Creating a digital supply chain
Creating a digital supply chain
Insight

Creating a digital supply chain

The supply chain management of the past won’t work anymore; companies are looking for a digital supply chain that can provide more agile, efficient, and transparent service delivery.

As every industry and organization is grasping the importance and necessity of making their digital transformation, retailers and manufacturers are jumping onboard. The supply chain management of the past won’t work anymore; companies are looking for a digital supply chain that can provide more agile, efficient, and transparent service delivery. An intelligent end-to-end supply chain that streamlines processes and improves real-time decision-making.

In a recent KPMG survey and report, we asked retailers and manufacturers to identify their main reasons for investing in digital supply chain. More than half of the respondents identified the need for real-time product visibility as a leading driver. Fifty-eight percent of all companies indicated they are rethinking their current business model as a result of, or to take advantage of, the changing digital landscape. Additionally, 70% of them noted that accelerated digital transformation is a strategic focus (JDA, KPMG Supply Chain Survey Reveals Contrasting Digital Transformation Strategies for Retailers and Manufacturers, June 2018).

Several technologies will play a key role in the digital supply chain, among them the cloud, big data, the internet of things (IoT), machine learning, “what-if” scenario planning, and social networks. But these technologies and capabilities need to be based on a firm foundation: the right digital strategy, proven implementation methodology, an effective performance measurement system, people with the right skills, and the management required to create a culture that is willing to carry out the change. Yes, we’re basically talking about transforming the entire business.

In our experience, we’ve identified several features that can improve the execution of a digital strategy:

  • A flexible strategy, prioritized and actionable, that can be adapted to changes in the global marketplace
  • A three- to five-year roadmap that guides the transformation of supply-and-demand capabilities and takes planning processes to the next level
  • Clear linkage to one or more corporate goals, such as growth or customer service levels
  • Both large opportunities for improvement that deliver significant ROI over time and “quick win” operations improvements with a fast payback
  • Eliminating outdated roles and responsibilities, unnecessary activities, and performance metrics that no longer reflect current realities

After defining your digital strategy, there is still a lot of hard work to be done to drive change and add the capabilities in several critical areas:

  • Processes. Establish the new end-to-end supply chain processes that digitization makes possible to connect suppliers and customers; get rid of any activities in functions and processes that don’t add value.
  • Technology. Create a deployment road map for the technologies that will support the digital supply chain, including the information integration layer, database and analytics capabilities, security, and the cloud.
  • Governance. This is a big one with numerous moving parts. New business models call for new governance for the new processes, and they include:
    • Creating an organization structure and culture realigned to be proactive rather than reactive; a shift to being a fast-learning digital culture that communicates with all stakeholders
    • Developing the talent and acquiring the expertise and skills needed to enable the new technology and carry out the new business models; cultivating partnerships and ecosystems that can provide access to the required capabilities
    • Managing performance by developing key performance indicators that will maintain people’s involvement, measure their performance, and drive the desired behavior
    • Partnering and collaborating closely with other companies to build a fully integrated, end-to-end supply chain of distributors, suppliers, and technology providers

There is no denying the complexity of creating a truly digital supply chain network—in fact, an end-to-end digital transformation program guidebook doesn’t actually exist today. But as these new digital applications are more widely used, there will be greater adoption and digital case study successes.

One thing is certain, if businesses count on the snazziest new technology to save the day but ignore their overall performance goal, culture, and governance, then their strategies are already doomed for failure. Supply chain transformation calls for preparation, understanding of the supply chain life cycle, a clearly defined supply chain optimization strategy, and factoring in all of the people- and culture-related aspects of the transformation.

Sure, there is a great deal of hype surrounding digital supply chain and how it can be applied across an organization. And the previously mentioned KPMG research indicated that 60% of organizations were holding back on their digital transformations due to unproven or uncertain ROI.

The digital supply chain has a lot to offer—integrated planning and execution systems, intelligent logistics visibility, smart warehousing, digital procurement, and prescriptive advanced analytics. By strategically approaching digital transformation, organizations can achieve an integrated ecosystem that is fully transparent to all stakeholders—from the suppliers of raw materials, to the manufacturers of finished goods, and ultimately to the customers.

For more on creating a digital supply chain, please reference select chapters of Technology optimization and change management for successful digital supply chains, a pivotal reference source that provides research on the application of digital business transformation programs to improve strategic, tactical, and operational supply chain processes.