Digital, Sustainable, Commercial Innovation

Last month, our team had the privilege of moderating a Leaders in Action (LIA) event on the theme of digital capabilities driving sustainable commercial innovation, co-hosted by Luigi Giucca, BAT’s head of supply chain at the company’s London headquarters.

Later in the event, Clare Harris, EVP for Shell’s supply chain, shared that company’s transformational journey as a provider and partner in the renewable energy space. She also brought broader insights into the future energy marketplace.

A group of CSCOs from large global companies joined this interactive event to gain peer perspective on their own digital journeys and to explore how they drive commercial innovation, business growth and further transparency to achieve decarbonization commitments.

Giucca kicked off the session by illustrating a digital capability maturity that has enabled greater agility and resilience and that allows BAT to make network design decisions in the context of its net zero objectives.

Moving Toward the Ultimate Control Tower

In just four years, the BAT team has made tremendous progress building an integrated set of functional control towers across planning and inventory management, supplier integration, manufacturing, distribution and fulfillment. The impetus for this rapid shift was the need to support a completely new business model. BAT is quickly moving from managing a linear, agricultural-based supply chain to orchestrating an ecosystem of suppliers and partners, as a consumer electronics company.

The figure below highlights BAT’s stepwise vision to create E2E synchronization and to move from “Reactive” to “Predictive” business operations.

What Did We Learn?

Here are some key takeaways from the group sharing and discussion at this LIA event.

On Building Ultimate Control Towers:

• BAT started with clarity on what the end state should deliver to the business and then broke the journey down into building functional or process capabilities, each with a well-defined ROI. It then delivered a sequence of more narrowly scoped, individual control towers over multiple years.
• The final step, which is in process, is to fully integrate these capabilities into what they have coined the “Ultimate Control Tower.” This unified system will be synchronized from source to deliver and leverage prescriptive analytics to respond to near-real time changes in supply and demand. Greater control over the end-to-end value chain will allow BAT to realize both cost and cash efficiencies. It will also create new opportunities to capture more revenue in the marketplace.
• Moving to the next level, BAT has created a carbon intensity visualization layer which allows planners to map transportation performance against carbon-optimal routing and to action compliance issues.
• Overall, these digital capabilities enable BAT business unit and end-to-end orchestration leaders to drive accountability on horizontal business process performance.

On Achieving Net Zero Emissions:

• Event attendees reported that their Scope 1 and 2 emissions targets are well quantified with robust roadmaps to achieve net zero emissions. These roadmaps are not without challenges, however. While many of the attendees reported having about a third of their sites at net zero status today, access to renewable energy in some geographic locations is gating full progress. Individual companies are also struggling to influence governments or utility companies to accelerate a shift to renewable energy sources.
• Several companies are using internal carbon pricing as a mechanism to change their investment focus. Payback on related projects is often more than six years, which puts pressure on the typical acceptance criteria for capital projects.
• Achieving net zero for Scope 3 emissions is a more significant challenge for the broader community. Areas discussed included the need for carbon reporting standards, educating and helping less mature suppliers and exploring opportunities across industry sectors for a more integrated approach to achieve individual companies’ commitments.
• Several companies have decarbonization targets fully integrated into their executive remuneration packages, linked to annual bonus or long-term incentive plans.

It was inspiring to hear the level of conversation and passion for these topics across the supply chain community. We’re very much looking forward to the next gathering of this esteemed group, next February, when a macroeconomic expert will socialize key trends and predictions for the labor market and broader economy, in support of improved scenario planning across our community.

Stan Aronow
VP Distinguished Advisor
Gartner Supply Chain
Stan.Aronow@gartner.com

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