Digital Supply Chain - Transformation

What is a digital Supply Chain? “In Digital Supply Chains: A Frontside Flip”, a Digital Supply Chain (DSC) is defined as a customer-centric platform model that captures and maximizes the utilization of real-time data coming from a variety of sources.

It enables demand stimulation, matching, sensing and management to optimize performance and minimize risk. The supply chain is the most significant business process for most companies today. This is a given for companies that manufacture and distribute products, but it rings true for companies that deliver software or financial services as well as other services.

Digital Supply Chain for Service Companies: Service companies deliver resources to their customers which means they must hire, train, and contract for their services’ resources. They also must deliver these resources to the customer when needed. Such companies are remarkably like a manufacturing company, but the line item parts that meet required specs are people. Most services companies must collect data on employee skills and the skill set required of future employees. In computer services, these skills pertain to specific code languages and all service companies must manage resources with the rigor that a product company uses. Digital Supply Chain metrics can direct and record progress.

Digital Supply Chain for Product Companies: Product companies typically have a supply chain leader with some scope of authority. However, in many companies, the scope of authority has shortcomings that need to be overcome. Who determines when factories will be closed or opened? Who contracts out specific parts of the supply chain? This person should have powerful decision-making authority over procurement, manufacturing, delivery and demand.

Why Supply Chain Matters to the Customer Journey? To start with, we need to think of the customer experience as broader than a point of purchase or a pre-purchase journey. The customer experience (CX) today involves the entire shopping journey (or buying process). Each transaction starts with ‘thinking’ and ends with ‘receiving’ or ‘returning.’ A single negative experience with a single consumer can snowball within hours into a social media backlash and result in millions of dollars in lost sales and severely damage the brand.

Digital Transformation (DT) of Supply Chains. The COVID-19 pandemic crisis is testing the resilience of supply chains as never before, and the consequences for how supply chains are designed and operated will take years to play out. The need to embrace the digital transformation (DT) of supply chains remains critically important for companies. Supply Chain Resiliency is now more important than ever. Visibility is fundamental to resilience, and data is intrinsic to visibility. Companies that are relatively advanced in their DT journey are using end-to-end data to connect globally dispersed operations and are achieving levels of visibility that are not available to less advanced enterprises. DT also improves the ability of companies to flex with volatile markets and shifting demands. We have seen how powerful this can be as the pandemic has forced drastic changes in the corporate world. Companies that can turn on a dime in this way have the flexibility and robustness needed to excel in highly changeable markets.

Digital Supply Chain Management – Common Goals and transformation advantages. To leverage inventory as a shared resource and utilize the distributed order management technology to complete orders from the optimal node in the supply chain. To maximize resource productivity, construct standardized processes, remove duplicate efforts and minimize inventory levels. Minimization of supply chain expenses is very essential. Cost efficient and cheap products are necessary, but supply chain managers need to concentrate on value creation for their customers. Increased expectations of clients for higher product variety, customized goods, off-season availability of inventory and rapid fulfillment should be matched. Transformation advantages. Develops better customer relationship and service. Creates better delivery mechanisms for products and services in demand with minimum delay. Improvises productivity and business functions. Minimizes warehouse and transportation costs. Minimizes direct and indirect costs. Assists in achieving shipping of right products to the right place at the right time. Enhances inventory management, supporting the successful execution of just-in-time stock models

Traditional Supply Chain (SC) Challenges.

Theft: Major problem for furniture retailers. Transaction errors: Retailers with inaccurate inventory. Information delays: dated information, incompatible information systems. Misplaced inventory: Retailers have reported that 15% of items cannot be found. Spoilage: active ingredients in the products are losing their properties. Lack of visibility in SCs: Do you know the inventory your distribution centers hold? Does the online inventory match your stores’ inventory? Poor delivery status information. Poor IT design: Unreliable, duplicate data. Security problems: too much or too little. Poor integration. Elusive inventory costs: Accounting systems do not capture opportunity costs.

Competitive pressures, technology change and an ever-expanding range of customer requirements. Customer demands a supply chain that is more customer-centric and responsive; “more customized products and services” and “faster order fulfillment times.” Ability to dynamically increase or reduce the number of their supply chains to accommodate constantly evolving customer segments. Asset Heavy Ecosystem - it barely meet today’s business imperatives, much less the imperatives for future growth.

