Supply Chain Digital Transformation: Tips For Your Digital Supply Chain
Supply chain digital transformation focuses on using technology to solve business problems and improve business procedures. It is an all-inclusive term that encompasses a variety of efforts within the organization, such as marketing, sales, customer service, and finance.
What is supply chain management (SCM)?
SCM, or supply chain management, involves overseeing the transportation of goods and services to and from a company and all the necessary steps in transferring raw materials and other components into finished products and delivering them to the end user. By streamlining SCM processes, a company can eliminate inefficiencies, enhance customer satisfaction, and gain a competitive advantage in the market.
What are the typical supply chain management areas?
The field of supply chain management is extensive and comprises functional areas.
- Inputs from Strategic Planning (i.e., Strategy, Marketing, Sales)
- Asset Management
- Information Systems
- Data and Analytics
- Research and Development
- Procurement (Purchasing)
- Supplier Management
- Demand Planning
- Supply Planning
- Materials Supply
- Inbound Logistics
- Third-Party Supplies/ Co-Manufacturers
- Quality Control
- Inventory Management
- Transportation (National and International)
- Order Fulfilment
- Customer Service
- Intercompany Movements
- Supply Chain Control Tower
Although these areas may seem distinct, they are interconnected and highly dependent on each other for an efficient supply chain.
What is supply chain digital transformation?
The present supply chain management (SCM) trends are helping to shape digital transformation. Utilizing digital solutions enhances the accessibility of supplier and consumer data, providing organizations with the opportunity to make more knowledgeable choices. Advanced data analytics, artificial intelligence (AI), and automation are some of the many drivers behind digital transformation.
Using digital technologies and data analytics, a digital supply chain can guide decision-making, optimize performance, and respond promptly to changing conditions.
What industries can benefit from supply chain digital transformation?
Supply chain digital transformation can benefit any industry with complex supply chains, including high-tech and electronics, consumer products, life sciences, and industrial, automotive, and aerospace/defense companies. While some industries are ahead in digital transformation and can lead to change, others still rely on manual processes such as spreadsheets for supply chain planning. This underscores the importance for them to start their digital transformation journey as soon as possible.
Digital transformation is changing supply chain relationships
The emergence of digital technologies has enabled companies to share supply chain data and resources in innovative ways. This has created opportunities for businesses to exchange warehouse space and transportation capacity. However, managers responsible for building supply chain relationships must now focus on fostering cooperation, trial and error, and confidence across organizational borders.
Adaptable business model
As businesses undergo digital transformation, they develop novel products, processes, and services. However, creating these new offerings often necessitates sharing information and assets with other companies in previously inaccessible ways. For instance, digital services might require companies to share physical resources like warehouse space with their competitors.
As a result, companies will have to alter how they build and manage relationships with other entities in their supply chain to enable new forms of alliances and agreements. To achieve this goal, it is necessary for supply chain relationship managers, such as account managers or supply managers, to develop a mindset that bridges organizational boundaries and fosters cooperation, experimentation, and trust.
Offer redefined relationships.
Collaborative forecasting, informed by machine-learning-based algorithms, necessitates interactions and is a supply chain process. These algorithms leverage real-time information on buying patterns to identify new parameters that affect demand. Companies require deeper interactions with upstream suppliers and downstream customers to capitalize fully on these insights.
A smart fridge freezer (Samsung as an example) illustrates a product that can change supply chain relationships. It can gather information on people’s habits, such as eating and drinking preferences. Manufacturers, suppliers, and retailers can use this new data to refine and create new products. However, this requires them to establish more comprehensive collaborative relationships. For instance, retailers could offer complimentary registrations to an app that monitors fridge usage. The manufacturer and suppliers can use this data to create personalized ads and accessories based on product usage.
Digital tools and platforms are examples of services that necessitate new relationships. Asset sharing can improve the agility and flexibility of a supply chain by allowing companies to move away from asset ownership. This also demonstrates how digital transformation can change the way companies interact with each other.
