforts are cognitive technologies (aka artificial intelligence (AI)). Journalist James Rundle (@JimRundle) reports, “Supply chains have taken a battering this year from the coronavirus pandemic and other extreme events — and artificial intelligence has emerged as a critical tool for navigating everyday business in this environment.”[6]
The Future of the Digital Value Chain
“Global change, business evolution, technology disruption, digital transformation — all terms with which we have become very familiar.” writes Anne G. Robinson (@agrobins), Chief Strategy Officer at Kinaxis. “We thought we fully understood the implications of these terms prior to Covid-19. However, now we understand them at entirely new levels as most of what we know and have come to expect in business and in our lives has been altered to some extent — and fast.”[7] She adds, “The pandemic has forced most businesses to rethink their operating models to ensure they can survive and thrive in a new economy. Global supply chain operations are no exception. In the supply chain world, change has already been coming fast and furiously as work processes, customer demand, new regulations and economic shifts disrupt planning and operations. Now, with more uncertainty than ever about which demand patterns may skyrocket or tumble without warning, operational and organizational planning are critical to ensure agility and resiliency to meet what’s next, which means working to unify forecasting, planning and execution. But, without buy-in from your key constituents, those terms become merely buzzwords with little meaning.”
In the Digital Age, companies cannot constrain their thinking and change management efforts to the confines of the business. They must start thinking in terms of the entire value chain and begin working for change throughout the entire ecosystem. Muma explains, “As businesses rethink their models, they are realizing that the linkage between the customer and their supplier network must be seamlessly integrated. Today, buying decisions are ever more rapidly changing. In near real-time, consumer and market intelligence must directly feed supply chain networks, dramatically decreasing reaction time. This requires employees to be customer-facing, fulfillment data must be available in real-time, inventory systems updated to support omnichannel distribution, IT systems have to be updated and provide interconnectivity to track individual orders, and supply chains must be able to respond faster and get closer to the customer. A new approach is required and the Digitally Integrated Value Chain has emerged.”
Concluding Thoughts
“In hindsight,” Lehmacher writes, “the year 2020 may be dubbed the ‘beginning of the beginning of supply chain digitization’. … Digitizing supply chain networks is not just about digital technologies and the transformation of processes, systems, assets and the creation of new solutions. It is first of all about culture, i.e., tackling the major challenge of making the workforce and leadership board fully prepared for this change. Once this has been achieved, companies can start to identify pain points and focus on the critical elements to turn traditional into digital supply chain networks.” Muma prefers viewing the digital supply chain network as a value chain. He concludes, “In a Digitally Integrated Value Chain, the supply chain is transparent and responsive to shifts in market behavior. Supplier and distribution networks operate openly, exchanging data and information. You have visibility across the entire market from customer and consumer back through supply and materials.” Currently, the digitally integrated value chain is more aspirational than implemented; however, the future vision of such value chains is becoming clearer — and it involves a lot less paperwork.
Footnotes
[1] Brian Belcher, “When Will Supply Chains Finally Move on From Paper?” SupplyChainBrain, 31 March 2021.
[2] Shawn Muma, “It’s time to digitally integrate the value chain,” Supply Chain Management Review, 10 March 2021.
[3] Wolfgang Lehmacher, “The Beginning of the Beginning: A Progress Report on the Digitisation of Supply Chains,” LogiSYM Blog, 17 March 2021.
[4] Christopher Holmes, “Digital and the Supply Chain—How Far Have We Come?” LogiSYM Blog, 15 April 2021.
[5] Trevor Miles, “Let’s be clear: Digitization is not the same as Digital Transformation,” Kinaxis Blog, 8 December 2017.
[6] James Rundle, “Supply Chain Strains Sharpen Focus on AI,” The Wall Street Journal, 31 March 2021.
[7] Anne G. Robinson, “Why change is essential during a supply chain digital transformation,” Kinaxis Blog, 31 March 2021.
