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Perspectives

Digital Supply Chains Moving At An Analog Pace

2017-08-09


While digital supply chains are high on the wish list for many companies, the pace of digitization and associated returns has many frustrated, our recent research indicates.

The results are in, and they are unanimous. Senior executives are actively investing in, planning for, and/or dabbling in digital supply chain technology. That is according to a recent survey conducted for us by Forbes Insights of 100-plus executives from leading North American companies.

More specifically, 49% are actively investing in digital supply chain overhauls, 33% are selectively using digital tools to supplement existing supply chains, and 18% actively researching and developing a digital supply chain strategy for the future. In fact, not a single respondent answered “doing nothing” in terms of upgrading their supply network.

When asked about the most important digital supply chain capabilities, 49% said social media analytics, 33% cited open source data (both public and privately shared), and an equal 33% answered “shared platform solutions” among the various suppliers located up and down the chain.

Those surveyed, however, were frustrated by the pace of change. Only 26% were “fully” satisfied with their supply chain transformation efforts, whereas the other three quarters were either somewhat transformed (40%) or minimally transformed (31%).

Unsurprisingly, lower than expected returns were also cited as a key frustration. The vast majority of respondents (36%) claimed revenue gains between 5% and 10%. One-fifth said their digital supply chain efforts raised revenues by 3% to 5%; another 10% said their efforts had “no effect,” and 3% “didn’t know” digital’s impact on revenue. 

On an encouraging — albeit minority note —19% of those surveyed attributed more than a 10% gain in revenues to their digital supply chains. More than half (52%) said their digital supply chain efforts have improved their security. And a leading 36% said their digital efforts have increased their margins by as much as 10%.

What’s preventing organizations, then, from seeing the “digital” forest through the trees? 

In our view, there are two leading impediments:

  • Senior executive indifference. Simply put, many decision-makers either aren’t aware of the significant gains that digital supply chains can bring or don’t believe their existing chains are outdated (i.e., the perception that “if it ain’t broke, don’t fix it”).

  • Lack of alignment among participants. Understandably, getting everyone on the same digital page is a big challenge, especially when working with other business units --let alone external vendors, partners, and systems. 

What can be done to overcome these challenges and speed digital supply chain adoption? In our experience, organizations need an approach that will result in a blueprint as follows:

Assess current operations.

Start by establishing a baseline for “digital maturity.” This typically consists of frameworks that evaluate and score an organization’s current state of operational excellence, agility, innovation and customer centricity, which can provide a baseline for assessing existing operations while identifying gaps for the “to-be” state.

Develop a plan to fill the gaps.  

Then evaluate requirements from a technology, process and organizational perspective and develop a set of prioritized initiatives.

Implement.  

Develop business cases for prioritized initiatives that can be measured and tracked for business impact and are socialized with key stakeholders inside and outside the organization.

Track and execute.  

Supply chain initiatives of any type are uncomfortable activities for many organizations and require a level of transparency and cooperation that are, under the best of circumstance, difficult to establish and maintain. Digital transformation, with its heavy dose of process re-engineering, adds another layer of complexity. Before putting the wheels in motion, companies need to determine whether they have the resident program management skills required to keep digital transformation initiatives on track. 

Relying on an existing organization — such as IT — to manage a digital transformation project isn’t always the answer. Establishing a CoE is one alternative; another is to bring a third-party specialist that can work across organizational silos and stovepipes.   

To learn more, please visit the Supply Chain Optimization section of our website  or contact us.

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Digital Supply Chains Moving At An Analog Pace