On-demand warehousing services
Providers such as Flexe offer on-demand warehousing services that identify underutilized storage spaces in the industrial sector and provide them to companies on a short-term basis. By sharing storage capacity in this manner, the space owner can offset the cost of unproductive assets and better align their warehousing needs with the demands of others.
By using this approach, service buyers can fulfill their changing storage needs without having to invest a lot of money in acquiring additional capital assets. However, the facility owner needs to be aware that other businesses interested in sharing their warehouse could be potential competitors. This was a difficult concession to make before the advent of digital transformation, which unlocked the potential of this type of service.
Walmart’s GoLocal platform allows merchants of all sizes to utilize Walmart’s delivery system for last-mile deliveries to their customers. Platform users have access to Walmart’s transportation network and external gig drivers. Companies can achieve new efficiencies by using the platform’s diverse user base. Using the platform’s various delivery routes, companies can potentially share vehicle space on multiple companies’ routes. This method of pooling goods improves vehicle utilization and reduces transportation costs. Businesses must be more open-minded about commercial rivalries to fully benefit from supply chain digital-transformation-driven asset-sharing services.
Supply chain digital transformation needs managers that can communicate effectively
It is essential to have managers who can communicate clearly and effectively and work well with others from different parts of an organization. These managers must also be able to collaborate across boundaries. Crafting and implementing new relationships requires managers to be receptive to unfamiliar business methods. They need to recognize the potential of non-traditional opportunities, select the most suitable partners, and draft agreements that optimize value while minimizing risks. Consequently, companies digitizing their supply chains or planning to do so must establish new roles and supporting systems. The following are some examples of these innovative approaches:
Identify collaboration opportunities.
Managers must encourage the exploration of alternative ways to capitalize on new relationships. For instance, companies adept in digital technologies should consistently experiment with innovations and create prototypes in collaboration with partners and clients. To provide customers with novel shopping experiences, Walmart is experimenting with live-streaming technology in partnership with TikTok, which also helps with brand building.
Create KPIs that reflect the gains from collaboration.
As a result of digitization, managers may need to expand their key performance indicators (KPIs) to include new opportunities. For instance, Walmart’s GoLocal service measures the benefits gained from delivery pooling, which was previously unavailable to businesses before joining the platform. It also tracks traditional KPIs such as on-time delivery. These measurements can demonstrate quick wins and help scale the advantages of digital initiatives.
Create adaptable contracts.
Companies can leverage digitalization and the communities of users it creates to adjust agreement terms to new business demands swiftly. Flex, a global contract manufacturer, has developed a cloud-based platform called Flex Pulse that gives the company visibility into its manufacturing operations worldwide.
Flex’s platform provides support for a digital contracts system, which stores and manages contracts while monitoring real-time processes involving Flex, its suppliers, and its customers. The platform facilitates the quick modification of contractual terms, such as incentives, in response to market changes. AI algorithms are used to track supplier performance and enhance joint operations, which are then reflected in revised contractual terms.
What are some of the challenges with supply chain digital transformation?
1. Align with business strategy.
Defining a clear and coherent strategy that aligns with business goals, customer expectations, and market dynamics is a significant challenge in SCM’s digital transformation. Without a strategy, there is a risk of confusion, fragmentation, and wasted resources. To address this challenge, a comprehensive analysis of the current state is crucial to identify gaps and opportunities and prioritize the most impactful initiatives. It’s also essential to ensure that all stakeholders, including partners, suppliers, employees, and customers, are aligned and communicated regarding the strategy.
2. Data accuracy and reporting analytics
Managing and utilizing the vast amount of data generated and collected throughout the supply chain is a significant obstacle in SCM’s digital transformation. While data is essential to digital transformation, it can also create complications, inconsistencies, and vulnerabilities. Addressing this challenge requires ensuring your data’s accuracy, completeness, and security. Additionally, it involves investing in appropriate tools and skills to analyze and visualize your data, allowing you to extract valuable insights that can enhance your decision-making and performance.
3. Change management and culture
A third fundamental challenge of SCM’s digital transformation is developing a mindset that welcomes and supports change, which is a crucial aspect of SCM’s digital transformation. The transformation requires changing how you work, think, and collaborate across the supply chain. This change necessitates learning new skills, adopting new processes, and overcoming resistance and inertia. Creating a vision and roadmap that inspires and motivates your team is essential to overcome this challenge. Furthermore, you must provide sufficient training, support, and feedback to help them adapt and grow.
