Can Your Supply Chain Afford to “Wait and See” Before Becoming Digital?

Stephen DeAngelis

February 01, 2021

In a volatile world characterized by rapidly changing technology, caution is often justified. Many analysts believe, however, that time for caution has passed when it comes to digital supply chain transformation. Nevertheless, “wait and see” seems to be the position of many supply chain professionals. Morgan Swink, a Professor of Supply Chain Management at the Neeley Business School of Management at Texas Christian University, and Nada Sanders (@nadasanders), a Distinguished Professor of Supply Chain Management at the D’Amore-McKim School of Business at Northeastern University, write, “Executives across all industry sectors are rapidly adapting organizational strategies and structures to ‘digitally transform’ their supply chains. Multiple factors are driving supply chain digitalization, including the growth of big data, artificial intelligence (AI), robotics and the Internet of Things (IoT). Some organizations are combining these advances with developments in hardware (e.g., servomechanisms) and software (e.g., analytics) to improve supply chain processes. Yet many supply chain managers are operating in a ‘wait-and-see’ mode when it comes to digitalization.”[1]

According to Craig Fuller (@FreightAlley), founder and CEO FreightWaves, the pandemic provided plenty of evidence that supply chain digital transformation was essential to future success. He explains, “[The pandemic highlighted that] we were in the midst of a technology revolution, where automation, transparency, visibility, and information were becoming paramount to every supply chain, big or small. The companies that had the sophistication to automate their order flows and the capacity to respond to volatile customer demand were winning big, while others were suffering significantly.”[2] In other words, “wait and see” companies may have waited too long. Lora Cecere (@lcecere), founder and CEO of Supply Chain Insights, laments, “Strangely, in the last decade, while companies had the opportunity to use technology better, supply chain performance declined.”[3] She asserts it’s time for laggard companies to give science a chance. By that she means, it’s time “to ground supply chain processes and technology implementations in data analysis while tying the results to the improvement in corporate performance.”

Focus on improving capabilities

The common thread running through the arguments raised by Swink and Sanders, Fuller, and Cecere is their focus on improving organizational capabilities rather than implementing digital technology per se. Cecere writes, “Most of my clients implement technology without asking themselves the simple questions of, ‘What does good look like? And if I am successful, what improves in my business?'” Those are excellent questions to consider before making investments in any technology. Swink and Sanders note:

Three key factors … separate leading firms from laggards. First, successful transformation efforts build upon a set of common underlying features that differentiate a digital supply chain from a traditional supply chain. Second, more advanced firms pursue visions of digital maturity that follow a natural progression of core attributes. Third, and perhaps most important, successful leaders strategically target well-defined capabilities. Many supply chain leaders make the mistake of focusing on technological solutions rather than building capabilities. Our key takeaway is that companies need to focus less on the technologies themselves and more on the capabilities they enable.”

Hank Canitz, a product and industry marketing leader, defines digital transformation in a way that stresses improvements in capabilities rather than technologies deployed. He writes, “Digital Transformation involves a focused effort of activity across multiple processes that accelerate performance and deliver new value-added capabilities. Digital Transformation in supply chain operations usually involves the development of new tools, skills, and/or processes that target a step change in speed and/or agility.”[4] Oliver Freeman, Senior Editor at Supply Chain Digital, asks, “Where would the modern world be without analytics and the detailed analysis of them?”[5] His answer, “In a ditch, I imagine. So, it’s unsurprising that ‘big data’, ‘data harvesting’, and ‘predictive analytics’ are all set to continue their exponential growth through 2021.” As Freeman rightfully notes, the effective functioning of digital supply chains requires data and much of that data comes from outside the organization. As a result, collaboration is essential. Brian Straight (@truckingtalk), managing editor of FreightWaves, insists, “The digitization of the supply chain is not a solo effort and only ultimately successful if organizations involve their suppliers, partners and customers in the process.”[6]