“Traditional supply chains still have enterprise-centric processes and leverage mainly internal, enterprise data. This leads to delayed updates, limited visibility insights, a reactive mode for both planning and execution, optimization by object rather than outcome, and decision making mainly based on humans (80/20 distribution). From a technology perspective, this leads to relying on legacy solutions and often an on-premises monolith.” ~ Gartner.

“Besides having applications in place to manage core enterprise capabilities (such as ERP and CRM or SCM with e.g., WMS), companies are looking for business applications to engage with their business partners end to end, upstream and downstream. Why? Once the end-to-end supply chain becomes visible and those insights are leveraged, notable advancements can be made” ~ Gartner.

Digital Supply Chain key focus areas.

“In Digital Supply Chains (DSC): A Frontside Flip”, is defined as a customer-centric platform model that captures and maximizes the utilization of real-time data coming from a variety of sources.

Companies need to focus on four areas to make the transition to a DSC: Demand, People, Technology, and Risk. Digital Supply chains are no longer a necessary evil where low cost and on time delivery wins. They are a tool for market success and business growth. Key focus areas: Performance Metrics. Blockchain Technology. Driving Demand with the Digital Supply Chain - Using Real-Time Big Data and AI/ Machine Learning.

Continuous and Multi-directional. Shift the emphasis from cost reduction and on-time delivery to managing elements of the demand stack actively.

Shift away from the traditional linear and one-way mode of value creation (design, plan, source, make, fulfill and service) to a continuous and multi-directional mode (configure, operate, connect and manage).

Move beyond functional silos and think instead of solutions through a network of partnerships and platforms. It’s a customer-centric model, not an asset-centric. Tomorrow's value creation will be continuous and two-way. Self-learning, self-correcting and insight-driven - enables the ability to make decisions in real time.

Maturity Assessment Ideas. Evaluate where your organization stands and decide which improvements to prioritize. 

Samples questions that you may leverage: How well does our company’s supply chain anticipate and match demand? How well does our supply chain staff collaborate with your company for the mutual benefit? How would you assess the state of our technology and its capabilities? How well do you think we manage business performance and compliance risks? Maturity Assessment Scale. Based on your assessment and ratings across areas such as Demand, People, Technology and Risk - it will enable you to see which level of maturity your organization is.

Why Digital Supply Chain transformation efforts fails? It’s not because the technology isn’t available, it’s because the people and processes are not yet ready to utilize it for the right purpose. Executives unclear about the end-to-end supply chain investment case and implementation journey for their business. Companies have a supply chain/technology talent/skills gap across the organization. Legacy IT systems and culture deeply entrenched and there is resistance to change. The prevailing culture is risk averse – “Why fix it if it isn’t broken?” Slow deployment of supply chain collaboration and new technologies means organizations are unable to show early wins to gain.

Solution Providers landscape at a glance. Multi-enterprise networks have been recognized as the foundation for supply chain agility, resiliency and digital transformation. It is an important step in the shift to a modern network-enabled supply chain.

Solution Providers in this space provides capabilities such as: Industry-leading network connectivity, which may include business partners connections. Visibility and Intelligence – Centralized data hub. Core and Cross-domain Supply chain apps – such as identity management, process workflows, document management, supply risk management, Performance, etc. Collaboration – cross network and self-serve portals

Many of these solution providers are leveraging future proof technologies, based on a combination of PaaS (Platform as a Services) and SaaS (Software as a Service) – these solutions in many cases leverages advanced implementations of AI/ML and Blockchain to ensure supply chain visibility, chain of custody services, on-time delivery performance and order replenishment capabilities.

Recommendations

??? Focus on how your supply chain can boost customer experience to rack up quick wins. “Delivery speed, order turnaround times, flawless returns, and the logistics for each of these can be improved faster than a thorough transformation.

?? Customer Experience (CX) is the crucial differentiator in modern business, and the supply chain is a crucial component for driving exceptional experiences. A great supply chain strategy requires a holistic view of the organization, enabled by technology and enacted by strong leadership.

?? What would your operating model look like to be able to support a “configure, operate, connect, manage” approach to the supply chain.

?? Develop the skill sets needed to design and manage multiple supply chains. 

?? Invest in supply chain innovation - This is no time for complacency.

?? Evaluate the build vs buy. Aligning your company needs with a future proof solution provider, may enable your companies to better focus on running the business vs the tool landscape.

References and credits: Architecting the 2025 Supply Chain – Accenture. Digital Supply Chain Institute – Transformation Essential Guide. Gartner - Magic Quadrant for Multienterprise Supply Chain Business Networks Published 4 May 2020 - ID G00379048