4. Technology selection and integration
A fourth key challenge of SCM digital transformation is to select and implement the right technologies that suit your needs and goals. Many options and solutions are available in the market, but not all are compatible, scalable, or reliable. To mitigate this challenge, you must evaluate and compare different technologies’ features, benefits, and costs. You must also ensure they can integrate seamlessly with your existing systems and platforms and support your future growth and innovation.
5. Security and Regulatory Compliance
Protecting your data, assets, and operations from cyberattacks, breaches, and fraud is a crucial challenge in the digital transformation of supply chain management. As you establish more online connections with suppliers, partners, and customers, new risks and threats to your supply chain emerge. To confront this challenge successfully, you should implement strong security measures and policies encompassing your devices, networks, applications, and data. Additionally, it’s essential to comply with the applicable regulations and standards that regulate your industry and markets.
6. Supply chain reliance and sustainability
Balancing economic, social, and environmental objectives and responsibilities is a sixth key challenge in the digital transformation of SCM. Digital transformation can optimize resource utilization, reduce waste and emissions, and increase customer satisfaction and loyalty. Still, it can introduce new challenges and trade-offs, such as e-waste, energy consumption, and the digital divide. To overcome this challenge, you need to have a comprehensive and far-reaching perspective that weighs the impacts and consequences of your decisions and actions. It would help to establish a flexible and robust supply chain that can adapt to unpredictable situations and uncertainties.
7. Talent to manage the digital transformation program
Assembling a skilled team is essential when it comes to digital transformation. It is imperative to bring together technology, data, and process experts who can collaborate efficiently. A competent leader who can motivate, work across borders, and drive change is equally crucial. This action may be the most significant step a company considering digital transformation can take.
What skills are essential to manage supply chain digital transformation?
While technical skills are vital, leadership and culture capabilities such as change management, strategy development, and business relationship management are also critical. The graphic below illustrates crucial business skills, including managing costs, products, and vendors.
Supply chain digital transformation talent management strategy
Due to a lack of the necessary technical, leadership, and business skills required to drive and execute change, IT leaders frequently fall behind on essential business transformation initiatives. Creating a solid talent management strategy is crucial for achieving the maximum benefits of digital transformation. It is essential to address this aspect at the beginning of the process to ensure seamless transitions and attract, train, and retain the appropriate personnel from the outset.
Use external consultants and temporary freelance contractors
Embedding new abilities and values is crucial for the success of any change. Nevertheless, it is essential to consider the trade-offs between achieving quick results and ensuring long-term sustainability. Every organization requires these skills; the question is how much and when to acquire them.
External consultants and contractors can expedite transformation in the early stages using effective strategies.
- Ensure that internal teams take ownership of the product at an early stage.
- Involve employees in teams from the beginning.
- Encourage employees to move out of their comfort zones.
- Establish robust protocols and ways of working from the outset.
- Understand the training needs and talent gap within current business operations
- Ensure leadership buy-in and robust governance protocols between all parties
Achieving success in supply chain digital transformation
Successful business leadership requires prioritizing value. To achieve a successful supply chain digital transformation, companies must decide quickly and utilize appropriate key performance indicators (KPIs) to measure progress and efficiently remove obstacles. We offer companies a weekly decision-making schedule and a digital value measurement system integrating technology and business operations. Our services guide the transformation process from top to bottom, ensuring accountability at every level.
Noirwolf is a management consultancy based in Leeds, UK. Our team of experienced consultants specializes in providing customized solutions for businesses that require senior-level business consulting support on specific global projects or a retained basis. We offer expert manufacturing and supply chain transformation consulting services, including strategy development, organization design, digital transformation, process optimization, change management, risk management, performance benchmarking, and supply chain technologies such as SAP/ERP. We aim to help you achieve successful business transformation through our supply chain digital transformation and change management services. Contact us today to learn more about how we can help you achieve your goals.