Realizing Supply Chain Digitization Results
The supply management profession is undergoing an accelerated transformation: Supply chain data is changing more frequently and growing more quickly than during prior decades. Forward-thinking leaders are left with two paths forward: Hire more people or become more productive.
During an IndustryStar webinar in November, 76 percent of respondents to an attendee poll said they were interested in “tools to increase personal and team productivity.”
Supply chain digitization of offline data offers hope on the productivity front. However, a deluge of new jargon — from Industry 4.0 to artificial intelligence (AI) — has overwhelmed leaders whose bandwidth has been exhausted by extended supply volatility. Information technology (IT) investments that enable future supply capabilities are seemingly out of reach for some, as headwinds like the semiconductor shortage require near-term focus. Fortunately, we are in the early legs of a long information race that has yet to determine winners.
Resiliency Through Changes
The prolonged coronavirus (COVID-19) pandemic has caused many supply management practitioners to forget that in recent years, there has been a consistent series of crises impacting supply.
“I can’t remember a five-year stint where we have had more disruption in supply chain,” says Tony Milando, senior vice president and chief supply chain officer of Rye Brook, New York-based Xylem. “It seems like every year, we have a recurring ‘non-recurring’ event. Several years ago, it was the electronic shortages, then tariffs, then the U.S.-Mexico-Canada Agreement. These disruptors all occurred before we knew what COVID-19 was.”
Resiliency has become the pursuit for industrial leaders as they push toward an unknown future. Focusing on quantifiable near-term milestones can prove invaluable in transitioning from abstract to practical supply chain digitization goals. Further, prioritizing projects that improve daily supply chain work productivity and collaboration can provide a calming force to strained teams seeking to advance longer-term supply performance capabilities.
Milando continues: “We’re looking at solutions that drive more timely insights and allow us to understand data in our factories quicker. Tools like predictive analytics and visibility technologies give more information on our shop floor, so we can make decisions quicker.”
How to Start Your Journey
A crawl-walk-run approach works best to start realizing supply chain digitization results.
Step 1: Form a team. A small, focused three- to five-member project team can help organizations swiftly assess their current state and develop a future state vision. Teams today are facing burnout from working longer hours under sustained stress. It may be time to tap new rising stars within your organization and/or seek outside service providers to complete a near-term assessment.
As you form your team, consider a term gaining momentum: buyer of choice. It is no longer enough to have a world-class supply chain solely within your four walls. Companies must now compete and win with their extended enterprise. Incorporate suppliers into projects and actively seek out ways to partner to compress timelines and share costs.
Step 2: Assess the current state. Key areas to assess include internal team skills, existing technology tools and data formats. It is important to take stock in the difficulty of benchmarking capabilities in relation to peers and competitors. Engaging a third party to conduct a one-week assessment can prove to be a high-ROI endeavor. Ensure that any third-party scope of work includes detailed recommendations for timing, costs, ROI, payback period and assumptions. Strive to receive an executive-summary business case as the final deliverable format to help accelerate internal budget approvals.
Real-time actionable information is the fuel that powers future supply competitive advantage. As such, an organization’s future state will likely be composed of a time frame for moving current offline data into a digital environment.
Step 3: Outline the future state. Prioritize IT capabilities that will carry the organization into the future. These capabilities will vary according to industry. They also will depend on a leader’s supply performance goals — goals that underpin overall company strategy. One approach is to map information flows and prioritize improving analyses and processes that take the most time. Building capabilities that empower teams to free up their time will embolden enthusiasm for your supply performance journey. Regardless of the capabilities deemed most important, supply chain will be integral in enabling future business-model innovations.
As an example, a global automotive Tier 1-supplier leadership team prioritized supply predictive analytics to foster a commercial competitive advantage. To accomplish this, the team digitized — offline — part print and plant data and augmented the data with third-party part cost and supplier data. The team was then able to leverage intelligent supply performance software to (1) identify specific part supply chains that could be optimized and (2) receive automated recommended action plans. The result? The team reduced its tactical analysis workload and increased its focus on strategic actions to improve desired business outcomes.
Lay a solid digital foundation by digitizing such invaluable offline data as supplier commodity strategies, material route flows and delivery lead times. The sooner you can navigate to a robust digital plan for every part, the faster you can realize productivity and collaboration benefits.
Step 4: Develop an actionable plan. Craft short-term, mid-term, and long-term plans (one, three and five years out). Avoid overanalyzing long-term plans by aligning near-term tasks that advance your long-term goals. In the evolving supply management world, it’s important to further break down the one-year plan into smaller quarterly plans or waves. Remember that the best laid plans are only as good as their ability to be executed.
Step 5: Execute sprints. Take your one-year plan and prioritize micro — two-week —projects that can be executed with a high-confidence interval. Aspirational goals can be motivating down the road, but make sure your immediate goals are executable. Collaborative, agile project-management software tools can also prove helpful in increasing the confidence interval of sprint waves as specific tasks can be scored with points. Over time, you will be able to dial in your team’s “run rate” — that is, the number of points that can be completed over a period.
Digitizing for Supply Competitive Advantage
Seek out daily productivity and collaboration proof-of-concept (PoC) projects that deliver near-term results while advancing your long-term supply chain digitization vision. Building and sustaining momentum is key to winning the marathon.
A June global research survey conducted by Cambridge, Massachusetts-based Forrester Consulting found that “a lack of digitization and a focus on costs is hindering supplier collaboration, with 77 percent of respondents admitting that cost dominates supplier selection, and a further 80 percent acknowledging they need to accelerate their digitization,” stated the Forrester report Collaborate to Win — Unlocking Supplier Innovation and Value.
Time, not money, is ultimately the most precious resource in a dynamic world. Prioritize Industry 4.0 initiatives that empower your team by freeing up their time to enhance business results.
Supply crises caused by years of annual black swan events have accelerated supply chain digitization plans an estimated five years, across industries from building products to construction equipment. However, actions and progress vary widely across companies, creating an opportunity window for leaders to outpace competitors in 2021.
The first action every marathon winner takes is a single small step forward. Winning the supply chain digitization game is no different.