Supply chain management is a critical function for businesses across industries. However, most supply chain leaders have had to contend with aging technology systems, which do not provide the required insights to overcome supply chain challenges in constantly changing scenarios.
As a result, global enterprises have felt the need for supply chain transformation to address the current global environment. According to a report by GEP and TechTarget, the global spend on supply chain solutions by 2026 would amount to $33 billion at a compound annual growth rate (CAGR) of 11.2%.
What is Supply Chain Transformation?
Supply chain transformation is the leveraging of digital technologies such as Internet of Things (IoT), cloud, big data, AI and ML to create an agile, high-performance supply chain that responds to constantly changing business dynamics and customer expectations, and also helps enterprises to retain their competitive advantage.
Supply Chain Transformation Goals
A survey from GEP & IDG – Digital Supply Chain Transformation: CIOs’ Key Challenges and Opportunities, where CIOs from 150 U.S. companies were polled, listed the following top goals for initiating supply chain transformation:
- Increased accessibility to data
- Improved planning process by leveraging analytics and integrating data
- Increased capacity, speed and agility
- More opportunities for innovation and collaboration
- Better compliance and risk management
- Ability to integrate technologies such as AI
An Example of Supply Chain Transformation
Here is an example of supply chain transformation: A global fortune 100 oil and gas corporation showed interest in improving efficiency and saving costs as its digital transformation strategy.
The company partnered with GEP to unify its supply chain and procurement operations across its units spread over 180 countries by deploying GEP’s proprietary software – GEP SOFTWARE™.
RESULTS: Better visibility and actionable reporting reduced the number of process steps by 10x, thereby reducing 75% of the time spent by the supervisory staff on their jobs, freeing up time to focus on strategic issues. The transformation also ensured a unified, seamless user experience and drove collaboration with suppliers and other stakeholders.
Read the complete case study here.
Important Steps in the Supply Chain Transformation Process
Most businesses have realized the necessity to have resilient and agile supply chains to succeed and remain competitive in the new normal.
Developing a supply chain transformation strategy is crucial and therefore enterprises looking to digitally transform their global supply chains may adopt the following seven steps.
- Vision: Define a vision in line with the enterprise’ objectives for supply chain transformation.
- Evaluate existing systems and resources: Check if existing systems can generate, collate, and analyze data easily to enable decision making. Check if the current systems support the new goals and objectives. And finally, check if the existing workforce has the necessary skill set to adapt to the new business model.
- Unified data and processes platform: A unified platform enables enhanced visibility for every role and process across the extended supply chain (end-to-end supply chain visibility).
- Cloud-based solutions: Cloud-based solutions enhance operational efficiency and significantly improve the ability to collaborate with suppliers, partners and other stakeholders in real time.
- Automated planning process: Routine tasks and less critical planning processes may be optimized to involve the best solutions automatically.
- Use data and analytics in real- time: Real-time data boosts end-to-end supply chain visibility and helps to pinpoint potential disruptions. AI- and ML-powered analytics improve planning processes and other processes in the supply chain to derive actionable insights.
- Align people and processes: A transformation strategy must be drawn up to align technology, people, processes and the management for a successful digital supply chain transformation rollout to achieve the desired efficiency and results.
Role of AI in Supply Chain and its Transformation
AI in supply chain is a key differentiator leading to supply chain transformation. It’s the need of the hour and one that offers a range of benefits to enterprises, such as:
- Greater visibility across the supply chain and access to accurate data help optimize the processes and lower costs.
- Actionable insights, such as predicting demand accurately, help optimize inventory resulting in cost reductions.
- Increased collaboration between stakeholders (internal and external) helps mitigate risks and tweak the planning process, enhancing revenue and optimizing inventory.
- Improved warehouse management optimizes inventory due to accurate demand prediction and ensures better process control.
- Using AI, cognitive supply chains learn over time to recognize potential risks and provide recommendations to mitigate them.
- Greater agility is accrued with end-to-end, real-time visibility, resulting in improved resilience.
Also Read: Benefits of Industry 4.0 On Supply Chains
Challenges of Supply Chain Transformation
- Goals are not clearly outlined.
- The workforce is not equipped to handle the new digital transformation.
- High investment is required for adopting advanced technologies.
- Real-time, transparent communication between stakeholders provided by the transformation is not leveraged.
- Poor integration of new technologies with existing systems.
- Poor assessment of existing systems and processes vs. the new.
- Fear of security risks such as cyberattacks and data thefts.
- The plan does not move from the paper to the implementation stage due to a lack of objectives and direction.
Also Read: Barriers That Impede Supply Chain Transformation
Checklist for Supply Chain Transformation Consultation
Here’s the checklist for selecting a consulting firm to ensure a smooth supply chain transformation journey:
- Past successes with digital supply chain technology development and deployment
- Keen understanding of unique supply chain processes, governance and security issues in different vertical industries
- Proven, credible technology vision and roadmap
- Global service and support capability
- Experience in cloud-centric supply chain systems development, deployment and management
- Ability to develop and track the financial metrics appropriate for each customer’s unique situation
Current State of Supply Chain Transformation
The current scenario of supply chain transformation, according to a recent Harvard Business Review Analytic Services survey, is that just 8% of companies have been able to mitigate supply chain disruptions. About 70% of companies are rapidly moving toward the digitalization of supply chains. About 28% have achieved digital maturity. About 50% cannot track their end-to-end supply chain performance due to lack of real-time data.
Supply Chain Orchestration and Why It’s Needed
Supply chain orchestration is a holistic approach to managing modern supply chains. The process involves coordinating activities and resources so that products and services can be delivered to intended customers at the right time and price.
Enterprises undergoing supply chain transformation see supply chain orchestration as a comprehensive approach to managing supply chains – right from sourcing of raw materials to delivery of finished products to the end customer.
How Has Digital Supply Chain Transformation Evolved?
Supply Chain Evolution: According to a report by the Economist Intelligence Unit and commissioned by GEP, the following technologies were implemented to minimize disruptions in their supply chains in the past three years.
- 38.25% of the executives surveyed used big data analytics and digital platforms
- 32.5% used cloud computing
- 30.75% used IoT
- 29.5% used Predictive analytics
- 25.5% used AI
- 15.25% used 5G
- 8.5% used Blockchain
Selecting the Right Supply Chain System
Given the evolution in the digitalization of supply chain management, it is no surprise that this space is saturated with solutions. Here are five features that may be considered while selecting the right supply chain management software.
- The supply chain software must provide data insights using AI
- Must have real-time visibility and collaboration
- Must be able to integrate with existing systems
- Must be cloud based for scalability
- Must have an intuitive interface and be user friendly
Conclusion
Enterprises acknowledge the need for greater digitalization of supply chains, underscoring the need for a skilled workforce proficient in the latest technologies. A tech savvy supply chain team will ensure technology is leveraged effectively for building agile and resilient networks through end-to-end visibility and collaboration, brought about by transformation initiatives.
