In a recent report, Digital Supply Chains: A Frontside Flip, The Center for Global Enterprise (CGE) states that “the digital supply chain focused on customers will have a huge impact on company financial performance and customer management. You can’t win without it.”
In fact, improved digital supply chains (DSC) can reduce total procured costs by 20% and increase revenue by 10%, according to the report.
Transformation is not a shrink-wrapped solution
The simple definition of a true DSC is, according to CGE, “a customer-centric platform model that captures and maximizes utilization of real-time data coming from a variety of sources. It enables demand stimulation, matching, sensing, and management to optimize performance and minimize risk.”
While the benefits of being a DSC are clear – and transforming into a truly DSC should be a business imperative – making the transition isn’t easy.
According to the report, some of the most critical and difficult factors in the DSC transformation include:
- Technology: Nearly all companies must make big changes to their system architecture.
- Demand management: All companies must create demand through the DSC.
- Risk: Risk increases daily with hackers and IP theft becoming part of the new reality.
But the single most critical and difficult factors for most companies remain their people.
The CGE research shows that current supply chain organizations simply do not have the people it will take to complete a “frontside flip,” enabling the enterprise to focus on the customer and spur significant revenue growth.
Furthermore, there are several fundamental skills missing from the current workforce. Seventy-eight percent of companies surveyed reported they were short on the right kind of people needed to execute the DSC in their company. Data scientists, for instance – people who collect and analyze essential Big Data that informs supply chain decision making – are in short supply.
A DSC is not a shrink-wrapped solution. There is no package to buy that will make it happen. The most important element is to get the right people, with the right skills, organized and focused on enabling an effective and capable DSC, the most important core process for the majority of companies today.
Keith Miears, VP of global supply chain at Dell and one of the 24 senior executives involved with the DSC initiative, agrees:
“The ability to collect and make effective use of Big Data is essential to the success of our business and its supply chain. One of the key challenges today is finding the right people and skills to realize this potential. We need different skills sets – more data scientists and IT professionals conversant with Big Data, analytics, and tools to interface with data available from the Web. We need to train key employees who know the company’s infrastructure to team with fresh university and college graduates and data scientists. And we need people who understand the opportunities and risks our business faces and can figure out what data we need. These are the people who can ask the right business questions and communicate with the data scientists.”
New people, new skills
The back end of the business remains hyper important. Minimizing inventory, utilizing low-cost/high-quality suppliers, optimizing shipping and logistics, and getting the right product to the right place at the right time remains essential.
Most companies employ people who know how to do these things. But advances in technology and social buying patterns make a backend focus insufficient. We need to reduce costs even further and to actually grow revenue as a result of the DSC. But the fact is, most companies lack frontside-facing skills in their organization.
So what can companies do?
We need to develop a road map for recruiting people with the right skills at the right time. This is not a case for wholesale new hiring. As new people are hired, companies must increase efficiency and function their backend activities with less help from HR. The road map for staffing the DSC must include new categories of hire, such as:
- Data scientists and data stewards who know how to collect, maintain, and analyze high-quality Big Data in a business context
- Maintenance technicians who serve as the new face of customer service as we move to service subscription and usage-based relationships where uptime is critical
- People who have deep expertise in technologies like blockchain, 3D printing, and driverless vehicles/drones
People management means focus
Clarity of intent is the first requirement for managing people well. You must be clear about what you want from the DSC, why it is important, and when it has to happen.
Accountability is the second requirement for managing people well. Each person on the DSC team must know precisely what they are accountable for and how their results will be measured.
The DSC requires a new scorecard that communicates what is wanted, who is accountable, and how rewards and punishments will be administered. It should make clear exactly how the DSC will drive revenue growth, how much growth, who is accountable, and how progress will be tracked and rewarded. The scorecard requires careful thought so it keeps people’s eyes on the back end while optimizing the frontside.
This may sound like common sense, but it’s rarely ever done this way. The DSC transformation is predicated on successfully working with a new balanced scorecard. Better metrics are required in order to encourage the collaboration with a purpose mentioned previously.
A new route to the top
The DSC leader is frequently a corporate center job with direct-line authority over business group supply chain executives. CGE has already seen several cases where this powerful role is working well. In one company, the head of the DSC has also taken on the ownership of the USA P&L. In another case, the DSC transformation is managed by an individual with a strong marketing background.
It is becoming clear that being the senior executive running the DSC is great training for the CEO position. In fact, incumbency in DSC leadership is a new route to the top.
As George Bailey, leader of the CGE DSC initiative, puts it:
“Companies must race to execute the DSC. They must make investments, change metrics, and get the right people on board. Costs will drop and revenue will increase and they will beat their competitors. Supply chains are no longer mundane, cost-driven processes that are painful but necessary. The best and brightest already know this.”
DSCs could be the most important transformation for companies over the next five years. Company leaders who recognize the importance of the people involved in this transformation will open doors for opportunity and growth.
Read CGE’s entire report, Digital Supply Chains: A Frontside Flip: Building Competitive Advantage to Optimize Performance and Customer Demand, to gain even more insight on what business leaders have to say about digitizing the supply chain.