As digital transformation progresses through supply chains, it becomes clear that certain supply chains are more mature than others. But none have achieved full digital maturity. The digital journey takes companies, and by extension their supply chains, through a series of ordered stages. Each stage contains specific competencies and technologies necessary to build a platform for continued digital evolution. Change is incremental.
But as businesses gain proficiency within each stage, their supply chains become better-equipped to meet the demands of today’s complex, networked, global business environment. And while certain steps may seem small, it adds up to some truly transformative opportunities throughout the supply chain.
For example, shipping companies must track their containers, which have long been tracked only using manual processes. In fact, according to a recent Kurt Salmon report, some 78% of shippers rely on phone calls, faxes, emails, or Excel spreadsheets to identify product location—and it takes about half of those businesses more than three days to do so.1 With digital network technology, this process becomes much more efficient. Rather than relying on manual tracking, a tracking signal is constantly provided, giving the shipping company real-time insight into where containers are at any given moment.
This is not a new business process, but an improvement of an existing one. When it comes to transformative changes, this is where companies and supply chains can begin to explore the power of digital technologies.
Digital technologies help leading businesses reduce the cost to serve by more than 6%
Stage 1: Intracompany collaboration
Change management is a long and challenging journey–especially in the enterprise, where it’s common for various business units and teams to work in silos. But transformative journeys begin with communication, especially within the four walls of enterprise. The first step of any digital supply chain transformation is aligning systems and processes within the four walls of the enterprise.
Start with an assessment. Although it may seem like an incremental improvement–or an enhancement to a problem that doesn’t exist–many executives are often surprised to learn of the many disconnects and communications breakdowns within their own companies. For example, the marketing team might run a two-forone promotion, but may not properly communicate this to the supply chain team. The marketing team has done its job by promoting product, but the supply chain is left scrambling to get inventory to the right place in time.
The first stage of digital transformation is all about identifying opportunities to improve your internal processes and workflows, finding ways to unify communications and systems, and incrementally addressing the supply chain challenges that are directly within your control. It’s a time to assess activities that supply chains are already undertaking.
Stage 2: A networked supply chain
Individual businesses don’t compete; their entire supply chains do. That’s because in a world of complex, global, highly distributed supply chains, success depends upon precise orchestration and collaboration between the business and its many suppliers and trading partners. After all, about 80% of supply chain data exists outside the four walls of the enterprise.i The more a business thinks of the supply chain as a network (and less like a linear set of processes and interactions), the more it can understand the power digital technologies have in improving visibility and enhancing collaboration with its partners.
Like the silos that exist within an enterprise, the lapses in visibility and communication between a business and its suppliers affect the supply chain more than most realize. Where the first stage of supply chain digital maturity is about connectivity within the enterprise, the second stage is about extending that connectivity outside the four walls. Many already use technologies like EDI for basic visibility between parties, while others might work with a 3PL or another logistics provider.
While it’s a start, EDI is mostly a point solution, and logistics providers can only offer visibility into their own operations. There are still blind spots, even though the foundation is there. To truly network the supply chain, businesses need to bring all the data among parties together on a single platform. This is the only way to see the big picture of what’s happening across the greater supply network, and to identify inefficient processes and opportunities so they can be improved.
As companies progress down the digital path, their supply chains will be required to catch up. By networking with suppliers and trading partners, businesses will be able to enhance existing interactions within the supply chain through greater collaboration and communication. But there are other benefits as well: businesses begin to see truly transformative changes at this level of digital supply chain maturity. It opens the possibility for new business models and service offerings to their suppliers and partners.
Stage 3: Full customer demand, integration
End-to-end supply chain visibility opens several opportunities to collaborate better with suppliers and trading partners, identify areas to improve, streamline financing, and react quickly to unexpected challenges or breakdowns. But there’s another area where this level of digital connectivity benefits a business: understanding demand patterns. Once businesses achieve a high degree of visibility into their supply chains, they become more attuned to demand and its effect on planning, forecasting, and the movement of goods.
A networked supply chain leads to more comprehensive data. Businesses at this stage of digital maturity have a better sense of what customers want and when they want it, which in turn triggers signals throughout the supply chain. Those signals can set into motion specific actions within the networked supply chain sooner. Making the most of this stage of maturity begins with enhanced analytics and business intelligence (BI) software. Businesses can then turn this new level of insight into action through increased automation of systems, and by connecting traditional planning and operations software to the network. This effectively extends systems such as ERP or PLM beyond the four walls of enterprise, further breaking silos between trading partners, and ultimately tying what’s being made directly to what the end customer wants.
A greater sense of demand is measurable throughout all nodes in the supply chain. It’s up to businesses to position their supply chains to better harvest digital signals and make better decisions when the time comes to fulfill orders.
Stage 4: Becoming predictive
The first three stages of digital maturity are all about breaking down silos and building out a network of connected, integrated, and responsive nodes across the global supply chain. And while the benefits of enhanced visibility, reduced friction, and greater responsiveness are self-evident, there’s still room for improvement. Indeed, a supply chain’s work is never done.
The next stage of maturity builds upon all the preceding work and truly takes a business into the future. It’s where supply chains go beyond simply responding to demand to predicting it. Businesses at this stage are capable of anticipating demand or outages. They can respond to a potential issue before it becomes a problem or major breakdown that costs money and time. These supply chains can lean on the digital signals being produced by the network to determine when exceptions or opportunities will arise, and act accordingly. In this sense, the supply chain becomes more than the sum of its parts, transforming into a living, breathing, global organism that helps a business stand apart from its competition through agility, speed, and relevance— while also protecting the downside risk of too much inventory and unwanted or irrelevant products. It helps build trust with customers through higher levels of service, while keeping investors and stakeholders happy with better forecast accuracy and improved margin control.