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Jam tomorrow for supply chain digital transformation

Stuart Lauchlan Profile picture for user slauchlan April 5, 2016
Great things could happen for supply chain digital transformation, but for now it's still all about phones and faxes.

jam tomorrow

The good news - 70% of executives have started digital supply chain transformation programs.

The bad news - only 5% are happy with the progress those programs have made to date, while 30% describe themselves as dissatisfied.

The even gloomier news - in an age of a supposed digital economy, nearly half of organizations use phone, fax, email as their main way to interact with supply chain partners.

Those are the headline stats from a research study by Capgemini Consulting and GT Nexus, an Infor company, entitled The Current and Future State of Digital Supply Chain Transformation. This purports to be the first digital transformation study of its kind to explore the state of the nation between organizations and partners up and down the supply chain, rather than internally or between supplier and customers.  The study surveyed 337 executives from large global manufacturing and retail organizations across Europe and North America. 

Some 75% of respondents say digital transformation of the supply chain is “important” with only 15% reporting that the majority of data from the extended supply chain is accessible to their organization. As a result, only 23% of respondents say that the majority of data from the extended supply chain is actually analyzed and used for decision making.

So what do organizations want to see happen? Asked about the situation five years from now, 95% of respondents want more processes with suppliers to be automated, while 94% expect to be getting real-time status updates from across the supply chain.

At the same time, 94% of organizations expect to share more data with their suppliers than today and the same percentage expects to collaborate more closely with those suppliers. In addition, 89% of respondents expect to include suppliers more closely into the planning process than today.

But there will be a price to be paid on the supply side as organizations will expect their suppliers to invest more on IT. This is clearly critical as the technology enablers for this will come from:

  • Supply Chain Visibility Platforms/Tools (94%).
  • Big Data Analytics (90%).
  • Simulation Tools (81%).
  • Cloud (80%).

For now, these technologies are not being used to maximum advantage. For example, only 6% of respondents said that a majority of their software was cloud-based, while for over two thirds (69%) less than 25% of their software is cloud-based.

Other identifiable barriers preventing or inhibiting progress include:

  • General lack of awareness throughout the internal ranks of their own organization (44%)
  • Lack of the required skills across their workforce (34%)
  • Supply chain partners lack the necessary awareness (50%)
  • Supply chain partners lack the required skills (42%).

As for the use of phone and fax in a digital age, the report argues:

It’s hard to overstate the significance of this finding. Modern, global supply chains can easily encompass hundreds or thousands of different trading partners across the world. A persistent reliance on outdated, manual, analog tools of communication such as phone, fax and email is fundamentally at odds with the needs of the ever-changing, fast-moving, disruption-prone nature of today’s global supply chains.

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Manual processes make communication across the supply chain incredibly difficult and give room for vast amounts of manual error resulting in more time spent on troubleshooting and fire fighting.

Kurt Cavano, Vice Chairman and Chief Strategy Officer at GT Nexus, says the study results are a wake-up call:

Manufacturers and retailers clearly have an idea of where they need to be and what digital technologies will get them there in the next five years. But it’s going to be a real sprint given the current reliance on outdated, analog technologies such as phone, fax and email to collaborate and execute in the global supply chain. Meanwhile, risk of supply chain disruptions runs high, with an expensive cost to pay.

To that end, the report offers 6 recommendations to organizations to kick-start supply chain digital transformation:

Focus on business value and base all decisions on Return On Investment, business benefits and how that ultimately impacts company performance and growth.

Fail fast, succeed faster. This requires an acceptance that not everything is possible and a willingness to kill initiatives off that aren’t working out or delivering the business benefits expected.

Adapt the governance model to break silos between departments and ensure business focus and enable decisions to be taken with clear understanding of their business impact.

Talent Management based on a realistic gap analysis between existing skills and those that are required for the organization to make progress.

Develop a partnership ecosystem, as you will need help. 

Don’t forget Risk Management, including a focus on cybersecurity and client/partner data protection.

My take

A lot of work to do. But a different perspective on digital transformation that is often overlooked in our inter-connected global economy.

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