Digital Supply Chain: how to unlock the real value of digital

Accenture research shows that the majority of companies have realized cost reductions and efficiencies by implementing digital technologies.

The hardest part however, where most companies fail, is unlocking the full value and potential of digital by taking a strategic and customer focused approach. To achieve this, three critical capabilities need to be developed: connectivity, intelligent analytics and automation.

The use of digital technologies across the supply chain allows companies to create real-time visibility on their operations. They can create a more agile and flexible supply chain, and accordingly move from a linear supply chain to a supply network/ecosystem. The use of digital technologies across the supply chain can result in increased efficiencies and reduced costs, and more importantly sustainable growth.

85% of companies have heavily invested in digital technologies, but very few have succeeded in achieving the expected growth value.

Less than 10% of executives recognize that digital investments lead to sustainable growth and two-thirds believe they are not successful at improving activities that add value and create competitive advantage (Accenture research).

Companies that struggle to turn digital into a success for their supply chain typically use a more opportunistic approach focusing on cost reductions and isolated supply chain performance improvements. The challenges these companies face are:

  • Not having a full understanding of digital technologies in the market: This can lead to uncertainty as to which digital technologies to choose.
  • Not putting forward a clear roadmap for digital investments: Typically, digital investments are not part of a bigger plan, but focused on individual issues or opportunities. Only 30% of executives prioritize cost savings in line with their business strategy.
  • Not adapting/aligning their ways of working to new digital solutions being implemented: Employing digital has significant implications on people, processes, structure, governance and performance management which need to be addressed.
  • Not focusing on the additional value created for customers: Investing in digital solutions that do not differentiate customer experience or aim at impacting service level make it unlikely that these investments will lead to growth.

To be successful in unlocking the full value potential of digital companies need to use a more strategic and customer focused approach, integrating supply chain and digital strategy.

  To build an end-to-end digital supply chain around the customer three capabilities are key: connectivity, intelligent analytics and automation.

Integrated and customer focused strategy

Successful digital companies have an integrated strategy on the use of digital in their supply chain. In short, they use digital to enhance existing business models and develop new ones with a focus on customer experience.

By both integrating their digital and supply chain strategy as well as keeping a customer centric focus successful digital companies develop only those capabilities that are most crucial to their strategy. For example, companies focusing on cheap and fast delivery will need different capabilities than companies focusing on quality and customer intimacy.

Furthermore, successful digital companies develop a deep understanding of digital technologies and their capabilities through active research. This enables them to link the right digital capabilities to the execution of the overall supply chain and business strategy and integrate them in one holistic roadmap.

Focus on a tailored customer experience

Digital requires delivering tailored customer experience, which is achieved by setting up a segmented supply chain.

Supply chain segmentation…

Specific supply chain configurations are defined to serve specified customer segments and optimize the value generated by each segment. Only those digital technologies are selected per configuration that actually add value for that customer segment. There is no point in using mood sensing or other predictive forecasting analytics for a customer segment with fixed ordering patterns.

…Leading to a tailored customer experience

Tailored customer experience consists of providing highly individualized, focused products and fully customized services which are intended to be bought anywhere, collected anywhere, returned anywhere or purchased via flexible channels.

Highly connected, intelligent and automated

A truly digital supply chain is characterized by a combination of three distinct business capabilities: connectivity, intelligent analytics and automation.

End-to-end visibility is the first step. Real-time visibility across the complete value chain allows companies to identify issues and root causes, enabling a company to manage its business in a pro-active manner without acting in firefighting mode. Both leading and less mature digital companies are using supply chain control towers to create visibility in all steps of the supply chain.

Connectivity and seamless collaboration with all parties across the value chain, both internally and externally, further enforces end-to-end visibility. Connected companies have the ability, often in real time, to react, relate and communicate with other parties and involving them actively in planning initiatives. For example, using a virtual collaboration room and collaborative forecasting allows for close interaction with suppliers and customers.

Visibility and connectivity facilitate access to data. In a next step, data is turned into valuable information by leveraging analytics, cognitive equipment and smart apps to provide actionable insights that improve decision-making. These Intelligent analytics allow companies to react to constantly changing customer requirements. Machine learning for example enables companies to significantly improve its forecasting accuracy.

In an ultimate step, automation will enable the supply chain workforce to focus even more on strategical and tactical decision making. Robots and Artificial Intelligence (AI) are supplementing and augmenting human roles in knowledge-intensive areas such as supply chain planning, customer order management and inventory management.

By leveraging the right set of digital tools, companies can grow these three capabilities (connectivity, intelligent analytics and automation) and build a truly digital supply chain.

In summary: To build a successful digital supply chain that unlocks the full growth and value adding potential of digital, companies should adopt a more strategic and customer focused approach by leveraging three main capabilities: connectivity, intelligent analytics and automation. Companies should select the right tools to fully deploy these capabilities.

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Feel free to contact me to discuss how we can support you to unlock the real value of digital in your supply chain.

This article has been co-written with Louis-Charles De Prez and Chloë Nuñez-Garcia

Author: Pieter Thurman