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The Supply Chain Management Blog covers the latest in SCM strategy, technology, and innovation.

Preparing Your Business for the Digital Supply Chain

Guest Author

By Mike Mortson, CEO, Supply Chain Game Changer

Supply chain professionals are hiking their spending on supply chain innovation—substantially. Ninety-five percent said they plan to spend more this year than last, and 60 percent will spend more than $1 million over the next two years on disruptive technologies such as robotics, automation, predictive analytics, artificial intelligence, and the Internet of Things (IoT). 

As digital transformation confronts supply chain leaders, we caught up with Mike Mortson of Supply Chain Game Changer to discuss the current state of the supply chain technology landscape—including how the easiest path forward, in many cases, may involve embracing a supply chain-as-a-service model to benefit from cutting-edge technologies and first-rate digital supply chain management skill sets.

How are firms responding to the pace of technology innovation and its impact on their SCM processes?

Most supply chain leaders recognize that it’s an incredibly exciting time to be working in the field. Certainly, they recognize that the digital supply chain is the future—that everything around us is either digitized or will be digitized.

Yet, I also see what I talk about as a dichotomy in the supply chain—where the approach to technology clusters around two extremes on a spectrum of options. At one end, a lot of people are just trying to understand and fix the problems with the basics of running their existing supply chains efficiently and effectively. 

At the other end of the spectrum, there's a tremendous amount of interest in the digital supply chain, whether that involves the Internet of Things, advanced analytics, autonomous vehicles, or other fast-maturing technologies, and developing and implementing the strategies needed to deploy a digital supply chain.

How do you handle firms that are still trying to grasp the basics?

First, no matter where a firm falls, it’s essential to recognize that supply chain is no longer just a back-office function. Today’s supply chain really touches every aspect of running a business—from strategic planning, to logistics and inventory, to sales and store operations. More important, supply chain increasingly covers activities that companies use to differentiate themselves, such as asset velocity and last-mile delivery capabilities. Supply chain is a leading C-level player in determining the competitive and financial success of most companies.

For those companies that continue to have problems with the basics in terms of the supply chain performance, they clearly need to spend their tactical energy on getting the basics right.  At the same time, they must also develop strategies to significantly advance their capabilities in anticipation of overcoming their issues with the basics.

These companies need to look at technology innovation in a very different light. This isn’t just about whether to embrace the digital supply chain, because that will inevitably happen over time for everyone. It’s also about whether those capabilities allow you to create better customer experiences and improve your productivity to compete more effectively, execute a successful shift in business strategy, or even just to fix your basic problems.

Perhaps we could talk more about the benefits of building a digital supply chain. What do these capabilities really mean in terms of the day-to-day realities of managing a supply chain?

First, consider that a digital supply chain enables complete, end-to-end connectivity and visibility: You can monitor and understand, in real time, what’s happening anywhere within that supply chain and make real-time decisions to create the outcomes that you desire. 

By looking at a supplier’s onsite, real-time quality-control systems and data, for example, you may anticipate how quality issues will affect the supply of key goods and bring other suppliers into the picture.  This level of visibility also provides unprecedented responsiveness to changes in customer demand. A customer may indicate that they need to increase the size of an order or take shipment sooner, and you can act immediately to get simultaneous commitments from every node of your supply chain, including suppliers, manufacturers, distributors, and carriers, so as to allow you to fill that order.

In the past, either of these scenarios would have involved any number of serial communications and manual tasks: making phone calls, sending faxes and emails, filling out forms, getting acknowledgements, and so on. You would measure lead time in days or even weeks.

In the digital world, however, these supply and demand fluctuations can be signaled in real time, with nearly instantaneous responsiveness and adjustments. Ultimately, you get what I call a “lead time-agnostic” supply chain. When you can respond quickly enough and with sufficient agility, then it no longer makes sense to talk about lead times at all.

That’s also true for forecasting. I believe that expecting to ever get perfect forecasting is a flawed expectation. But if your supply chain can react and adjust in real time, to deliver whatever is needed, wherever and whenever it’s needed, then forecast accuracy no longer matters.

Are there certain technologies or areas of innovation that get extra visibility—and extra concern—when firms look at implementing a digital supply chain?

The technology set is far-reaching; it includes the areas I mentioned before, such as the Internet of Things, along with digital connectivity, cloud computing, blockchain, big data, artificial intelligence, predictive analytics, machine learning, virtual or augmented reality, wearable devices, 3D printing—I could go on. All of these will have a meaningful impact on the strategic direction of the supply chain. 

But it’s also critical to look at how the technology will transform the role of the supply chain professional—specifically, the skill sets and expertise required for the role. 

It's not going to be sufficient for people just to know how to place purchase orders, or how to move inventory through a warehouse, or how to handle dispatching with freight carriers. The digital supply chain demands a radically different level of expertise and skill set. 

You’ll see a premium placed on holistic, end-to-end supply chain management leadership skills. I call this development the Quantum Leap to the supply chain skills of the future, which includes control tower skills, a focus on data analytics rather than data entry, change leadership skills, technological expertise and more refined risk management skills. And then, as I said earlier, a complete understanding of how a digital supply chain interacts with all participants of your supply chain—people, business processes, and business strategy—and the leadership skills to design and run it all.

It sounds like firms that weren’t worried before about adopting digital supply chains might be when they start thinking about the question of staffing and skill sets.

The ability to implement a digital supply chain varies widely. Many large corporations are well on the path to developing the required skill sets. But within small and medium-sized companies, many more are struggling with the basics.

This is why the proliferation of technologies and opportunities around the digital supply chain really means companies need to look seriously at outsourcing these functions. There’s going to be a major shift towards what I call supply chain as a service (SCaaS).

Companies will look more to external parties who are experts and who have already made the investments in the digital technology, so they don't have to invent everything themselves. They can leverage SCaaS to run elements of their supply chain or manage the overall supply chain, and to make the quantum leap to a digital supply chain. Otherwise the demands on resources, finances, and skills will prove to be prohibitive and prevent companies from making significant advances in deploying the digital supply chain—which will be increasingly important to the competitiveness and financial success of their company.

As the technology progresses, this type of solution is going to become truly critical. Businesses will be able to focus on their core competencies—not on maintaining a team with increasingly specialized digital supply chain skillsets.

 

 

Mike Mortson’s career has taken him through nearly every aspect of a modern enterprise supply chain—from manufacturing facilities and warehouses to distribution centers and global supplier networks. It’s a background that makes Mike uniquely qualified to understand how digital innovations are transforming the supply chain, and to explain how and why businesses can successfully implement their own digital supply chain strategies.

For more insights, trends, advice, and solutions related to modern supply chain management, procurement, logistics, leadership,  technology, change management, business, and the digital supply chain, visit Mike’s website, Supply Chain Game Changer.

 

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