No Denying the Relentless Advance of the Digital Supply Chain

Stephen DeAngelis

January 29, 2019

Some people are simply intractable in their beliefs. There are still people who deny the Earth is round, that man landed on the moon, and that climate change is a reality. People who deny their companies must adapt to the Digital Age will be pigeonholed in the same slot as Flat Earthers. Analysts from Adelante SCM rhetorically ask, “Why all the fuss today about digital transformation?”[1] They continue, “The short answer is because many companies and their trading partners … have not advanced very far on the digital transformation journey. They still rely on paper-based, manual processes; they lack electronic connectivity with most of their trading partners; their data quality is still poor (inaccurate, incomplete, and/or not timely); and they have failed to modernize their IT systems.” Not all companies are laggards. George Bailey, Managing Director of the Digital Supply Chain Institute, reports, “[2018 was] a banner time for supply chains and many companies have made substantial progress toward implementing a truly Digital Supply Chain that lowers cost and increases revenue.”[2]

The digital supply chain imperative

“Supply chains are going digital — and not a moment too soon,”” insists Hans Thalbauer (@HansThalbauer), Senior Vice President of digital supply chain and industry 4.0 for SAP. “The coming of e-commerce and the omnichannel has ignited a revolution in the way that goods get to market. For consumer products companies, the old model of manufacturer to wholesaler to retailer is no longer adequate to meet the needs of buyers.”[3] Bailey notes new technologies will “dramatically change the status quo across all industry sectors.” Most analysts agree digital supply chain transformation is an imperative; but, just because something is required, doesn’t make it easy to achieve. Adrian Gonzalez writes, “There is a lot of discussion today about digital transformation, including why it’s important and what the benefits can be. It would be nice if you could just press an ‘easy button’ to be digitally transformed and have all of the supply chain visibility you need, but the reality is that there are many factors that go into making digital transformation a reality.”[4] Just because it may prove difficult, however, doesn’t mean it isn’t essential. Adelante SCM Analysts explain, “For years, companies have been able to succeed despite [digital] shortcomings, but as the pace of change has accelerated, as customer requirements have become more demanding, and as competitive pressures have intensified, companies are struggling to keep up. Simply put, the old ways of working are no longer aligned with the new rules for success, which are centered on having the ability to make smarter decisions faster and on delivering an enhanced customer experience profitably.”

The path to digital transformation

According to Bailey, the best place to start digital transformation is with cognitive technology. “Algorithms are the heart and brains of the Digital Supply Chain,” he writes. “Market-leading companies figured out that the recipe for success is developing algorithms that predict and manage the business. Algorithms … rely on real data to draw conclusions and take action [and] top companies [are using] Artificial Intelligence/Machine Learning (AI/ML) technology … to make them smarter every day.” A cognitive platform provides a solid foundation upon which to build a digital supply chain and ultimately a digital enterprise. Thalbauer asserts, “The digital supply chain … encompasses and integrates all business processes required for the selling of products: design, planning, engineering, manufacturing, logistics, warehouse management, transportation and customer service. Each of those disciplines has historically functioned in isolation, requiring the manual replication of data and often resulting in big gaps in communication. To tear down those walls, companies need to begin transforming their supply chains, with the goal of achieving customer centricity.” Siloed business divisions operating with siloed data are relics of the Industrial Age and ill-suited for Digital Age operations. Cognitive platforms can help integrate data and align business units.

As Adelante SCM Analysts noted above, having the ability to make smarter decisions faster is essential in today’s business environment. Bain analysts, Michael C. Mankins and Lori Sherer (), assert that if you can improve a company’s decision making you can dramatically improve its bottom line.[5] They explain:

“The best way to understand any company’s operations is to view them as a series of decisions. People in organizations make thousands of decisions every day. The decisions range from big, one-off strategic choices (such as where to locate the next multibillion-dollar plant) to everyday frontline decisions that add up to a lot of value over time (such as whether to suggest another purchase to a customer). In between those extremes are all the decisions that marketers, finance people, operations specialists and so on must make as they carry out their jobs week in and week out. We know from extensive research that decisions matter — a lot. Companies that make better decisions, make them faster and execute them more effectively than rivals nearly always turn in better financial performance. Not surprisingly, companies that employ advanced analytics to improve decision making and execution have the results to show for it.”

Cognitive computing platforms are ideal for enhancing decision-making because they present decision-makers with actionable insights gleaned from the oceans of data being collected from various sources including point-of-sale data, loyalty programs, Internet searches, machine monitoring, social media, and the Internet of Things (I0T). And that list is by no means exhaustive. The point is data is one of the most valuable assets held by businesses and, in order to leverage its benefits, cognitive technologies are required. Get on the right path with the right tools and, according to Adelante SCM Analysts, you’ll achieve numerous benefits, including:

  • Eliminating waste from the value chain, which includes eliminating manual and paper-based business processes;
  • Breaking down the silos between functional groups and IT systems and enable true collaboration and intelligence sharing between them;
  • Integrating electronically with all trading partners, preferably in a cloud- and network-based platform, using modern technologies such as APIs and web services;
  • Treating data as an asset and develop processes and a governance structure to manage data quality;
  • Leveraging network-based business intelligence, optimization, and analytics tools to convert data into actionable intelligence.

They conclude, “Digital transformation is taking action to solve these long-standing issues that add cost, complexity, and inefficiencies to supply chains.”

Concluding thoughts

Underscoring Gonzalez’ assertion that digital transformation is not easy, Bailey notes, “[Last year] companies around the world reported that their progress toward a Digital Supply Chain was slower than they expected, and, of course, slower than they would like. Companies found that the workforce (and management) did not have adequate skills to operate in a digital environment. They found that organizational silos prevented an efficient way to gather data, generate algorithms, come to the best conclusions.” Cognitive technologies can help overcome some of these challenges. There’s no denying the digitization of the supply chain will continue to advance relentlessly and laggards may find a once difficult path to be an impossible one if they fail to get started on their journey.

Footnotes
[1] Adrian Gonzalez, “Defining Digital Transformation,” Talking Logistics, 19 December 2018.
[2] George Bailey, “The Year Of The Digital Supply Chain,” Forbes, 20 December 2018.
[3] Hans Thalbauer, “The Digital Era Has Arrived, and Supply Chains Must Adjust,” SupplyChainBrain, 13 December 2018.
[4] Adrian Gonzalez, “Digital Transformation: Why It’s Not an ‘Easy Button’,” Talking Logistics, 3 December 2018.
[5] Michael C. Mankins and Lori Sherer, “Creating value through advanced analytics,” Bain Brief, 11 February 2015.