Digital transformation is the most complex and critical challenge for today’s supply chains.
With global market forces and increasing market complexity, supply chain management is at a crossroads. The pressure caused by these forces is reshaping the linear supply chain model into one we call the intelligent supply chain.
On the journey toward an intelligent supply chain, decision-makers believe that emerging technologies like artificial intelligence (AI), cloud computing and the Internet of Things (IoT) will be central.
Traditional vs Intelligent Supply Chain
The traditional supply chain model is linear, siloed and has an absolute focus on the physical movement of goods.
Suppliers provide the raw materials to manufacturers, who pass on the finished products to distributors, who then provide select amounts of that product to the retail outlets that ultimately sell products to consumers.
For decades, this functional model has been refined to support a global consumer marketplace and supply base that continues to grow. It’s been an evolution for the most part. But this old supply chain management model no longer meets today’s expectations.
An intelligent supply chain connects people with processes and things to enable visibility, communication, planning, analysis, simulations, and execution. These processes are orchestrated across the different functions based on real-time inputs and requirements, coming from connected assets and products.
The Intelligent supply chain is the transformation of a conventional supply chain into a digital one by re-imagining the various processes and infusing them with intelligent technologies.
Intelligent Supply Chain has a strong Return on Investment yet fails to attract attention
A recent McKinsey study found that the average supply chain has a digitization level of 43 per cent. This is the lowest of the five business areas (including Products and Services, Processes, Marketing and Distribution, and Ecosystems) that were examined. A mere 2 per cent of the surveyed executives said the supply chain is the focus of their digital strategies.
Yet that same research suggests that, on average, companies that aggressively digitize their supply chains can expect to boost annual growth of earnings (before interest and taxes) by 3.2 per cent—the largest increase from digitizing any business area—and annual revenue growth by 2.3 per cent.
Two steps towards an Intelligent Supply Chain
1. Establish Your Digital Supply Chain Vision
Whether your digital transformation is a survive or thrive effort, you need a clear vision. Why are you going to invest in this effort? Why is it important? What problems are you looking to solve?
An effective digital transformation depends on a forward-looking concept for the future supply chain. This means thinking about the outlook for the company, the pressures that influence its competitive situation, and the raised expectations of its customers. Ultimately this vision must be aligned with your company’s strategic goals.
2. Articulate and execute your Digital Supply Chain Strategy
Once you have set out your vision for the supply chain, you should articulate that vision in terms of the current (and required for the future) business/ technical capabilities, such as:
Better decision making – AI and machine-learning systems can provide supply-chain managers with recommendations for how to deal with particular situations, such as changing material planning and scheduling in response to new customer orders.
Process Automation – Automated operations can streamline the work of supply-chain professionals to focus on more value-adding tasks.
Customer Experience – Digital technology can make customer experiences better by giving supply-chain managers more control and providing customers with unprecedented transparency. For example, track-and-trace systems send detailed updates about orders throughout the lead time.
Business model innovation – A digital supply chain can help your company strengthen its business model (for example, by expanding into new market segments) and collaborate more effectively with both customers and suppliers.
Articulating your digital supply chain strategy happens through three components:
- A long-term plan that outlines your journey for the next seven to 10 years and how it will be supported at all levels in the organization. This plan can also be executed on a three-year rolling basis, with updates as needed.
- An optimization plan that outlines specific short-term goals that need to be met in order to stay in business.
- A transformational change management plan that outlines the processes or tools you will completely change.
These components allow you to operate in two modes. One helps you focus on continuous improvement goals, like meeting or exceeding quarterly expectations. The other focuses on transforming your supply chain for the future.
Although your journey toward a digital supply chain may require new and better integrated technologies, don’t forget that digital transformation is about people. And you must take them on the journey with you by preparing your workforce for a digital transformation.
Advances in digital technology have enabled many companies to improve their supply-chain performance quickly at a modest cost. However, the appeal of these technologies has led some companies to mount hasty, and often disappointing, implementation projects.
Transformation success is highly dependent on the successful implementation of the technologies that have been selected. Again, in our experience, traditional implementation methodologies that were developed for deploying older technologies are no longer appropriate for the new Industry 4.0 technologies and process redesign efforts.
Our SIM (SynergERP Implementation Methodology) enables rapid implementation, process improvement and prototyping, and has proven invaluable in helping our customers to harvest the benefits of Intelligent Supply Chain design.