Traditional Businesses are disrupted by Digital Native Players and this has increased the pace of change at a speed that was never imagined. The disruption is being done by not traditional competitors that were defined by Porter in its 5 Force model but from players who did not exist in the competitive landscape. This is the reality in this digital era and organizations need to adopt non-traditional business strategies to remain relevant. So being agile and adapting to the changes in environment is the only way to be ahead. In this article, Piyush Chowhan, VP & CIO, Arvind Lifestyle Brands, highlights the challenges and identifies steps required to build a modern digital and agile Supply chain that will create differentiation for organizations to compete in the digital era.
SUPPLY Chains are the livelihood of any business and they impact the overall customer experience for any organization. Modernization of Supply Chain remains key priority for lot of organizations, but the traditional structures are becoming a major roadblock in becoming an “Agile Supply Chain”.
We are now able to know exactly where our Ola or Uber cabs are, and they have provided high level of visibility of the vehicles to their customers. The digital e-commerce players are able to determine exact time of delivery of goods to the last minute and hour. We are now able to customize the products to our choice and still able to get very fast delivery of those customized products. These disruptions in B2C space are putting a lot of stress in the traditional supply chain structures. The only way to be able to survive in this on-demand economy where “instant gratification” is a given to transform the supply chain operations. It requires a very different approach to supply chain and old methods of managing supply chain need to be re-visited. The pressure on supply chain professionals is immense due to Sustainability, Cost Pressure, Disruption and Risk Mitigation, which have further escalated the complexities. The disparate Supply chain Planning and Execution functions are adding to this complexity by creating barriers within the organizations to be agile towards the customer needs.
There are various surveys conducted to understand the pain that the current supply chains suffer from and some of them are as follows:
• Lack of visibility of data across supply chain: We live in an information era where all decision making requires availability of data on real-time basis. Unfortunately, traditional supply chain was built on silo structure hence end-toend visibility of data is also limited. In one survey, 80+ supply chain professionals have cited that this visibility of data is the biggest barrier for digitalization of supply chain.
• Siloes in Supply Chain Planning and Execution Functions: The traditional functions of planning and execution are still in siloes causing a lag in decision making, thereby reducing agility. This requires a lot of efforts by various teams to reconcile the planning data with execution data leading to delays. Its quite important that technology platforms can integrate these silo pieces of data to generate meaningful insights.
• Huge amounts of data handling: The supply chain processes are generating huge amounts of data across various processes. More than 80% of supply chain officers have highlighted that the amount of data is doubling in every two years, but the technology platforms are not ready to handle such data volumes to provide correct insights for decision-making. The old ERP solutions are not agile in their data handling capability, thereby constraining the fast decision making.
• Reactive Disruption Management: A lot of processes of supply chain are still working on the Reactive Paradigm because of the delayed availability of processed data. The modern supply chain requires proactive disruption management so that they can provide better customer service in case of events that are adversely impacting customer experience. This also requires building technology platforms that are agile and provide real-time visibility for fast changes to avert any exigencies in supply chain.
This advent of digital era has provided a plethora of technology choices that might be overwhelming at times and makes the decision to choose difficult. The era of Automation by ERP has gone and transition towards the modern SMAC (Social, Mobile, Analytics & Cloud) era has happened very fast. Thus, the correct technology choice is critical for this digital transformation of supply chain.
Rise of IOT and Sensing Technology: The cost of sensors has fallen drastically and the advent of IOT has opened up a new dimension of data visibility for the supply chain processes. While these technologies have been available for quite some time, the reduction in price of computing technology has been immensely aiding in the expanse of the sensing technologies. The movement of goods can now be accurately monitored, and real time information is available with the adoption of RFID technology. This provides huge power for supply chain teams to understand the events that cause disruption in the movement of goods. This technology, if implemented at scale, can give real-time corrective decision-making capability for any deviations.
• Rise of Mobile and Edge Computing: Earlier most of the computing capability was hosted centrally and distributed edge computing was costly. The fall in prices of Edge Computing devices combined with Mobility solutions has provided a big power to the end users who are at the various points of the supply chain. The information processing at the various nodes of supply chain can now be available in real time to all the supply chain participants. This can help in getting the silo information across the various partners seamlessly.
• Rise of Big Data Technologies: The advent of Big Data Technologies has made ability to process large amounts of data very fast and derive meaningful insights in real time. This helps supply chain players to collaborate and work on real-time data so that decisions can be accurate and faster. The challenge of delayed data, silo data can be resolved by the implementation of these new age data lake platforms, which process huge amounts of supply chain data in real time.
• Rise of Robotics and Drones: The movement of goods across the supply chain has been the area that is required innovation if the customer experience needs to be enhanced. Rise of Drone and Robotics can help in the movement of goods faster without much human intervention, leading to lesser errors. This will help in touchless movement of goods, which ultimately increases supply chain turns. This will also lead to faster turnaround times for customer orders.
