November 11, 2019
Supply Chain Digitization: Starting the Journey
Outside observers are surprised to learn that some multi-billion dollar supply chains are still managed with manual processes, spreadsheets and even paper records.
Many enterprises have tried to start the digitization their supply chain, only to end up with a circus of siloed systems that can’t communicate with each other.
Still others have invested in expensive enterprise resource planning systems, only to abandon them because they just don’t map to the natural workflows of procurement, asset management, and disposition.
As a discipline, supply chain is just starting on the digitization journey. But as we head into 2024, the pressure is increasing for supply chain managers to integrate new technologies.
A fully digital supply chain is the key, here’s why:
Benefits of Supply Chain Digitization
The pressure to digitize often comes from the C-suite, as leaders search for time and cost efficiencies that will give them a competitive edge.
It’s easy to see why. The potential rewards of digitization are staggering.
According to a 2019 McKinsey report¹, “Among top-quartile supply-chain performers, strategic investment in supply chain correlates with strong financial results. A typical $10bn organization can expect to see a $70m earnings before tax (EBT) improvement and a potential $85m cost reduction.”
Other research groups are finding similarly impressive numbers on the potential of digitization.
Forbes reports that “…a digital supply chain can lower procurement costs by 20%, reduce supply chain process costs by 50%, and increase revenue by 10%, according to recent Center for Global Enterprise (CGE) research.” ²
Additionally, with the help of API integrations you are able fully automate the day-to-day operations of your supply chain. Thus highlighting further why digitization may be beneficial.
Potential Risks of Digitization
Supply chain is the central nervous system for any enterprise, and change brings risk.
Many supply chain professionals are all too aware of what’s at stake, and are understandably hesitant to tamper with something that works. The spectre of the loss of up to tens of millions of dollars per day as the consequence of error would be enough to make anyone risk averse.
It’s a perspective echoed by NASA Chief Flight Director Gene Kranz in the movie Apollo 13: “failure is not an option.”
Digital Supply Chains Are the Future
Within a few years, however, supply chain managers won’t have a choice but to go digital. Global supply chains are becoming increasingly complex. The need to manage constantly shifting economic, political, regulatory and climate change risks are making the development of more adaptable supply chains a necessity.
And adaptable, for a system of this complexity, means digitization.
How to Get Started Digitizing Your Supply Chain
Logistics are often the initial adopters for digital technologies because the benefits of automation are easier to understand.
For example, RFID inventory tracking provides instant access to information about what you have, how much of it you have, and where it’s located. It’s easy to visualize how this information can save endless person-hours of running around warehouses. RFID also enables leaner inventory collections because they help eliminate “mystery stacks” full of inventory that exists, but no one knows what it is or why it’s being kept.
But the benefits of digitization extend throughout the entire supply chain, from procurement to surplus disposition. If your organization is one of the “60% of enterprises” that “don’t have a clear digitization strategy” ³, these steps chart a course to success.
1. Formalizing the Initiative
It’s one thing for a CEO to task a team with digitization, it’s another thing entirely to really make it happen.
Projectizing supply chain digitization is the essential first step. A leader with formal project management training is a key asset, as is a diverse working group consisting of domain experts with real experience with the kinds of problems that surface on a day to day basis.
Making the time to thoroughly document requirements and identify key tradeoffs is essential in ensuring that you don’t make heavy investments in systems that just don’t work.
Great supply chain management systems:
- Integrate the entire supply chain, from external suppliers to the recovery buyers who buy your surplus assets
- Allow complete record keeping of every asset in your inventory
- Are often cloud solutions
- Keep records of internal and external communications
- Have dashboards with the analytics you need
- Integrate with other systems you need to keep using via API
- Are constantly evolving to meet new user needs
2. Keep Your Eye on Risks
Leverage the skeptics in the group: put them to work on identifying, assessing, and tracking risks. If the worst does happen, they’ll be an important early warning system. Even the crankiest naysayer can be lured into the fold by the chance of being able to say ‘I told you so’.
A project manager experienced in IT will be able to advise your team on disaster-proofing your digitization steps. For example, keeping data formats easily exportable and potentially running old systems alongside new during trials will help not only with recovery, but help get buy-in from the more reluctant stakeholders in the group.
3. Start Small, Scale Up
Use incremental adoption strategies. Start with one part of your supply chain at a time, and roll out in a series of pilot projects if necessary.
Getting to a win, no matter how small, can validate the approach and provide incentive to keep going.
4. Start With Automating Repetitive Processes
You should only have to do any task once. If you do it more than once, it’s a candidate for automation. Supply chain professionals should be spending their time analyzing information, forecasting, and solving problems, not copying and pasting information from one format into another.
5. Measure Digitization Success
At every stage of digitization process one of the main priorities needs to be analytics. The answers to any question you can ask about your supply chain should be available through your data.
At the start of your digitization process, identify metrics you can keep tracking and also new metrics that you want to be able to track going forward.
If anyone on your team is reluctant to engage in the process, however carefully, they should get excited at the prospect of having better information available to them at a keystroke.
6. Abandon (or Fix) Whatever’s Not Working
One key to a successful digitization process is the ability to quickly identify things that aren’t working. From there, assessing whether there’s a fix, or whether the only option is to start over, should be carefully considered.
Whenever anything goes so seriously wrong that you need to abandon it, the lessons learned need to be understood and shared.
7. Manage Expectations About Timeframes
Take the time to do it right. If needed, hire for any expertise gaps you may have.
The good news is, however, that most CEOs have realistic expectations. A Capgemini report says that, “(63%) of the organizations we surveyed say that their management realizes that supply chain digitization is a process that is continuous and takes a long time.” ⁴
Try Requis Digital Asset Management Software Today
Requis was developed by supply chain professionals for supply chain professionals, and are designed around logical workflows. We’ve talked to thousands of industry insiders and continue to talk to thousands more as we grow and improve.
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Also, visit our other blog post for more information on the future of digital supply chains.
References
- McKinsey, Supply Chain 4.0: Opportunities to use your supply chain for differentiation
- Forbes
- Deloitte Global CPO Survey 2016
- Capgemini Research Institute, Digital Supply Chain Survey; May 2018