From Supply Chains to Digital Supply Network and Digital Collaboration Networks

Digital has a massive impact on the supply. Adding digital technology to enhance is not enough. Companies must re-invent their supply chains making their underlying DNA digital.

The Supply “chain” has evolved from linearly thought process to a circular concept (Circular Economy) to a now system of networks (Digital Supply Network).

This new Digital Supply Network allows to add/ drop partners and contributors fast and fill any disruptions with immediate alternatives.  It maximizes access to information, knowledge, innovation, resources, materials, infrastructure, services, products, etc.  It enables to respond to market opportunities at lighting speed and scale large without requiring upfront large investments. Cloud and XaaS services offering often almost immediately pay per use solutions.

Digital Supply Networks require a new vision and way of thinking. Traditional, text book supply chain methodology breaks down.

Disruptive technologies such mobile, social media, cloud, big data & analytics enable unprecedented opportunities to gain a holistic and detailed understanding of the real-time situation and take the best decision for the particular moment. Like smart IT networks automatically reconfigure themselves when one node breaks, so digital supply networks will equally and easily adjust. Mass production and mass customization are now fully possible fast and very efficiently.

Digital Supply Networks will then finally evolve into Digital Collaboration Networks, where there will not be one major driving company that procures from “outside” to produce/ deliver their products and services, but rather where a collection of individuals and organizations collaboratively add and receive inputs and support to create a collection of outputs, products and services.

What companies can/ should do?

 -       Follow a systematic approach

-       Re-visit your business strategy and align to the vast changing market, customer and competitive environment

-       Identify core strengths and capabilities across the key value chains.

-       Develop suitable Operating Model, architect a blueprint for the future.

-       Drop none-value adding work. In-source and outsource accordingly.

-       Streamline your processes, people and metrics accordingly.

-       Drive value transformation and optimization across the entire organization

-       Extend to your effort to your partners and tier 1 suppliers

-       Use data & fact based approaches (Lean Six Sigma, etc.), digital technologies (Big Data & Analytics, AI, Visualization etc.) to analyze complex cause-and-effect interrelationships and to gain an “end-to-end”/ holistic understanding for executive planning & decision making.

-       Think and optimize in concentric overlapping life cycles of products, services, innovation,

-       Focus on execution excellence, but in an agile, experimental way of continuous improvement

Specific examples of how digital impacts key functions within the organization

Procurement

Companies need to blueprint the future procurement operating model, optimize spend demand management through zero-based budgeting, sourcing for direct/core categories, relationship management and risk strategies. They need to improve total value of ownership by reducing overhead expenses and COGS; develop new cash flow streams through supplier innovation; reduce environmental and community development costs; decrease working capital.

The procurement operating model blueprint maps how a client’s procurement organization will operate across their organization, process, talent, and technology (and digital) landscape in order to implement their strategy and achieve the targeted operational and financial improvements.

Companies need to better plan and optimize their supply chains. At British Telecom we drove the reduction of the large supplier base with the objective to selectively focus on less suppliers, but developing more partners that would help BT achieve its strategic objectives and to achieve more collaboration, value contribution, innovation, speed, delivery capability and operational excellence.

Product lifecycle management (PLM)

Traditional product value chains used to be linear. Now they are fast-moving product development value networks, encompassing an extended ecosystem of partners, suppliers, manufacturers and customers—all influencing the product lifecycle.

Digital enablers and new technology paradigms have become part of the product development and lifecycle management process, utilizing big product data and digital infrastructures

Digital technologies can now reduce marginal cost of supply to near zero. Companies like YouTube, Kickstarter, Airbnb and Uber show you don’t need to own assets to provide trusted access. The cost for each of these companies to add a new room, video or car is near zero.

Digital allows the industry’s value chain to be completely unbundled. There are thousands of start-ups attacking existing markets of incumbents.

Customers use digital to change the way they interact with products, companies are looking for ways to use digital to develop them. “Words like ‘gym’ or ‘shops’ are nouns that describe a business but no longer define it. Digital is making the nouns a lot less relevant than the verbs.

Companies must take a holistic, transformational perspective on Innovation, Product Development and PLM. They strengthen outcome-driven business discipline that harmonizes people, process, data and systems. Everything should be driven by a measurable, outcome-driven business case.

R&D and Advanced R&D

When working with Huawei on developing and enhancing its Advanced R&D capabilities years ago, we looked at industry best practices to drive transformation. Today Huawei is an industry leader in new annual patents. Huawei eagerly learnt from the best and become a star.

Digital calls companies to rework their global operating model in R&D; planning and procurement; manufacturing locations; talent acquisition, retention and growth. The focus must be to develop and launch the right product, at the right time for the right cost.

 Product portfolio management

Companies need to adjust and optimize their product portfolio. It requires reducing complexity (using insight driven customer demand) and cost-to-serve to improve margins and minimize product costs.

Frugal Innovation, a term coined in developing countries, is a great concept that applies also to the developed markets. Basically, it focuses on just the features that a potential customer is just willing to pay and dropping other cost drivers that are just waste.

XaaS is more than just a new way to deliver technical capabilities, it is a major shift in the fundamental business model of the industry. XaaS allows companies to sell differently, to an expanded set of buyers, with a different value proposition – all of which much be backed up by a transformed set of commercial capabilities.

It also allows to reorganize engineering capabilities in order to increase developmental agility while maintaining quality and predictability.

In a time when consumers increasingly want to rent or pay for use, rather than own, companies need to adjust their business models. It may require organizations to diversify their business and play with numerous business models.

Ensure strategic alignment between the application landscape and business imperatives

• Reduce application redundancies and drive standardization

• Assess and address technology risks

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