Digital makes current supply chain models obsolete – What companies can do

The impact

Digital technology is disrupting traditional operation and now every business is a digital business. The impact on supply chain management is particularly great. Companies must re-invent their supply chain to unlock the full potential of digital.

Re-adapting is not enough. Digital is too different. Traditional governance mechanisms and business processes are too inflexible. Piecemeal digitization of supply chain elements is counterproductive. Instead it requires to re-imagine supply chains as integrated digital supply networks.

Digital technology renders traditional supply chain models obsolete. Digital can and will destroy business and operating models. It changes the nature of control points, the role & value of data. It shifts the level of value creation at each stage of the value chain.

Examples of successful digital companies

Coca Cola, for example, analyzes up to 1 quintillion (!) data points with their Black Book algorithms to assure consistent 12 month supply of their orange juice and makes manufacturing plans 15 months in advance based on external factors such as weather, expected crop yields and cost pressures.

Uber and Lyft leverage mobile technology to create secure temporary transportation by connecting drivers with riders.

Cisco Systems pronounced that supply chain and logistics constitute almost $3 trillion in value at stake (a combination of increased revenue and lower costs). This value can be gleaned by re-uniting product, talent, information and currency electronically via a digital supply network.

SMAC technologies are the most disruptive

Social media can help companies tap innovation from outside the organization, generate demand triggers for specific products & services (Physical supply chain), provide customization and community building through social channels and targeted product & service offerings (Information supply chain), solicit feedback and reduce selling costs (Financial supply chain).

Mobile communication provides real-time, 24 hour/7 connectivity, support for corporate field forces (Talent Supply Chain), offer store specific apps that drive demand (Physical Supply Chain) provide updates on product delivers (Information Supply Chain) and enable remote payments and new buying opportunities (Financial Supply Chain).

Analytics analyze employee performance & behavior and improve effectiveness & efficiencies (Talent Supply Chain), implement alerts & response actions and assist with predictive maintenance (Physical Supply Chain), understand customer behaviors that inspire new products, services and customization opportunities (Information Supply Chain) and help optimize procurement spend (Financial Supply Chain).

Cloud computing provides remote access for experts to help companies educate, train and solve problems (Talent supply Chain), leverage the contribution of partners & suppliers through portals hosted in the cloud (Physical supply chain), increase access to applications and crowd-sourcing opportunities (Information Supply Chain) and provide end-to-end source to pay functionality (Financial Supply Chain).

 

Digital technologies make supply chains Connected, Intelligent, Rapid and Scalable

Digital technologies enable networked process and optimization of the entire enterprise rather than just some individual functions. It unites all stakeholders across the value chain and inspires a new way of collaboration and innovation. It can help companies mass produce and mass-customize products & services at the same time.

Digital technologies make supply chains Connected, Intelligent, Rapid and Scalable

Becoming Connected gives companies real-time visibility, seamless collaboration within and beyond physical boundaries, and ability to adjust the product & service functions as well as business & operating models.

Arriba, for example, achieves a complete and seamless source-to-pay process by connecting 1 million suppliers and 4 million users in over 190 countries through the cloud.

Becoming Intelligent allows companies to leverage analytics, cognitive equipment and smart apps to turn data into valuable information, actionable insights, predictive decision making, automated execution (with seamless human-machine interactions), increased operational efficiency and enhanced, accelerated innovation.

Becoming Scalable companies can more easily optimize and duplicate processes, up/ down scale supply chains, add and reduce partners & suppliers; target niche markets, segments and customers more effectively. Digital plug-and-play capabilities make it easier to configure and re-configure. Channel-centric supply networks support customized products & services and personalized experiences.

Lockheed Martin Corporation developed Digital Tapestry and brought digital design to every stage of the production process. It includes 3-D virtual simulations for design and 3-D printing technologies for prototyping and production. The result is a less expensive, more reliable system in a completely artificial environment. Designers can manipulate parts or entire machines and see how they go together and operate. The system responds with a constant stream of automatically updated specifications.

