Digital supply chains – Do you risk falling behind?

Few respondents see a high impact over the next three years from drivers such as the internet of things, automation or robotics. Nevertheless, digitalization seems to be a strong focus – in cooperation with suppliers and channel partners, for example, or using “Big Data” for forecasting and demand planning – with more than 33% rating it as important or very important for their organization. But the same percentage rated the degree to which the organization addresses the drivers as low or very low. Respondents were very clear that their organizations are not well prepared to address digitalization drivers showing the largest implementation gaps as of today (see Figure 2).

Figure 2: Key drivers rated according to the gap between importance to 2020 and how well addressed in respondents’ organizations

N=268 respondents, average ratings, only complete results are taken into consideration

When it comes to key drivers, outside of the tried-and-tested supply chain management basics, differences are to be expected between industries. For example, only 9% of respondents from the mining & metals industry considered the use of “Big Data” for demand forecasting an important or very important driver. This figure rose to 60% for FMCG, freight & logistics and retail. A B2B industry will place much lower importance than a B2C industry on availability of integrated data across all channels and partners or a customer-facing supply chain. But it would be short-sighted to believe that a company and its supply chain leaders do not need to stay abreast of opportunities and trends – change might be driven by your channel partners, i.e. players further down the value chain. The question remains whether the low level of importance attributed by respondents to the internet of things, robotics, 3D printing and the like, points to a larger issue, namely that companies tend to plan for technological shifts only when that technology is ready to replace existing processes and methods. In our fast-moving and increasingly digital age, organizations may be waiting too long to prepare for disruption of their supply chain by digital and technology drivers. Conclusion Supply chain leaders must balance short-term benefits and the longer-term investments needed for an efficient and effective supply chain that is ready for the future. Based on our survey results, this involves the following three key activities:

1] Getting the basics right

– implementing supply chain best practices and improving supply chain performance using tried-and-tested methods

2] Having a strategy for an increasingly connected and digital world

– no revolution, but continuous evolution of a digital supply chain where greater transparency and analytics leads to improvements in delivery times, reduction of inventory, reduction of supply chain cost and risk, and increased ability to create value for customers and, therefore, sales

3] Being ready for big technology shifts

– involving robots and autonomous vehicles, 3D printing and connected products, and the internet of things, to improve product and service offerings and reduce costs Senior supply chain leaders should embrace a holistic approach that aligns people, processes and structures within the supply chain function to the challenges that a digital and increasingly automated world present to companies of all industries and in all stages of maturity. They should not focus only on implementing more and better technologies, but must inspire, manage complexity and develop distinct cultures conducive to success in rapidly changing environments.

Ralf Seifert is Professor of Operations Management at IMD. He directs IMD’s new Digital Supply Chain Management program, which addresses both traditional supply chain strategy and implementation issues as well as digitalization trends and new technologies.