The Supply Chain Goes Digital: Opportunities And Challenges
Digital supply chain disruption is in full swing. Today’s hottest companies – Uber, AirBnb, Netflix, and Alibaba – are all service providers that own no actual inventory. Major logistics providers are getting in on the act, with DHL testing the use of augmented reality glasses among its employees and UPS looking to provide 3D printing services from its stores. Amazon is testing out delivery drones, robotics for goods handling, and new apps to optimize asset-light delivery services in major cities. The traditional supply chain has been officially disrupted.
The digital economy will transform the way we live and work, how business runs, and how society functions – and it will do this in a timeframe that is much shorter than any other major economic transition in history.
- Everything is becoming digitized
- Everything, and everyone, is connected
- Everything is being shared via the cloud
- Everything is now personalized
- Everything is directly available
This transformation has impacted, and will continue to impact, the business processes and systems that are required to remain competitive. It will change how we design, plan, make, ship, and operate our products and assets.
Digital supply chain challenges: Lack of robust preparation and understanding
Industry leaders, on the whole, are woefully unprepared for navigating the digital economy’s complexities or leveraging its opportunities. While 90% of CEOs know that the digital economy will have a major impact on their industries, less than 15% currently have plans to adapt to this economy. A further 71% of companies say their digital maturity levels are still “early” or “developing.” In just two short years, one-third of all industry leaders will be disrupted by digitally enabled competitors. Seventy percent of executives say they have started digital supply chain transformation, but they may lack a clear understanding of what this transformation entails.A lack of robust preparation and understanding is hindering the transformation process. Resource shortages are affecting businesses on multiple fronts, including a shortage of material resources and human resource talent. In today’s dynamic landscape, customers are demanding better, individualized products faster.The very nature of collaboration is also shifting. Businesses must collaborate not only with people but with assets. The sharing economy can therefore be thought of as an extension of the Internet of Things, where everything is connected.
Digital supply chain opportunities: Collaborative supply networks and product lifecycle management
Companies must develop an environment in which they can manage information and processes simultaneously across the extended supply chain. This new
evolution of supply chain is more connected, intelligent, responsive, and predictive. It enables companies to drive customer-centric processes and deliver personalized products uniquely built and delivered for the “segment of one.” These demanding customers have to be serviced across a business network of global partners, who are increasingly challenged by resource scarcity.“To win in the digital economy, we have to reimagine how we design, plan, make, deliver, and operate our assets,” argues Hans Thalbauer, senior vice president of Extended Supply Chain at SAP.This starts with a clear understanding of the building blocks for digital supply chain success, including collaborative supply networks and product lifecycle management.
4 building blocks for digital supply chain success
To achieve digital supply chain success, you’ll want to make strides toward these four goals
- Customer-centricy: Customers demand a new type of experience. Omnichannel sales strategies have raised the bar when ordering products and services. You can now order goods from anywhere, on any device, at any time. But companies need to change business processes to ensure the same level of service in designing, producing, planning, and delivering these products.
- Personalized “lot size” of one: Businesses must be prepared to sell to a market of one. Closely aligned with customer-centricity are the design, manufacture, and distribution of individualized products. Design processes must deliver all practical configurations and combinations, planning and manufacturing processes geared to support “lot size of one” production and delivery processes that profitably support smaller and more frequent shipments.
- A network of networks to drive the sharing economy: As businesses expand globally, the ability to successfully operate within business networks will mean the difference between winning and losing. These networks – and networks of networks – will be the platforms on which successful businesses innovate, collaborate, grow, and continually evolve – at both speed and scale. For example, networked companies are 50% more likely than their peers to have increased sales and higher profit margins. Automated collaboration with suppliers can improve efficiency by 50%. Companies need to focus on being demand-driven and responsive, and thereby transforming their previously linear supply chain into a customer-centric demand network.
- Sustainability to mitigate resource scarcity: Sustainability is no longer a corporate social responsibility afterthought. It is a contemporary business imperative for addressing the global shortage of resources and talent. Sustainability includes innovation and design processes that deliver sustainable products to the market; a product stewardship network that manages global product safety and compliance throughout the product lifecycle; and track-and-trace solutions to ensure visibility from raw materials to finished products and contain the effects of product recalls.
The future of your supply chain strategy in today’s connected world
In a connected world where every company is becoming a technology company, smarter products, assets, and services will drive new processes and opportunities across the supply chain. Every company across all industries requires a simple digital approach to build a pragmatic and executable vision of its digital supply chain strategy.