Steps towards digital supply chain transformation

If your company wants to truly transform its supply chain to achieve the goals defined by Canitz, decision-makers must be ready to make some agonizing, but necessary, changes. Tricia Wang (@triciawang), a self-described Tech Ethnographer & Sociologist, explains, “A lot of companies treat digital as if they are ‘doing digital’ — this is ‘digitization’ at its worst — as if it’s some checklist of things to do. It’s very transactional, and people are so busy doing digital they don’t even know WHY they are doing it in the first place! Whereas [some companies] embrace ‘being digital’ — this is ‘digital transformation’ at its best — it’s a total paradigm shift in the culture and operations — it’s not just about buying the latest digital tool, but about creating a new system, new cadence, new mindset.”[7] Like the subject matter experts cited above, Gartner analysts stress the importance of focusing on improving capabilities during the transformation process. They note, “By first developing the foundational supply chain capabilities and then incorporating proven business and technology innovations, leading supply chains can move beyond exploration to integration and optimization.”[8] Change is always hard and, generally, painful; however, success can ease the pain. Gartner analysts suggest three steps companies can take to increase the chances of making a successful transformation. Those steps are:

Step 1. Embed supply chain in the digital ecosystem. Gartner explains, “An organization’s digital ecosystem is a network of people, businesses and things interacting through real-time integrated solutions. By leveraging technologies such as the Internet of Things (IoT) and big data, information is shared effectively across the digital ecosystem. These technologies can also inform decision-making and drive efficiencies across the supply chain ecosystem.” As noted above, this requires genuine collaboration.

Step 2. Implement autonomous supply chain. The term “autonomous” is a bit misleading since it implies no people are involved. Gartner analysts explain, “The introduction and pervasiveness of artificial intelligence (AI) into supply chains can introduce autonomous processes into their functions that augment — not replace — people.” They add, “AI is expected to be able to progressively make a range of complex decisions, more autonomously (for example; better predict demand, set inventory levels, reroute transportation, redesign the supply and distribution network).”

Step 3. Synchronize with digital business. Digital supply chains are only a part of a great digital enterprise. Gartner analysts explain, “Supply chain leaders can play a crucial role in identifying and addressing any gaps in their organization’s response to the challenge of digital business.” They add, “Keys to synchronization are: Proactive risk mitigation, real-time asset optimization, autonomous operational responses, instant demand shaping and sensing, and proactive corporate social responsibility management.”

Concluding thoughts

Freeman notes, “Since the dawn of trade, supply chains have been crucial … to the survival of humankind, and we need them now, more than ever before.” Supply chains have also evolved since the dawn of time and now is no time to stop. Cecere concludes, “Now is the time to build better using new forms of analytics to ground the supply chain in data to unleash the promise of the Art of the Possible. Use data and new metrics systems to free the organization from the ball and chain of corporate politics. … My plea? Sidestep politics: give science a chance.” Canitz adds, “To be truly competitive in an increasingly volatile world, forward-thinking companies will need to transform their supply chain operations by investing in digital supply chain capabilities.” Finally, Gartner analysts conclude, “Digital is a key priority for most supply chain leaders, but fewer than half have defined or plan to implement a supply chain digital transformation roadmap that addresses both short-term improvements and a strategic long-term vision. Supply chain digital transformation is proven to drive growth, mitigate risk and optimize costs, but requires strong alignment between business and supply chain strategy to succeed.” It may not be too late to start your company’s digital transformation journey; however, time is running short.

Footnotes
[1] Morgan Swink and Nada Sanders, “Want to build a digital supply chain? Focus on capabilities,” Supply Chain Management Review, 9 November 2020.
[2] Craig Fuller, “Supply Chain tech investing is on fire. This is just the start.” FreightWaves, 11 December 2020.
[3] Lora Cecere, “A New Decade: Give Science A Chance,” Supply Chain Shaman, 28 December 2020.
[4] Hank Canitz, “Digital Transformation of the Supply Chain,” Logility Blog, 30 November 2020.
[5] Oliver Freeman, “The Global Supply Chain Technology Outlook 2021,” Supply Chain Digital, 10 December 2020.
[6]Brian Straight, “Digitizing the supply chain is a collaborative effort,” FreightWaves, 15 December 2020.
[7] Trevor Miles, “Let’s be clear: Digitization is not the same as Digital Transformation,” Kinaxis Blog, 8 December 2017.
[8] Janet Brice, “Gartner: Three-steps to supply chain digital transformation,” Business Chief, 6 December 2020.