The Digital Supply Chain is more about Transformation than Technology

Stephen DeAngelis

November 21, 2018

New technologies always open doors to new opportunities and new possibilities. Nevertheless, business consultants caution executives not to pursue the latest shiny toy without a good reason. Those consultants often repeat the mantra, “Don’t change for change’s sake.” Consultant Rick DeMarco (@rickd0216) explains, “The power to change is the power to grow. John F. Kennedy once said, ‘Change is the law of life. And those who look only to the past or present are certain to miss the future.’ But change for change’s sake can be more damaging to your efforts towards creating an engaged and inspired workforce than no change at all. Some leaders change things they shouldn’t change and don’t change those they should.”[1] On the other hand, three business school professors, Freek Vermeulen (@Freek_Vermeulen), from London Business School, Phanish Puranam, from INSEAD, and Ranjay Gulati, from Harvard Business School, assert, “The idea that a firm might want change for its own sake often provokes skepticism. Why inflict all that pain if you don’t have to? That is a dangerous attitude. A company periodically needs to shake itself up, regardless of the competitive landscape.”[2]

Given such conflicting advice, business executives are often left with the following questions: Why should I change? When should I change? What should I change? How should I change? Those questions are particularly pertinent today because most consultants are advising business leaders they need to transform their Industrial Age organizations into Digital Enterprises —and that transformation often begins with the supply chain. Regarding digital supply chain transformation, Lora Cecere (@lcecere), founder and CEO of Supply Chain Insights, asserts, “While technology is an enabler, the best case studies focus on transformation using technology. The focus is on outcomes not digital innovation. The best change efforts focus on solving hairy, business problems and improving business results.”[3]

Answering those nagging digital supply chain transformation questions

Why should I change? Supply chains have historically adapted when new technologies have made them more efficient and effective. Today, there are a number of technologies (e.g., cognitive computing, sensors, the Internet of Things (IoT), robotic process automation (RPA), and blockchain) with the potential to make supply chains better. The common thread weaving those technologies together is data; hence, the imperative to implement a digital supply chain. Craig Guillot (@cguillot) explains, “From manufacturing plants and distribution centers to store shelves and consumers’ doorsteps, players across the supply chain are looking to automated technologies to boost efficiencies. A key way to do this, many have found, is to reduce the ‘human touch’ from supply chain operations. Autonomous forklifts, picking robots, RFID tagging technology and conveyor systems are taking root in many warehouses as popular tools to boost efficiency.”[4] But as Cecere pointed out, these technologies should only be implemented if they solve “hairy business problems and improve business results.”

When should I change? The simple answer to this question is: Now. Ed Bradley, Co-Founder of Virtualstock, asserts, “Traditional supply chains are a thing of the past.”[5] Although Bradley specifically writes about retail supply chains, many of the reasons he suggests traditional retail supply chains need to transform have broad applicability. And his warning that “companies that fail to adapt to the sector’s exponential rate of change risk slipping into obscurity” should worry all business leaders. He concludes, future-proofed, successful businesses “have the greatest agility, visibility and scalability across their supply chain.”

What should I change? This question is best answered with two other questions: What are your biggest challenges? What technologies can help address those challenges? Frank Meerkamp (@Meerkamp), managing director at Accenture Applied Intelligence, explains, “The traditional supply chain is a tapestry built on an outdated analog network — yet it exists in a digital world. This outdated supply chain model simply cannot effectively adhere to today’s shifting market demands that stem from fluctuating geopolitical landscapes and an increasingly connected and evolving global trade system. As such, organizations that rely on traditional supply chains are failing to optimize them in a holistic fashion.”[6] He adds, “Organizations that establish a data-driven supply chain can gain advantages in increased forecasting accuracy, identifying and resolving issues in real time, creating new segmentations, and delivering on consumer requirements with speed, specificity and scale.”

How should I change? How companies transform their supply chains depends on a lot of factors. Each company faces a unique set of challenges and must bushwhack its own transformation path. Nevertheless, Gartner’s Rob van der Meulen (@bobvdmeulen) suggests there are three steps all companies need to take at the beginning of their transformation journey. They are:

  • Step 1: Confirm the organization’s digital vision, and the supply chain’s role. Van der Meulen writes, “Breaking out of silos and agreeing to a digital business vision across the entire organization must be the starting point. This is the catalyst for action, where you define with other leaders a vision for the type of digital experience you want your organization to deliver to its customers, and identify the supply chain capabilities needed to deliver it.”
  • Step 2: Align the supply chain operating model to the digital vision. Although this sounds like a common sense thing to do, van der Meulen reports, “Just 25% of supply chain organizations say digital projects across their companies are aligned under a single governance process.”
  • Step 3: Prioritize digital technology investments. What are your company’s most pressing challenges? The answer to that question will help you prioritize your technology investments. Van der Meulen adds, “In times of uncertainty, supply chain organizations tend to focus on improving existing operations to boost today’s bottom line and forgo the investments needed to support tomorrow’s top line. In many cases, this conservative approach will not align with today’s wider organizational priorities. To support an organization that can compete in the future, supply chain leaders must do more than streamline their operations. They must build the future digital supply chain.”

Concluding thoughts

Every world-class company wants to eliminate waste, optimize processes, and satisfy customers. In today’s digital world, achieving those goals requires Digital Age solutions. Meerkamp explains, “Intelligent technology, including AI and machine learning enables [those goals] to be attained over time through self-learning, predicting, prescribing and optimizing supply-chain performance automatically across business functions. Automation can flag and resolve exceptions in real-time and machine learning-based algorithms can predict these exceptions and supply chain outcomes. As the nature of the exception or resolution process changes over time, cognitive computing learns and adapts to it. In turn, this enables supply chains to handle more complexity, making them more dynamic, flexible, adaptive and efficient. The result is a reinvented system that is more customer-centric, service-oriented, self-learning, and agile — with these innovations, businesses can ultimately improve their customer experiences and increase margins.” Applying the right technology to the most challenging problems is the key to digital supply chain transformation.

Footnotes
[1] Rick DeMarco, “Change For The Sake Of Change Is Not The Best Strategy,” Inward Strategic Consulting, 13 August 2015.
[2] Freek Vermeulen, Phanish Puranam, and Ranjay Gulati, “Change for Change’s Sake,” Harvard Business Review, June 2010.
[3] Lora Cecere, “Driving Transformational Change,” Supply Chain Shaman, 14 September 2018.
[4] Craig Guillot, “Planning paves the way to a truly automated supply chain,” Supply Chain Dive, 23 October 2018.
[5] Ed Bradley, “Top 5 tips for building a future-proof supply chain,” The New Economy, 16 October 2018.
[6] Frank Meerkamp, “Reinventing the Supply Chain with Intelligent Technology,” Supply Chain Management Review, 12 October 2018.
[7] Rob van der Meulen, “3 Steps to a Digital Supply Chain,” Smarter with Gartner, 15 August 2018.