Digitalization
is impacting (and disrupting) almost every industry. Supply Chain Management
(SCM) is a prime candidate for value creation using digital thinking and
technologies.
The complexity,
scope and fluidity of today’s supply chain create enormous amounts of data,
information and change. SCM must integrate, manage, optimize, change activities
– ideally in real time (as the market and other factors require).
SCM covers
both internal and external operations, covering clients, end customers, partners,
suppliers, service providers on a global scope. Government and trade bodies,
NGOs and other parties increase challenges. SCM deals with a huge number of divers
stakeholders creating a complex web of contacts, roles, interests, flows of
goods, services and information spanning.
In this
blog, I would like to share thoughts for improving and digitalizing supply chain management.
Like always, I base my views on best practices. Here, I summarize and present methodology
from Capgemini Consulting, that I regularly use for benchmarking:
Traditional
supply chain models have resulted in rigid organizational structures,
inaccessible data and fragmented relationships with partners. We often find a
combination of numerous key deficits: Lack of transparency, agility, end-to-end
process integration; sub-optimal use of locations and labor cost differences,
bundling of tasks; overly complex IT landscapes.
Often
several hundred applications supporting supply chain processes, lead to lengthy
implementation cycles and overly high maintenance costs. Disparate IT systems
bring in inconsistency and redundancy in data.
Digital
supply chains are based on a digital operating model that implements digital
capabilities along the organizational layers of governance, processes, data
& performance management and IT. Such model enables business process
automation, organizational flexibility and digital management of corporate
assets.
Business
Process Automation bears a value driver potential of on average 20 percent of
the cost base. It integrates business processes, collaborates with customers
and suppliers, has event driven process scenarios and embeds analytics/ optimization.
It is about straight through processing, complete execution of end-to-end
processes without the need for re-keying or manual intervention. All necessary
data is available to employees to complete the transactions. Management of
physical flows is enabled by a closely knit web of checkpoints that are tracked
and monitored.
Organizational flexibility bears a value driver
potential of on average 50 percent of the cost base. It accelerates business
process innovations, manages a mix of global and local processes, flexibly
handles In & Outsourcing and rapidly implements new business models. It
gives greater freedom to choose the appropriate degree of centralization needed
to support specialization or minimize process costs. Centralizing specific functions
can generate higher value through better quality and productivity. Central
master data management helps avoid double entries and inconsistencies; while
supply chain planning activities benefit from a bigger pool of optimization
objects.
Digital Management of Corporate Assets bears a
value driver potential of on average more than 5 percent of the cost base. It
generates new business insights, operates a scalable data model (processes,
product lines, customers) and integrates views (financial and operational KPIs,
internal and market data). As information becomes available at the micro level
it allows companies to treat a single customer order as a profit center or a
single process as a cost center. Aggregation of all these transaction results
in much more accurate performance measurement of a specific customer, industry
segment or location.
Capgemini offers a systematic Framework with
five layers for Digital Transformation of Supply Chain Management:
On the top, layer 1, Digital Supply Chain
strategy integrates digital initiatives into the overall supply chain strategy
in order to generate and measure long term value. The identification of
business benefits requires top management expertise and inputs regarding
currently perceived pain points and industry best practices. Typical outcomes
of an analysis of pain points are often broken processes, local instead of
global optimization, low visibility, etc.
Supply Chain Operating and Governance Model,
layer 2, helps realize the full potential of being a global company. It
examines internal alignment of roles, procedures, service level agreements and
transfer pricing schemes.
Integrated Supply Chain Performance
Measurement, layer 3, uses Web 2.0 technologies to trace every order or
transaction. Tagging technologies and virtualized data centers make information
available. Combining this operational data with financial information, with
external data from market and benchmarking efforts improves decision making.
Integrated Supply Chain Performance Management,
layer 4, integrates the different supply chain functions such as product
development, procurement, production, maintenance, and logistics across
locations in order to minimize waste and non-value added activities.
Supply Chain Technology Architecture and
Infrastructure, layer 5, provides the design logic for business processes and
IT infrastructure, integrates and standardizes requirements of the
organizations operating model. The challenge is to select and implement digital
technologies and integrated platforms that employ reusable and exchangeable components
with minimal investment in time and effort. Examples are RFID, wireless
tracking devices, warehouse labor and vehicle management systems,
voice-directed picking devices, etc.
Since 2005, I have been working with British
Telecom’s Supply Chain Excellence practice. Auditing, evaluating and improving BT’s
partners and suppliers I have witnessed the enormous opportunities to generate
value for companies: Produce better products & services, respond to clients
faster and more flexibly, develop effective eco-systems of partners, suppliers
and customers…
Leading improvement efforts across all business
functions and value chains, I could align structures & roles with
strategies, optimized systems, processes, policies and procedures. Digitalization
gives us now the tools and technical capabilities to take supply chain
management to the next level – a global, truly holistic, agile, effective and
cost-efficient, living and continuously improving ecosystem.
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To share your own thoughts or other best practices about this topic, please email me directly to alexwsteinberg (@) gmail.com.
Alternatively, you also may connect with me and become part of my professional network of Business, Digital, Technology & Sustainability experts at
https://www.linkedin.com/in/alexwsteinberg or
Xing at https://www.xing.com/profile/Alex_Steinberg or
Google+ at https://plus.google.com/u/0/+AlexWSteinberg/posts
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