• Rise of Artificial Intelligence (AI) and Machine Learning (ML) Models: Supply chain management processes have a lot of critical decision making, which is dependent on lot of data. The availability of data based on the above sensing technology needs to be processed using modern algorithm that are now possible with the help of AI and ML models. The processing power in both mobility and cloud solutions has now been made possible to run sophisticated models that was not possible earlier. Hence these models can now churn insights that can allow fast decision making in the hands of supply chain professionals.
• Advent of Block chain for better collaboration: The biggest roadblock of efficient supply chain management has been the sharing of data across enterprises that are part of the extended supply chain. The advent of distributed block chain networks can create wonders by sharing data across the entities in supply chain, thereby building trust and transparency across the various nodes. This can help in building smart contracts and financial reconciliation processes across entities smoothly, which helps in making a lot of mundane activities redundant across supply chains. This can also aid in making time available for supply chain professionals for value added activities.
We can now see that there are a lot of technologies, which can create a huge impact in the supply chain management processes. It’s important to understand that not everything can be applicable in the entire context, thus we have to do a proper assessment of the cost benefit analysis before looking at adopting the same in our enterprises. There has to be a defined digital supply chain roadmap that needs to be crafted keeping all the various internal and external entities in mind. There has to be clearly defined strategic objectives for this transformation journey with clear distinction between automation and digitalization of processes.
There are certain challenges that organizations have faced while undergoing this transformation and we visit some of them in the next section.
Change is always tricky and poses unique problems for every organization. Supply chain transformations are more complex since they span not only within organization but also across entities. Organizations are still trying to find an optimal path that balances improving current operations with potential opportunities offered by digital technologies. Most of the disparity between potential and actual gains from supply chain digitization can be explained by technology gaps and management choices.
The right approach to digitizing supply chain requires integrating suitable leading-edge technologies with revamped operations. Challenges in unlocking these opportunities are described in more detail below:
Digital Transformation Strategy: Though senior executives at organizations understand strategic importance of digital supply chains, they don’t necessarily understand the entire spectrum of strategic possibilities made possible by digital transformation. Many leaders find it difficult to keep up with the rapid pace of technological change, as well as obtain alignment on the new rules, challenges and operational risks that go along with it. This mindset— focus on digital transformation primarily for operational investments, coupled with a relatively smaller emphasis on profitability—suggests that, while most leaders may associate operational improvements with strategic growth, they do not necessarily associate them with revenue growth from R&D-driven new products or business models. This needs to be changed to harness financial benefits from these transformational initiatives.
Supply Chain Strategy and Alignment: Many organizations may consider supply chain as relatively important in digital transformation efforts, however they fail to see it as a driver of digital innovation, nor do they involve their leaders in strategic decisions. This seriously impacts future supply chain digital investments, resulting in suboptimal digital transformation results. Organizations must ensure to elevate the status of this function to harness truly innovative and transformative uses of technology offered by digital supply chains in the areas of end-to-end supply chain transparency, intelligent optimization, and flexible, intelligent decision making.
Approach towards Innovation: As organizations seek to adopt digitally transformative technologies within their organizations, they should recognize that using technology to drive innovation, rather than just improve current processes, offers strong prospects for growth. To make innovation a part of the digital transformation strategy, organizations must get comfortable with exploring new technologies and assessing their ability to yield strong ROIs. In addition, they should consciously limit the tendency to make technology investments only in productivity and operations areas to ensure they don’t miss out on new untapped opportunities and risk being left behind the competition.
Talent: Digitally enabled supply chains have talent requirements that can be quite different from those of conventional supply chains. Research shows that technology implementations fail rarely because the technology did not work but rather because people are not willing, or find it too difficult, to use them. Hence it is critical that organizations build capabilities across their ecosystems collaboratively with their employees and empower them to understand and extract information from connected assets and use it to drive informed decisions.
Organizational Culture and Structures: While the organization and IT landscape are established, an innovation environment with a start-up culture has to be created. Thinking Big, Starting Small and Scaling Fast are the three key tenants of digital organization building new technology capabilities. This “incubator” needs to provide a high degree of organizational freedom and flexibility as well as state-of-the-art IT systems (two-speed architecture independent of existing legacy systems) to enable rapid cycles of development, testing, and implementation of solutions. Fast realization of pilots is essential to get immediate business feedback on suitability and impact of the solutions, to create excitement and trust in innovations (e.g., new planning algorithms), and to steer next development cycles. The “incubator” is the seed of Supply Chain 4.0 in the organization – fast, flexible, and efficient.
Connected Data Insights: In a connected digital supply chain, integration of digital information happens from many different sources and locations in an ongoing cycle. Throughout this cycle, real-time access to data is driven by the continuous and cyclical flow of information and action between the physical and digital worlds. Organizations must possess capabilities to automate data creation, adopt cross-functional usage and most importantly make decisions based upon these insights. This ability to fully harness each stage of the physical digital- physical loop is crucial to the full realization of digital supply chain capabilities and benefits.
Digitalization of supply chains is required and once we take a holistic approach towards this transformation, we can really create a digital avenue for organizations to stay competitive in this fast-changing world.