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3 Steps to a Digital Supply Chain

August 15, 2018

Contributor: Rob van der Meulen

Supply chain leaders must work to proactively shape their organizations digital vision and strategy and ensure the supply chain operating model can deliver on both.

The impact of digital trends on the supply chain has caused plenty of excitement, but also confusion. In a 2017 Gartner survey of 318 supply chain organizations worldwide, 75% reported concerns about the governance of digital projects. Yet corporate digital business initiatives continue to evolve rapidly, and 36% of supply chain organizations say their own digital projects don't align to them.

“ 75% of supply chain organizations worldwide have reported concerns about the governance of digital projects”

“Supply chain leaders should already have a plan for supply chain digital initiatives and how to align them to what’s going on in the wider organization and its ecosystem,” says Michael Burkett, vice president and distinguished analyst at Gartner. “Yet the reality is that organizations pursue digital projects in silos far too often.”

Alignment doesn’t just mean waiting for the wider organization to tell you how to invest, however. “Be proactive and define the emerging technologies that will best optimize and transform your supply chain. Feed this expertise from the front line into the organization’s wider digital business strategy, and then do your part to make it a reality,” Burkett says. He breaks down how to do this into three steps.

Step 1: Confirm the organization's digital vision, and the supply chain's role

Breaking out of silos and agreeing to a digital business vision across the entire organization must be the starting point. This is the catalyst for action, where you define with other leaders a vision for the type of digital experience you want your organization to deliver to its customers, and identify the supply chain capabilities needed to deliver it. Understanding the CEO’s priorities is critical at this juncture.

Gartner’s 2018 survey of 460 CEOs suggests that these leaders remain predominantly focused on growth, but are increasingly willing to look at new operating models and corporate structures to obtain it. “Look for supply chain technologies that have the potential to open new revenue streams rather than simply efficiencies, and get buy-in and participation across the business,” says Burkett.

Step 2: Align the supply chain operating model to the digital vision

Just 25% of supply chain organizations say digital projects across their companies are aligned under a single governance process. “A lack of alignment clearly makes it less likely a supply chain will successfully support key organizational priorities,” Burkett explains.

For example, a product manufacturer’s business priority might be to ensure that a customer’s equipment never stops working. Digital advances now give it the ability to digitally monitor assets and offer solutions in near real time. This capability effectively creates or improves a service-based revenue stream for the manufacturer.

“ Just 25% of supply chain organizations say digital projects across their companies are aligned under a single governance process”

Real-world examples of this include Rolls-Royce’s TotalCare program, which guarantees an aircraft engine’s availability, and HP’s Instant Ink program, which ensures printers stay online. To deliver on digital business priorities such as these, the supply chain must change. Instead of simply responding to spare parts orders, it must predict potential failure and orchestrate spare parts supply and service across a partner ecosystem to prevent downtime. The type of digital technology investments that can deliver these changes to the supply chain include:

Step 3: Prioritize digital technology investments

In times of uncertainty, supply chain organizations tend to focus on improving existing operations to boost today’s bottom line and forgo the investments needed to support tomorrow’s top line. In many cases, this conservative approach will not align with today’s wider organizational priorities.

To support an organization that can compete in the future, supply chain leaders must do more than streamline their operations. They must build the future digital supply chain. “This is a supply chain that delivers a customer experience and not just a product,” says Burkett. “It’s an intelligent supply chain that makes decisions as it interacts across an ecosystem of digitally connected partners.”

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