Digital disruption is changing markets everywhere. Today’s digital customers want unique experiences delivered “on demand” and at hyper-speed. In a recent study by Accenture Strategy, 4 in 10 supply chain executives reported their customers are looking for faster and more flexible fulfillment, while one-third said customers increasingly want customized products and services.
Digital technology holds the potential for increasing competitive agility by dramatically changing how businesses design, source, make, move, and service products. Most executives understand how essential these changes are to the business, and 85% of supply chain executives are already working to introduce new digital capabilities into their operations.
But even as companies embrace these changes, many often overlook the difference between “digitally enhancing” their traditional supply chain operations and re-inventing their operations to truly become a digital business.
Trendsetters Blaze the Trail
Many organizations are adding digital capabilities onto traditional supply chains — creating hybrid models that combine older paper-based and newer IT-optimized processes. In effect, these organizations are trying to construct new buildings on old foundations: refitting, rewiring and re-adapting instead of re-inventing.
However, piecemeal digitization of the supply chain is no longer enough. Re-imagining the supply chain as an integrated digital supply network is essential to generating higher levels of value.
Consider how “digital trendsetters” — top performers in terms of both profitability and revenue growth — are building the digital supply network. They are breaking away from the pack of “digital followers” by responding to digital disruption differently:
- Trendsetters are designing their supply chain operations around the intersection of suppliers, products, and customers. Unlike digital followers, who say that giving customers a unified experience remains their primary supply-chain objective, trendsetters strive to deliver a tailored customer experience: highly individualized, focused products and completely customized services providing buy-anywhere, collect-anywhere, return-anywhere capabilities via flexible channels.
- Trendsetters are leveraging the full spectrum of digital technologies, investing in analytics, mobility, and cloud. But they also take digital technologies further than digital followers by investing significantly more in the higher-order digital technologies that facilitate hyper-flexibility like artificial intelligence, the Industrial Internet of Things and intelligent products.
- Trendsetters are leveraging their digital investments to build new levels of collaboration — well beyond their four walls. Unlike digital followers, whose focus remains on enabling collaboration among internal functions, trendsetters’ ecosystems encompass all stakeholders, including start-ups, in a broad, fluid, and proactively managed network.
One Size Does Not Fit All
Digital technology has the power to drive a convergence of supply chain elements — aiding companies in capturing huge savings and competitive advantages, and enabling them to become trendsetters. While different digital capabilities are essential to different companies, there are four advantages that should be associated with every digital supply network:
Connected. This is the foundation of the digital supply network. By leveraging various digital capabilities, connected companies enable extensive visibility, high levels of control, and outsized influence. Connected companies interact more fully with the entire business ecosystem, allowing for easier reaction and more thorough communication with customers. And they often capture larger amounts of data that impacts the way the supply chain operates.
Intelligent. Savvy companies extend their connectivity advantage by using digital to transform data into valuable information. The key: leveraging analytics, cognitive equipment and smart apps to provide the right information for decision making.
Take, for example, Taleris America, a joint venture company that serves the airline industry. By epitomizing the use of digital technology, Taleris leverages predictive analytics to analyze data from sensors installed on aircraft parts and systems to make predictive recommendations regarding aircraft maintenance and operations. Thus, clients can turn unscheduled maintenance into scheduled maintenance, identify potential disruptions before they occur, and recover more quickly from delays.
Scalable. Companies often struggle to scale their supply chains up or down as circumstances require. However, smooth scalability becomes more attainable when a supply chain has been instilled with high levels of digitally enabled connectivity and intelligence, making it easier to optimize and duplicate processes, detect errors, and add or reduce partners as needed.
Rapid. The further ahead we look, the more companies’ processes and priorities will need to innovate as fast, or faster, than their products. In response, they will need to use digital technology to diagnose more quickly, adjust more rapidly and execute more efficiently.
For example, speed is the essence of Dell’s global command center, which helps companies monitor supply chain activities and make adjustments in real time. Linked to a geographical data system, the command center’s Clear View monitoring platform rapidly notes service-dispatch activity, thus making it possible to match the dispatch with the optimal parts location.
Adopting a Digital Supply Network
The digital supply network is built with digital DNA. The key is re-inventing the supply chain itself — thinking differently about how to concurrently move and optimize people, information, and finances, as well as designs, materials, parts, and products. Accenture Strategy recommends three primary steps to transform a traditional supply chain into a digital supply network:
Envision the Power of the Network. It is essential to define the digital supply network vision for the organizations. And with increased pressure on supply chains to deliver value to the organization, the digital supply network must be designed to deliver increased competitiveness. The vision should identify the specific business outcomes to be realized from the digital supply network. A primary input for the vision is the new demands and services being required by the digital customer, today and 10 to 15 years from now.
Forget Functional Excellence. Once the vision is defined, the next step is to conduct a value-chain analysis to identify the value-creating activities that will be at the core of the digital supply network. The analysis will reveal the path that the enterprise transactions take in delivering value, depicting the way work actually gets done in terms of interrelated value streams that traverse the business.
Map Your Digital Journey. With the vision defined and the core activities revealed, a digital blueprint for the organization can be created. The blueprint sets the milestones for the transformational journey, taking into consideration the people, process, and technology aspects of the transformation.
By restructuring supply chains as networks, and equipping them with new capabilities that are enabled by digital technologies, companies can unlock the full potential of the digital supply chain.
Kris Timmermans is senior managing director for Accenture Strategy, which helps global organizations develop supply chain and service operations capabilities.