Becoming Rapid – Speed is one of the most important currencies of the future. Digital technologies help diagnose, adjust and execute more rapidly and efficiently. Resources shift from within the company across the extended enterprise.

Enhanced responsiveness and sophisticated analytics help accelerate responses to changing demand, supply signals, competitor moves and technology shifts. Proactive prevention and predictive analytics can increase reliability and adaptability. Last mile postponement helps swiftly repurpose organizational assets and align supplies with evolving demands.

Dell launched a global command centers to monitor supply chain activities and make adjustments in real time. The platform links with the global data systems and monitors service dispatch activity, matching dispatch with optimal part location. It also serves as trend spotter, early warning and feedback system.

 

Key steps for companies to build their Digital Supply Network

The supply chain is evolving from a function concerned with the expedient movement of materials to an inter-enterprise discipline that concurrently optimizes materials, talent, resources, information and finances. Supply chain take a crucial role in the enterprise wide realization of outcome-focused missions like “create highly differentiated customer experience”, “achieve perfect order rates”, or accelerate innovation.

The new supply network is built with digital DNA. It is important to follow systematic process to transform a traditional supply chains into a digital supply network.

1)      Envision specific business outcomes for now and a decade into the future.

2)      Conduct a solid value chain analysis (see my blog on Prime Value Chain Analysis)

3)      Map your digital journey with a blue print of your future organization including the people, process, technology and governance aspects of the transformation. It should outline the convergence of talent, Physical, Information and Financial Supply chains into one cohesive network to assure a vibrant, interconnected ecosystem. Include a transformation plan from an existing technology landscape to a future digital one.

Key trends, aspects and opportunities to incorporate into your supply chain

Consider key aspects in your plan

·         Collaborative planning & scheduling - Optimize inventory holding and storage for delivery within hours to a customer for a premium fee.

·         Dynamic inventory and replenishment planning (based on real-time visibility across extended supply chain) for greater customer assortment, faster delivery and product flow streamlining.

·         Leverage external talent and infrastructure beyond customer boundaries: Leverage social networks, interest groups and customer product development forums to create new innovation; combine with up skilling internal employees to enable superior customer experience & service

·         Precision pricing based on collected on the ground and online intelligence and analytics.

·         Procurement mall – an online IT system & helpdesk provides intelligent choices for procurement and facilitates end-to-end procurement operations on a self-service basis. Allows merchants to access and apply best practices from across the global enterprise.

·         Transport planning based on supply side intelligence providing cloud based industrywide collaboration, internal real time demand visibility and dynamic route planning based on real time analytics.

·         Automated warehouse operations that connects people and IT systems on a real-time basis through smart equipment, RFID enabled warehouse picking systems, to increase accuracy and efficiency.

·         Micro-segmenting of customers to improve store layouts, customize offers and product mix based on customer behavior and social media data.

·         In-store/ off-line collaboration: Retailers could offer their physical infrastructure for a fee to the online market place and vice versa to provide customers with unprecedented access to assortments; plus establish on-demand access to inventory in the supply chain network.

·         Transport Cooperation to share transport with channel partners and even competitors. (Nestle and Coca Cola)

·         Shopper Insight – Customer preferences to drive product mix, promotions & sales through fast data analytics, alerts and in-store devices.

·         On-spot selling – arming in-store employees with customer-specific information, advice and upselling.

·         Movable supplies – Bring products closer to the customer to reduce delivery time based on demand sensing and movable warehouse capacity.

·         Last mile delivery – Consolidate deliveries across network, supply chain partners, other retailers and even competitors to reduce costs/ expedite delivery; use also pick-up lockers.

Special thanks & credits to Gary Hanifan, Aditya Sharma and Carrie Newberry of Accenture Strategy – Operations for their thought leadership and publications. This article has incorporated much of their content.


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