Digital Transformation in Supply Chain Management: Preparing for Future Growth

The digital supply chain is the next frontier for organizations to optimize their value chain and financial performance. Take advantage of the current slow-down to slingshot past the competition. With the consumer behaviors shifting at a rapid pace, the need for the supply chain to be nimble, elastic, and transparent is more critical than ever. If you’re looking at high-value areas to focus on right now, digitizing the supply chain is a strategic investment that has proven to bring in solid financial results and help you move closer to your customers.

What’s the vision? A fully integrated and collaborative customer-centric supply chain where you have:

• Full end-to-end visibility of the supply chain. Monitor your goods and operations via Internet of Things (IoT) and share the data with supply chain partners in real-time.
• Data analytics that can turn into actionable insights.
• Delivery excellence. Employ cognitive and artificial intelligence and machine learning to address your biggest planning challenges and improve customer experience.

One of the biggest mistakes companies make in modernizing their supply chain is layering on the latest digital tools to the legacy operational processes and technology stack. Instead, they should be bold and reimagine their end-to-end operations with an implementation plan that is scalable and customer-centric and will drive the top and bottom lines of the business.

In the past decade, traditional supply chains have undergone substantial upgrades via ERP implementations, sales, and operations planning applications, and data analytics. However, these improvements do nothing to break down the supply chain’s siloed multiple disciplines: for instance, automation within order management isn’t going to yield expected performance improvement if it is not integrated with planning, inventory management, and logistics.

A successful digital supply chain transformation is a holistic end-to-end cross-functional digitization of all functions within the supply chain ecosystem, from product planning to post-sales customer support. The two fundamentals of the transformation are:

1. Digitization is tied to the enterprise strategy
2. Technologies are essential to optimizing the operational processes that are focused on a seamless customer journey involving both partners and consumers

Digitization should drive operational excellence, and operational excellence is the cornerstone for implementing digital tools, a virtuous cycle to drive supply chain performance.

Developing a digital technology roadmap for next-generation supply-chain processes

Organizations are currently at varying levels of maturity in terms of supply chain digitization. An organization that is just starting the journey should look at, as an example, streamlining its sales and operations planning (S&OP) to make it a closed-loop collaborative process. It should implement a digital application to automate data gathering, integrate with enterprise resource planning and derive value from analytics. On the other side of the spectrum, enterprises that are at a higher maturity level can focus on IoT, AI, machine learning, blockchain, augmented reality and other forward-looking technologies for operational improvements, predictive analytics and precise decision-making to operate at a higher velocity. Also, organizations should align their supply chain digitization initiatives to the overall enterprise digital transformation because many components interconnect.

Align supply chain digitization initiatives to the overall enterprise digital transformation as many components interconnect.

Let’s look at the four key areas in a supply chain transformation you need to address as you develop your strategic roadmap.

1. Enterprise strategy

The most common factors influencing the success of most digital supply chain transformation initiatives are:

• Lack of understanding of the supply chain landscape and processes
• Absence of supply chain leadership in the early stages of planning
• Limited budget – not included as part of overall capital expenditure
• Lack of organizational urgency

Many key business functions within an organization continue to pursue digital projects in silos. The supply chain transformation strategy should align with what’s going on in the broader organization and its ecosystem—it should support the overall strategy of the business.

2. Supply chain objectives

Supply chain organizations should clearly define their business objectives for successful digitization. Again, depending on the where they are in their maturity, here are a few examples of objectives by discipline:

• Product design: Increase time to market lead time, incorporate IoT capabilities, improve innovation velocity with solution brokers
• S&OP efficiency: Reduce data entry with predictive analytics (ML), closed-loop partner collaboration, improve cross-functional transparency with analytics
• Customer-centricity: Improve customer intimacy, personalization, real-time updates on pricing, delivery time, etc.
• Logistics: Reduce fulfillment lead time with AR or automated warehouse picking
• Inventory management: End-to-end integration across the supply chain network, from supplier-to-manufacturing-to-in-transit for visibility, accuracy, and optimization
• Post-sales: Proactive quality sensing, self-service, and social engagements
• Analytics: Control tower for executive steering

3. Supply Chain Maturity Assessment

Others have noted that “the digital technology landscape that the current supply chain faces is far more than just software for process enablement and transaction tracking.” This is why it is critical to assess the current state of the supply chain network and maturity level to build a solid digitization road map that aligns with the supply chain objectives. The assessment will help identify strengths, gaps, and opportunities for continuous improvements in the following areas:

• Supply chain digital talent: Evaluate the organizational skills in the respective functions to develop and augment digital skills
• Operational process excellence: Review the business processes for efficiency, cross-functional collaboration, and information sharing
• Digital tools: Assess the current technological capabilities to support the future transformational vision for the organization
• Data and analytics: Evaluate data gathering tools, sensors, and analytical applications to identify if insights can be developed for tactical and strategic decisions
• Culture: Assess organizational culture for innovation and experimentation

4. Digital roadmap and prioritization

Technology alone isn’t enough to fix and transform your supply chain. It should include all aspects of the maturity assessment cycle. Once a complete list of all initiatives is set, establish a clear value score for each initiative based on the organization’s prioritization methodologies for executing the roadmap.

As your supply chain transitions digitally, it is good to build confidence within the organization and partners by executing high value but relatively small transformation projects first. Companies should be flexible to alter or adjust course based on the outcomes of each pilot use case. Establish a clear procedure to evaluate the success of a pilot use case. Agile methodologies to demonstrate quick, continuous success in an iterative fashion can foster a great transformation culture.

Conclusion

Now is the time for companies to focus on functions that can deliver better value to the business and customers, supply chain being one of them. It is proven that a highly optimized digital supply chain can increase financial performance, including a lift in sales and earnings, reduction in costs, and enhancement of the customer journey. But rather than adding on the latest tech to legacy systems, companies should take the bold leap forward by rethinking their current supply chain and investing in the innovations that make sense to their operations. When growth returns, you’ll be ready to hit the ground running.

This article was originally published on Forbes.com on May 27, 2020. Siva Saravanan is a member of the Forbes Technology Council.