Why Supply Chains Are So Difficult To Digitise? - PART 1

And, why the gaps in digitisation are discovered only when it is too late?

Digitisation Stalls At The Crux of Supply Chains

There must be good reasons why the march to digitisation stalls every time it hits the wall of the supply chain. In this article want to explore some of these reasons, and what can be done about them.

First things first. It is indeed true that complete digitisation of supply chains is difficult, if not outright impossible, in the current industrial set up?

To get an idea of the magnitude of the task, let us first examine what it means to digitise the most complex parts of the supply chains - the last mile problem.

Industrial Age Set-Up Drags the Chain in the Information Age

The most remote, and hence the most difficult part of the supply chain is the last mile. The problem is well known - I wrote a blog about it in 2011 - which is available here.

The complexity of the naturally evolved network of the rivers’ last miles must be seen to be believed. You can get lost for your entire life in the intricate network if you do not retain tight control over your perspective.

It is relatively easy to digitise and map the key arterial flows. What makes, or breaks a digitisation effort is the detail required for mapping the flow to the endpoints.

Think of the human body. The 60,000 miles of blood vessels move blood from the heart to various organs and disperse into smaller veins as they go.

To get to our fingertips, blood travels in the smallest blood vessels, capillaries, which are less than 1mm long each.

So you can imagine how sophisticated the network is and utmost caution is needed at all times. The same applies to businesses.

So where is the evidence that lack of digitisation is indeed a problem in the current industrial set-up?

Quality of Data is of Key Concern

I have written extensively on this problem based on my observations in some of the best supply chains in the world. The problems in the lesser supply chains are only more accentuated.

WE ARE FLOATING IN SEA OF DATA

Just like the ancient mariner had no dearth of water, we have no dearth of data. And, just as minute quantities of salt (3.5%) that is present in all that seawater, is enough to make raw seawater unusable for most practical purposes, minute quantities of data error is enough to make most of the raw data unusable for practical purposes.

The biggest opportunity

In information technology the most bang for the buck is not in generating or collecting more data, but in making the data more usable.

I was asked a question at a recent speech why I was not as bullish as everyone else on big data. I likened the current big data set-ups to an ocean full of seawater. It still takes a huge expense to desalinate the seawater, just as it takes a lot of effort to make the data usable.

Start-ups fall woefully short

Any start-ups that figure out a better way to collate, parse, access, and make usable the supply chain data to create insights would be a tremendous success. If you know of any, please let me know in the comments below.

The Results Do Not Reflect the Expense and the Effort

Digitization is the buzzword of the moment in Supply Chain. Going by the number of articles and posts on digitization, you would think that the pope has just discovered religion.

In fact, I recently read an article which used the word ‘digitization’ nearly 100 times in about 4 paragraphs.

It talked about demand digitization, supply digitization, inventory digitization, fulfillment digitization, planning digitization, and many such things.

Clearly, the hype surrounding digitization is running far ahead of reality. Here is a direct quotation from the article in the link:

Thinking of digitization, I was reminded of our business transformation projects and trouble with getting accurate data. Despite spending hundreds of millions of dollars on ERP systems, (and in many cases over a billion dollars), most companies still fall way short in terms of their data – both in terms of accuracy and completeness.

Before starting almost every project we are assured that the data will be in our hands within a few days – at the most. Typically, we count ourselves lucky if the data extracts are available within 3 weeks, and are accurate enough to be useful for analysis.

A Well Documented Knowledge Base

Unfortunately, the supply chain team ends up copping most of the blame of this state of affairs. Whenever data deficiency in supply chain shows up, the knee jerk reaction is to point fingers at the people working in the depths of supply chains.

The purpose of this blog is not to pin the blame, as much as to find the root causes and means to overcome these. To identify the root causes - let us look at the typical digitisation process within a company, and the problems endemic in the process itself.

Since the ERP drive in the 1990s, we have accumulated significant knowledge base of digitisation projects and their outcomes. By now a lot of this knowledge has gradually permeated and dispersed into the public domain.

Despite over 30 years of this accumulated knowledge, and clear understanding of at least 18 common oversights and errors - the problems with supply chain digitisation continue to persist. I could quote instance after instance of massive digitisation spend yielding barely passable results, or worse.

Root Cause Analysis is Lacking

Project cost and time overruns continue to be common. Worse still, project goals as defined at the time of the budgetary approval are rarely achieved by the end of the project. It is quite common to change the goal post in the middle of the project. In this process, everyone is making money except for the management and shareholders of the company that owns the digitisation effort.

Only a few of the cases show up in public domain - here is a sampling of these. Yet an insider could easily write an entire novel just from a single case study in their own company.

I do not want to write that novel. My intention is to move the focus to the root causes so that they can be isolated and addressed.

Before I go on with the second part of this series, I think this is a good time to pause and let the readers reflect on what the root causes are in their minds. I have my own strong hypotheses (and that is all they can be without a scientific experiment).

So, if you have come this far in reading this piece, you are clearly interested in the topic. Point out some obvious and, some not so obvious root causes in the comments below to continue this conversation.

About Me:

If this is the first time you are encountering my work, I specialise in results-driven supply chain strategies and work to make supply chain boards a common reality in most businesses. My company website has more of my writings on www.globalscgroup.com.