Digital supply chains must be reinvented, not refitted

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The impact of digital technology has dramatically altered almost every business and industry across Australia. Olaf Schatteman, Managing Director for Accenture’s Strategy Operations practice in Asia Pacific, says digital has also emerged as a key disruptor increasingly causing volatility in many supply chains. For technology to create new supply chain opportunities, a new perspective is needed.

 

Today, companies provide untold numbers of products and services integrated with digital capabilities. Digital has also emerged as a key disruptor increasingly causing volatility in many supply chains.

There are four primary drivers causing the digital disruption:
Empowered customers – More aware, better informed and more connected customers are far more demanding in a digital world. They expect companies to provide high quality, customised products and services at lower cost and in reduced time. This places more pressure on supply chains.

Data availability – Enormous amounts of customer and transactional data are now available, but supply chain managers are challenged to make sense of it all and do not always have the analytics required to derive management insights and support decision making.

Connectivity – Channels, such as online and mobile, are now connected to physical supply chains. In addition, the Internet of Things and technologies such as machine-to-machine, or telematics, enable visibility into operations that we’ve never had before. Supply chain managers need to figure out for example how to provide one experience across all channels, and how to capitalise on telematics and mobility to reduce downtime and enhance their remote operations and field support.

Commoditisation – Digital technologies, such as virtual prototyping and electronic Bill of Materials, enable faster design and production, resulting in reduced time to market. Product designs get copied faster by competitors and innovations have a shorter lifespan.

Digital technology has changed the way many businesses design, source, make, move, store and service products. For example, the advent of 3-D printing now enables companies to produce parts locally using a digital template, creating customised goods that can be moved to market quickly.

Many companies have recognised the significance of these changes and are now working to introduce new digital capabilities across their operations. And although many businesses have taken the first step towards digitising their supply chains, most commonly they’re simply layering digital capabilities over traditional supply chains; creating hybrid models that combine older paper-based and newer IT-optimised processes.

But the cards are stacked against them. Digital is too different. The physical footprint of modern supply chains is vast and traditional governance mechanisms and business processes are inflexible. The piecemeal digitisation of supply chain elements is counterproductive and frequently results in reams of inconsistent, redundant data; inefficiencies; and unrealised performance potential.

It is true that real digital transformations – as opposed to digital add-ons – present a significant challenge for businesses. However, the potential growth and profit-enhancement opportunities of a truly digital supply chain are too great to ignore.

The observation of successful digital supply chain networks reveals four distinct advantages:
Connectivity – Leveraging various digital capabilities, connected companies enjoy extensive visibility, greater influence and high levels of control. In real time, they can react and communicate more effectively with customers. Connected companies also enjoy improved planning, execution and collaboration with their team and their clients. They also capture greater amounts of useful data – the starting point for business intelligence.

Intelligence – The most successful projects extend the connectivity advantage by using digital to turn data into valuable information. The key is leveraging analytics, cognitive equipment and smart apps to provide the right information for decision-making.

Scalability – Smooth scalability is attained when a supply chain is supported by high levels of (digitally enabled) connectivity and intelligence. Processes become easier to optimise and duplicate; errors and anomalies are simpler to spot. Companies are better able to add or reduce partners and suppliers as needed. They also may become more effective at targeting niche markets, segments and customers.

Speed – The further ahead we look, the more we realise that companies’ processes and priorities need to change as fast, or faster, than their products. Digital technology will allow companies to diagnose more quickly, and adjust and execute more efficiently.

Developing a digital supply network
For technology to create new supply chain opportunities, a new perspective is needed; the digital supply chain must be reimagined as a “digital supply network” that unites not just physical flows but also talent, information and finance. This requires an end-to-end review of all aspects of the supply chain.

Digital can change the nature of a company’s control points. A good example is Tesco PLC, which has developed virtual supermarkets on the Seoul subway in South Korea. Tesco invites smartphone users to browse images of over 500 health, beauty and grocery products on the subway walls, and then scan QR codes to purchase these products for same-day delivery. Using this model, Tesco’s customers enjoy huge time savings, while Tesco benefits from reduced investments in store inventories and infrastructure.

At a minimum, digital can engender organisational change. For example, Amazon has streamlined its fulfillment centres by using robots to bring products and racks to workers. A broad rollout of this model is predicted to reduce the processing cost of an average order by up to 40 per cent and save Amazon up to $916 million each year.

A successful digital supply chain network will also source and combine product, talent, information and currency information by tapping into existing technologies. This includes:
Social media networks
Social media can help companies tap innovation from outside the walls of the organisation (the talent supply chain), generate demand triggers for specific products and services (the physical supply chain), offer customised and targeted service through social channels (the information supply chain), and showcase products for early feedback and to reduce selling costs (the financial supply chain).

Mobile networks
Mobile communications can provide real-time support for corporate field forces (talent), offer a platform for store-specific apps to drive demand (physical), provide status updates on product deliveries (information), and provide the foundations for remote payments and new buying opportunities (financial).

Analytics
Analytics can help companies analyse employee behaviours and improve efficiency (talent), assist with predictive maintenance (physical), understand customer behaviours to inform new products, services and customisation opportunities (information), and review contracts to optimise procurement spend (financial).

Cloud computing
Cloud computing can provide access to remote employee education programs (talent), raise the contribution of partners and suppliers through collaborative portals (supply), increase access to applications and crowd-sourcing opportunities (information), and provide end-to-end source-to- pay functionality (financial).

 

Of course, not every digital capability is relevant to every company. There is no one-size-fits-all prescription for a digital supply network. However, the right digital supply chain network design can help companies capture huge savings and competitive advantages by fostering networked processes; optimising the complete enterprise instead of individual functions; uniting designers, suppliers, manufacturers, distributors, logistics services providers, retailers and even customers; and inspiring new ways of thinking and working by enhancing visibility, collaboration and innovation.

Olaf Schatteman is Managing Director for Accenture’s Strategy Operations practice in Asia Pacific. 

 

* Would you like to learn more about the latest developments in procurement technology? Advice, analysis and education on technology and how it can improve procurement performance will all be on the agenda at ProcureTECH NZ, 11th Nov, Auckland. Click here for more details.

 

 

 

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Procurement and Supply Australasia (PASA) is the leading provider of information and education to procurement and supply professionals throughout Australia and New Zealand. PASA supports the largest community of engaged procurement stakeholders in the region, through its renowned series of events, publications, awards, plus various community and network building activities. PASA is a trading name of BTTB Marketing, for many years recognised as the leading producer of conferences and events for the procurement profession in Australia and New Zealand. Whether producing under the BTTB, CIPSA Conferences or now PASA brands over the last ten years, our events have consistently led the market in terms of both educational and networking opportunities.

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