Two years ago, a group of leading CEOs from around the world met in China to discuss the major issues facing their companies in the global marketplace. The meeting was organized by the Center for Global Enterprise (CGE), - the nonprofit research institution founded by former IBM Chairman and CEO Sam Palmisano to study the contemporary corporation, globalization, economic trends, and their impact on society. The CEOs at the meeting in China concluded that their highest research priority was the evolution toward Digital Supply Chains (DSC), and its potential to transform organizations and the conduct of business around the world. In response, the Digital Supply Chain Institute (DSCI) was launched a few months later.
In October of 2016, the DSCI, in partnership with CREATe.org published its first research paper, Digital Supply Chains: A Frontside Flip. The paper explains the key differences between traditional and digital supply chains, and provides practical advice to help companies prepare for the digital supply chains of the future
The traditional supply chain has evolved over the years as a crucial process used by many companies for the production, handling, and/or distribution of their products or services. Traditional supply chains generally comprise five separate back-office functions: transport, warehousing, purchasing, marketing and finance. Their key objective has been to improve the efficiency of getting goods and services from suppliers to customers, through a series of intermediate steps including manufacturing, distributors and retailers. But, these supply chains were quite fragmented, with limited interactions and information sharing among their various functions and steps.
Over the past couple of decades, the explosive growth of the Internet has made it much easier for companies to transact with each other around the world. The connectivity and universal reach of the Internet has enabled companies to integrate and better coordinate all their various processes, as well as to go beyond the boundaries of the firm and develop highly sophisticated global supply chains. Vertically integrated firms have evolved into virtual enterprises, increasingly relying on supply chain partners for many of the manufacturing and services functions once done in-house.
The DSCI paper argues that it’s time to focus on the transformation of the whole supply chain process, not just in further increases in efficiency. Their traditional linear nature is increasingly misaligned with the more networked nature of today’s global production.
“Successful companies will need to take advantage of new management practices, a continuously expanding data reservoir, and new technologies relevant to Digital Supply Chains, if they are to achieve future competitive advantage and delight their customers. The key element cited by all of the companies involved with this initiative is the frontside… People running the global supply chain of the future [will have] to perform a frontside flip. That is, they will have to flip their focus to the customer-facing side - the frontside - of the business.”
The evolution from traditional to digital supply chains is driven by five key game changers:
Real Time Big Data and Analytics. The most important factor enabling the ability to flip to the customer-facing front side are the massive amounts of data now at our disposal from a wide variety of sources, including mobile devices, sensors, IoT systems, and social media, along with the sophisticated tools being developed to collect, analyze and use the data. These data and tools will enable companies to make better decisions across the overall supply chain, including product design, manufacturing, distribution and sales.
Digital Manufacturing and Delivery. Several breakthrough technologies will have a major impact on manufacturing and delivery over the next several years. Foremost among them is the emerging robotics revolution. Robots are computers that have both a brain and a body. A robot’s capabilities are defined by what its brains and body can jointly do. AI advances have greatly benefited the robot’s brains, as they have those of all other computers. In addition, the electromechanical components used in robotic devices are also advancing rapidly. Innovations in their design and in the algorithms that guide their perception, reasoning, control, and coordination are driving the development of a wide variety of industrial and personal robots.
3D printing is another promising technology with the potential to significant impact the supply chains of a growing number of industries, including medical devices, automotive and retail. So are drones, which are already being deployed in infrastructure maintenance, security, assets monitoring and other tasks across a number of industries.
Purposeful Collaboration. Collaborative software or groupware, designed to help people work closely together to achieve a common goal, is critically important for an integrated supply chain to succeed. Purposeful collaborations are the only way to reconcile the competing goals and objectives of the various participants in a supply chain, both within the different departments of a company, as well as across the external ecosystem of partners.
Addressing Risks. Information sharing and transparency enhance the capacity to see and address risks in a digital supply chain, including cyber attacks, IP theft, and compliance issues.
Blockchain. Blockchain technologies hold great promise for digital supply chains over time, increasing the speed, security and accuracy of financial and commercial settlements; tracking the supply chain lifecycle of any component or product; and securely protecting all the transactions and data moving through the supply chain.
To help companies in their evolution toward digital supply chains, the DSC Institute has developed an Execution Framework based on four major imperatives: managing demand, managing people, managing technology and managing risk.
Managing Demand - Real-Time Continuous Engagement with Customers. “Executing the frontside flip is difficult for supply chain organizations that have focused exclusively on procurement, manufacturing, shipping and logistics… Demand forecasting will improve as people manage new sources of data to create and make better DSC decisions. In many companies, the demand forecast is developed by the sales team based on existing data and intuition. In the near future, winning companies will use artificial intelligence (AI) to match demand and supply. Inventory will be reduced by as much as 30% as companies build algorithms that automatically replenish based on observable demand signals.”
Managing People - Cultural and Organizational Shift. “All organizational change is derived from people willing and capable of moving to the future. This is certainly true for the journey to a digital supply chain, which will require education, communication, organizational redesign, process redesign and bringing in new personnel… The crucial change for the supply chain division is to shift from being exclusively a support organization and instead realize decision-making rights, similar to the line leaders that are running P&Ls.”
Managing Technology - Enterprise/Platform Agility and Customer Visibility. As discussed earlier, data is growing at an unprecedented rate. “Much of this data will contribute to the DSC and help with everything from product design to shipping and delivery to sales and distribution. The sub story is that organizations today already have too much data and can’t readily integrate and use it to support management decisions… Almost all of the companies we worked with reported that they have trouble getting clean data today that is reliable for future Digital Supply Chain management and decisions. This has to be quickly fixed because it is the basis upon which the new sources of data will sit.”
Managing Risks - Enhance Risk and Management Capability. “The Digital Supply Chain will provide new, more sophisticated ways to identify risks. Big data will create early warning systems allowing companies to become more proactive and preventative. Companies will be able to mitigate risks more effectively. Companies will also be able to go beyond risk mitigation and compliance to turn a risk into a competitive advantage by outperforming other companies in a targeted area… The management challenge is determining where to mitigate risks and where to excel and turn a risk into a competitive advantage.”
To further assist companies, the DSC Institute has been conducting research and developing detail guides in three key areas: performance metrics, blockchain technologies, and real-time Big Data and AI. The first such guide, Digital Supply Chain Transformation Guide: Essential Metrics was recently released. In the spirit of You Get What You Measure, the Guide, - along with an accompanying set of tools, - aims to help supply chain executives assess their present state, as well as understand the key metrics they should be tracking along their evolution toward an effective digital supply chain.
Very interesting and informative note. I'm now testing data in a project called Client360, to get all the internal info our Big Tech company has on any of its customers -- so as to offer more relevant products and services to them.
AI & cognitive SW only bots will also be increasingly important.
So are teams and team work -- see Agile methodology for where tech is going.
(first time here - came from the 2016 note on Prof Coase & the Firm).
Posted by: Tom Grey | October 24, 2017 at 01:31 PM