November 13, 2020

Supply Chain Digital Transformation: Your Year 1 Checklist

In this article:

  • Despite their best intentions, few businesses have made digital transformation a reality.
  • How to determine the first steps to digital transformation for your business.
  • Fundamental characteristics to look for in a software solution.

A year ago we wrote an article to help supply chain managers start bringing their supply chains into the digital realm. In this post, we’ll give you some more detailed steps to planning and executing your first roll out.

Digital transformation in supply chain is the holy grail of business in what we’ve called the Decade of Supply Chain. People outside of supply chain—even within the same company—are often astounded to learn that even in this day and age, there are a surprising number of large scale companies that are still managing supply chains using spreadsheets and emails.

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As of May 2020, Capgemini’s research shows that only 35% of companies are monitoring their operations in real time. In spite of billions of dollars in investment in technology, enterprises are not achieving the visibility into their supply chains that they will need to succeed in the next few years.

The reasons for the lag boil down to complexity and risk. On the complexity side, supply chains can have hundreds of thousands of layers. Risk can arise from ongoing change in everything from weather to politics. These combined challenges make practitioners hesitant to trust systems, especially if they’ve already tried systems that don’t follow workflows or create the right outputs.

And yet the clock is ticking. Businesses who aren’t leveraging the efficiencies that digital transformation can give are becoming less competitive all the time.

Assuming your organization has accepted that digital transformation is something that has to happen, what specific practical steps do you need to take to make that switch? There’s no one-size-fits-all solution, but there are some essential steps that any business can take to discover the right process. It’s a multi-year journey, but one that can be achieved.

The Checklist

1. Map Out Your Supply Chain

On a recent edition of the Supply Chain Next podcast, consultant Rob O’Byrne recommended that the first step any business will need to take is to review their supply chain.

Most supply chain leaders know the overall structure of their supply chain. They will also know their tier one suppliers. But do they know their suppliers in tiers two and beyond, right down to the raw materials stage? They may, if they’ve had to deal with a major disruption, but most don’t.

In the long term, we recommend mapping out everything for all your suppliers, from their locations (their manufacturing facilities, not just the head offices) to the regulatory frameworks that apply to the products you use. Include all the transportation linkages that connect them. But for purposes of getting started on building a solution, you can pick a level of detail that makes sense, considering that not all your suppliers will be ready to reveal who their suppliers are.

2. Start with Your Biggest Pain Points

Rob O’Byrne also recommended that once your picture of the end-to-end supply chain is mature enough, the next step is to identify your biggest pain points. When it comes to digital transformation, he says, “Start at your biggest pain point because that’s where you’re going to get your biggest bang for your buck.”

What this does is tie the digital transformation initiative into business KPIs like costs, and less tangible elements like visibility and resilience (if the pain point is disruption-related, which many are).

3. Start Evaluating Technology Solutions

To prioritize pain points for action, start with problems that can be solved digitally.

GE’s former Global Director of Open Innovation and Advanced Manufacturing, Dyan Finkhousen, was the principal architect of their transition to platform ecosystems for connected vehicles, connected equipment, and connected experts.

In this article on digital transformation she notes, “Business strategists should be looking past their traditional playbook and should start looking at accomplishing the business priorities for the coming year. The goal is to put priorities that can be achieved through digital means first.”

When looking at software, you’ll need to spend some time searching for and evaluating solutions. Make sure you involve stakeholders at all levels and ensure that their needs are met.

Whatever solution you choose, look for these fundamental characteristics:

  • Usability. If software is impractical for your team, they won’t use it—they’ll simply work around it.
  • Choose a cloud-based platform solution. This will not only allow you do develop an end-to-end view of your supply chain, you’ll also be able to use it to interact with outside organizations, like suppliers.
  • Consider the full asset lifecycle. Everything you own, from the things that get turned into products to the equipment you use in manufacturing, needs to be bought, managed and sold.
  • Integration ability. Your chosen software should be able to connect to other tools via an application programming interface (API) or software development kit (SDK).
  • Exit strategy. If you can’t export the data to a spreadsheet, you’re locked in and can’t easily transition to another system if needed.

Keep your original pain points in mind while you’re looking at software features, and don’t be dazzled by tools that do everything but address your problems.

4. Plan Your Project Program and Do Your First Roll Out

Once you’ve chosen a solution that will address your biggest pain points, plan your adoption in phases.

Remember that for your first project, you’ll want to work with a bite-size piece in order to provide meaningful benefits to the organization. This will help you get buy-in for the digital transformation program as a whole from executives and practitioners alike. Smaller projects that can be delivered in a tangible timeframe are more likely to be fully executed (given that the people carrying out the initiative will have other responsibilities) and are therefore more likely to succeed.

Ensure you have established your initial KPIs and benchmarks so you can tell if the solution delivers the expected benefits.

5. Scale Up, Keep Measuring, and Tackle the Next Challenge

Once you’ve established that your chosen solution delivers positive results and your team is happy using it, it’s time to double down.

Don’t wait too long between phases, or you’ll lose momentum. Use the efficiencies you’ve gained from your first phase to pay for the time you need to start the second. (At the very least, solving your first pain point should mean there are fewer fires to fight, which in turn should buy you more time.)

If you’ve planned effectively, you should have the buy-in you need to continue expanding your program.

Further Reading

More articles on getting started with digital transformation:

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