Posted by Ryan Renner on May 26, 2017
Conversations about the digital transformation of supply chains tend to revolve around the exciting capabilities of this or that technology–analytics, robotics, cognitive computing, and others. But important questions are often left unanswered: What does digital transformation mean to me as a chief supply chain officer (CSCO) or chief operating officer (COO)? What does a digitally transformed supply chain look like? How will digital transformation impact my role within the organization?
Here are three insights from a recent Deloitte point of view that can help you answer those questions:
Digital transformation is a fundamental shift. As new technologies blur the physical and digital worlds, we are shifting away from a world where most of our assets are physical: workers, machines, tools and inventories. New digital technologies allow organizations to use data collected from these assets to help drive solutions to our greatest challenges. So instead of a strictly linear supply chain, digital transformation means shifting from linear supply chain operations to dynamic, interconnected, open systems known as digital supply networks (DSNs) (Figure 1). As information flows between the physical and digital worlds, CSCOs and COOs will be able to overcome the delayed reaction process of the traditional linear supply chain. What’s exciting is that DSNs offer a continuous flow of information that helps facilitate automation, improve workflow, provide greater transparency, generate insights, and enable increased collaboration across the supply network.Supply chains can incorporate and utilize increased intelligence. With these new technologies, it’s no longer prohibitively expensive or time consuming to gain insight in to every step of operations or to understand customer or supplier demand patterns. While the linear flow of designing, creating, and moving physical goods remains unchanged, improved information flow can transform supply chains into more efficient networks. As a result, organizations can connect with more partners and suppliers to deliver increased value.
For example, many of the latency challenges of linear supply chains can be avoided. One multinational grocery retailer can maximize revenue by reducing the chance of product stock outs. By feeding weather data into a predictive analytics tool to forecast weather-dependent products (such as ice cream), inventory and supplier orders can be adjusted on a store-by-store basis. In the past, the chain might have been able to adjust orders when warmer weather was in the forecast, but supply chain latency might not have allowed a quick reaction time. A DSN makes data-driven changes, communicated throughout the network in real-time, possible.
Performance improvement is just the beginning. Not only can the DSN allow operations to become more nimble, flexible, and customizable, higher levels of performance can allow DSNs to generate a wealth of insights that inform business strategies. CSCOs and COOs can use these new-found insights to partner with other leaders across the enterprise on strategic planning and decision making. Importantly, these insights should also allow CSCOs and COOs to add revenue to their list of objectives, which already include cost, quality, speed, innovation, service, and agility.
Leveraging these characteristics, CSCOs and COOs can begin to imagine–based on data-driven insights–how the DSN can be used to not only improve the supply chain, but to fuel growth across the enterprise.Getting to that point means answering another very important question: What does our journey to a digitally transformed state entail? That’s the subject of my next blog.How is your company approaching digital transformation? I’d enjoy hearing from you.