Digital Supply Chain Transformation Still in Early Stages

Stephen DeAngelis

November 12, 2019

Former IBM executive Irving Wladawsky-Berger traces the origins of the Digital Age to the release of the Netscape browser in December 1994.[1] Although a quarter century sounds like sufficient time for organizations to adjust to this new age, most analysts believe we remain in the formative years of digitization. Supply chain expert Mike Mortson (@mmortson) believes it’s still fair to ask, “What is the digital supply chain?”[2] Steve Banker (@steve_scm), Vice President of Supply Chain Services at Arc Advisory Group, agrees it’s a fair question. He writes, “Companies mean different things by the term ‘digital supply chain transformation.’ For some companies, it means replacing manual, paper and pencil processes with digital data and process support. For some companies it means using autonomous mobile robots and other forms of robotics in their supply chain. For some, it means applying machine learning and artificial intelligence (AI) to supply chain Big Data. And for some, it means getting better digital data to support an end to end supply chain involving multiple tiers of a company’s supply chain.”[3]

Mortson asserts new technologies are shaping the digital supply chain. He writes, “All of the technologies that we hear about every day, from Blockchain to Virtual Reality, have many areas of applicability in both our personal and business lives. But in the area of Supply Chain, which truly spans the entire operations of most any company, these technologies provide the platform to totally redefine how the work of Supply Chain is conducted every minute of every day. In the simplest terms we are entering the age of the Digital Supply Chain!” Twenty-five years into the Digital Age, one wouldn’t think we are just now “entering the age of the Digital Supply Chain.” However, staff members at Material Handling & Logistics (MH&L) provide support for Mortson’s assertion. They report, “Fear of change and data challenges are roadblocks to companies adopting a digital strategy.”[4] They note organizations are particularly slow in adopting cognitive technologies for supply chain planning. They report, “Only 7% of companies are reaping the benefits of digital transformation of supply chain planning, according to a new study by ToolsGroup and Spinnaker.”

Moving forward on the digital supply chain journey

Banker notes, “If a company is focused on digital projects designed to substitute manual processes that exist inside the four walls of the enterprise, that company’s digital and supply chain efforts are immature.” Banker is correct. What he describes is digitization, not digital transformation. Digitization is the gateway to digital transformation. During a 2017 conference, Tricia Wang (@triciawang), a self-described Tech Ethnographer & Sociologist, told participants, “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.”[5] That new system probably has at its digital core a cognitive platform, like the Enterra Supply Chain Intelligence System™. Cognitive platforms can handle mundane data tasks as well provide decision-makers with actionable insights mined from today’s data rich supply chain environment. Such systems can also facilitate connectivity to the larger supply chain ecosystem.

Supply chains have always been about connectivity and digitization within the confines of company is insufficient to meet the needs of today’s connected businesses. Gary M. Barraco, a logistics expert at E2open, writes, “Right now, the demands of the ‘perpetually connected’ business environment and consumer are driving organizations of all sizes to think about how they must digitally transform their supply chain operations. … Digitizing your global supply chains empowers your planning, sourcing and logistics teams to collaborate, automate and effectively leverage analytics.”[6] Katherine Noyes (@noyesk) adds, “It’s no secret that the linear supply chains of yesteryear are increasingly transforming into digital supply networks (DSNs) that can deliver enhanced efficiency, innovation, and performance.”[7] Noyes goes on to discuss “the Digital Capabilities Model for Supply Networks (DCM), a new reference model from the Association for Supply Chain Management (ASCM) and Deloitte that can help companies assess their preparedness and gain insight into where and how to invest.” The new model contains six fundamental building blocks: Synchronized Planning; Connected Customer; Smart Operations; Intelligent Supply; Digital Development; and Dynamic Fulfillment. Clearly, cognitive technologies are essential to make the model work. Banker asserts digital transformation involves filling in information black holes in the supply chain. He explains, “Filling in the information black holes that exist in most companies end to end supply chains would be a digital transformation project that is operating at a much higher level of maturity. This means connecting with suppliers, customers, and key supply chain partners up and down multiple tiers of a company’s extended supply chain.”

Concluding thoughts

Barraco concludes, “To do it right, companies [must take] a holistic, integrated approach. This wide-ranging approach to establishing a digital supply chain encompasses product development, sourcing optimization, foreign supplier management, product and factory risk, quality assurance, and the management of export, global transportation, duty, import and logistics processes.” Mortson adds, “A complete deployment of Digital Supply Chain technologies would replace all uses of paper, eliminate all manual data entry and updates, and eliminate the need to request (e.g., with a phone call) information because you would already have it at your fingertips. The deployment of electronic sensors and tracking capabilities will allow for the real time tracking of the movement of all goods throughout every aspect of the manufacturing, transportation and logistics processes that permeate any Supply Chain. End to end electronic connectivity enables performance management and optimization of even the most complicated Supply Chains. By definition this end to end real time connectivity also means that a Digital Supply Chain will be fully integrated all the way from the Customer through to all levels of Suppliers, inclusive of all functions, with transparency and visibility throughout.” As you move forward, keep in mind that digitization and digital transformation are not the same thing. As Wang stated, digital transformation is “about creating a new system, new cadence, new mindset.” If your company hasn’t done that, it remains in the early stages of digital transformation.

Footnotes
[1] Irving Wladawsky-Berger, “Looking Ahead After a Quarter Century Into the Digital Age,” The Wall Street Journal, 16 August 2019.
[2] Mike Mortson, “What is the Digital Supply Chain?Supply Chain Game Changer, 1 October 2019.
[3] Steve Banker, “20 Things to Know about Supply Chain Digital Transformations,” Logistics Viewpoints, 30 September 2019.
[4] Staff, “Companies Still Behind on Digital Transformation of Supply Chain,” Material Handling & Logistics, 30 September 2019.
[5] Trevor Miles, “Let’s be clear: Digitization is not the same as Digital Transformation,” Kinaxis Blog, 8 December 2017.
[6] Gary M. Barraco, “Bridging the Gap: Advantages of a Digital Supply Chain in a Perpetually Connected World,” E2open Blog, August 2019.
[7] Katherine Noyes, “Building a DSN? There’s a New Road Map for That,” The Wall Street Journal, 29 September 2019.