Digital Business Means Big Change for Supply Chains

Chief supply chain officers have an opportunity to lead business transformation by influencing three changes in the digital world.

As the world moves into a digital first environment, it is critical that chief supply chain officers (CSCOs) find a place at the leadership table. They must learn to manage “sideways”, focusing on a different approach depending on where the digital transformation is centered.

Opening the Gartner Supply Chain Executive Conference, Peter Sondergaard, senior vice president and global head of research at Gartner, told the audience of supply chain strategists, that there are three things that will change in the digital era:

  • The way power is distributed among and within businesses
  • The way technology impacts the supply chain
  • The way to establish leadership
Peter Sondergaard, global head of research at Gartner, highlights three things that will change in the digital era during the Gartner Supply Chain Conference.
Peter Sondergaard, global head of research at Gartner, highlights three things that will change in the digital era during the Gartner Supply Chain Conference.

CSCOs must react to these changes and learn to control and influence all three.

“Simply stated, every business unit is a technology start up. There is a shift of demand and control toward digital business units closer to the customer, where business units, such as the supply chain organization, are taking on more technology spending,” said Mr. Sondergaard. “In leading organizations, one quarter of enterprise costs will be devoted to the digital transformation. About 20 percent of that will be allocated directly to supply chain transformation. Digital spending by business functions is directly impacting the ability of the CSCO to achieve a higher level of demand-driven value network maturity. This is the power shift.”

The second area to change is technology. Digital technology is reshaping the supply chain. The CSCO of the past was most concerned with enterprise resource planning (ERP) implementations and master data management. Now, supply design and supply chain analytics are in the top five priorities for leading enterprises.

“The focus is on how the supply chain can consume and leverage data, integrate sensors and other elements of the Internet of Things (IoT) and software for customer segmentation and marketing automation,” said Mr. Sondergaard. “In particular, e-commerce software, supply chain optimization and traceability and product cost analytics warrant focus. This is a linear evolution of the investments under way in many supply chain organizations.”

But technologies are not just for incremental improvement. They can be disruptive too. Take, for example, a drone. The drone will not only do last-mile package delivery, but will monitor disruptions upstream in the supply chain. There are enormous applications for these devices – from agricultural and geographical survey to oil and gas pipeline inspections to disaster response and recovery. Five years from now they will be a standard part of supply chain operations in many industries.

“These and other technologies, such as smart machines which will automate decision making, are the new technology building blocks of the future digital business. Falling behind in these developing technologies could have serious implications for enterprises,” warned Mr. Sondergaard.

The third area of change is leadership. Talent is the key to digital leadership, and leaders must focus on talent and organizational strategy. Focus on talent that understand sales and operations planning, analytics and the emerging world of smart machines.

“The best leadership advice is to make your bosses’ priorities your priorities,” said Mr. Sondergaard. “Gartner’s 2015 CEO Survey showed that CEO’s top priorities are information technology and talent. Make those your top priorities. Then adapt to the digital reality with a bimodal capability, involve your customers, invest in experimentation, expect projects to fail, adjust and try again. Get a seat at the digital leadership table. Recognize that with the advent of digital business, change of different kind of upon us and adapt. Because great organizations adapt.”

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