As more industrial businesses move to digital models, the supply chain is at the centre of a new digital age. With surging data growth, advances in IT systems and an influx of pioneering technologies, digitalisation has the potential to deliver improved efficiency and ease across the supply chain. But it also brings heightened complexity.

Whether or not the supply chain can embrace the changes driven by advancing digital technologies, depends entirely on the preparedness of leaders to handle additional intricacies while continuing to manage existing systems and operations.

A common mistake is to think that, on its own, technology is the answer to all supply chain problems. It’s not as easy as plugging in the machine, switching it on and then reaping the benefits. In fact, more often than not, it’s much less about the technology itself and more about the approach to the overall business model. Fundamentally the solutions are found inside the company.

“It feels like artificial intelligence and blockchain are tools that can be used to automate processes and create more relevant insights, but there are deeper cultural changes which need to be recognised between the trading and supply chain execution arms of an organisation,” explains Peter Louden, business solutions director at Clipper Logistics, a leading retail logistics provider.

The supply chain should be viewed as a source for growth, innovation and improved customer experience

The problem is that technologies have drifted into an already problematic supply chain landscape. Issues such as lack of visibility or slow decision-making still haunt the industry and they simply won’t be solved by digitalisation alone. In fact, these kinds of problems can hinder the latest technologies, so it’s crucial the industry recognises and tackles existing challenges when implementing a digital model.

Marcus Würker, chief information officer, UK and Ireland, at DHL Supply Chain, advocates a combination of focusing on internal solutions and embracing new external technologies. “Orchestrated technology scouting and the creation of internal digital products, coupled with encouragement and empowerment to make decisions at a local level, will allow for a reasonably fast deployment of digital strategies without compromising on sustainability.”

Business-wide approach

Critical to the digital transformation process is introducing an end-to-end strategy that encompasses all areas of the supply chain. To weather the pace of change and increasing uncertainty, successful businesses need a truly integrated end-to-end supply chain, which requires a business-wide approach, and much closer working with other parts of the company, such as sales.

Rob Wright, executive director at SCALA, a supply chain and logistics management company, explains: “The sales and commercial teams have a key role to play in supporting and contributing to an aligned approach on customer relationship management, order management and demand planning.”

In addition to breaking down internal silos, the extended enterprise must also be aligned, which means taking a different approach to suppliers, distributors and logistics providers, in addition to customers and manufacturers. Relationships with these partners should shift from being focused on cost, to focus on growth, innovation and customer experience.

A digital business model must always look ahead by experimenting with different technologies, predicting trends and identifying where digitalisation might be needed in the future.

“If you look to transform people, processes, technologies, you will find a complex mix of tangible and intangible assets developed around a traditional command-and-control hierarchy,” says Nick Eades, chief marketing officer at Wincanton.

A future-facing business requires a new mindset to determine the tactics and strategies it employs.

Existing systems must also continue to run effectively while the latest ones are deployed. Creating a balance between new technologies, strategic solutions and traditional systems is essential to a successful digital strategy.

Digital business models need more than just a reworking of supply chain operations, they require a complete culture shift. That’s why the supply chain has not yet truly exploited digital technologies. Leaders in the field must begin to look beyond the short term, fix existing problems and cultivate the right talent, all while creating an end-to-end strategy that encompasses the entire supply chain. This is how to lead the supply chain in an age of digital disruption.

Why are traditional supply chains struggling in the new digital landscape? 

For the last two decades, companies have used a cascaded decision-making process, where each function focused on optimising only its own view of the supply chain. They took decisions in their silos on issues such as core costs which would, in turn, affect factors such as how much product they need to build and how they distribute. 

These decisions could have impacts across the whole organisation that would not be understood by the team making them and take time to become apparent. Without visibility over the whole system, decision-makers would unintentionally create new challenges for themselves and the business, such as a lack of product availability or too much product in the wrong place.

In an age with consumer expectations of speed and personalization driven by the Amazon effect and volatility from trade, tariffs and regulatory changes, companies can no longer succeed with old systems like this. They are fundamentally transforming their supply chains to become more agile in their decision-making and their ability to pivot away from dangers and towards new opportunities posed in the digital world. 

The rise of digitisation and trends like servitisation (where companies wrap services around products) call for the tighter alignment of functions that may have been previously separate. If the teams selling services are not aligned to those selling or maintaining the product, the resulting misalignment will create significant issues.

In an age with consumer expectations of speed and personalization driven by the Amazon effect and volatility from trade, tariffs and regulatory changes, companies can no longer succeed with old systems 

What is the key to change?

Shifting the mindset among supply chain professionals - and the wider business - is central. You can put the best technology in the world into an organisation but if the people using it aren’t convinced that it will benefit them and their jobs they’ll always find ways to go back to thinking in silos and traditional tools such as Excel. 

Effective change management throughout the whole company is crucial. Supply chain professionals must take the key stakeholders from across the company on a transformational journey, communicating the value of the changes for them and the business. 

What does this mean on the ground?

As an example, we worked with one consumer goods giant that sought to engage employees at all levels in its transformation and empower them to be “citizen developers” via participation in that vision. They also equipped them with training opportunities and new data and technology tools that enable them to gather insights and then share them across the organisation. 

Different teams must be able to see how their actions affect each other and the overall supply chain

What do supply chain professionals require to assist them in shifting mindsets and fostering collaboration?

A top-down mandate from board level to drive supply chain transformation is critical to getting the rest of the company to collaborate and change their mindset. Without that, heads of supply chain will run into resistance to change, in turn reducing the chance of achieving the broader transformational goals. 

That executive mandate should also be accompanied by KPIs or metrics that are clearly aligned across different functions, from production to sales to customer service. Different teams must be able to see how their actions affect each other and the overall supply chain; that visibility can only happen if everyone is held accountable to a single vision and complementary KPIs. 

How is Kinaxis helping companies successfully transform their supply chain? 

Kinaxis is built on the fundamental premise of enabling enterprises to be agile. Our technology can work with your current processes and adapt with them as your business moves towards digital transformation. Our solutions remove the time and latency between different processes and decision points, enabling people to collaborate on an always-on, synchronised supply chain. Decision-makers can see problems as they start to arise, not after.

We can even look into the future, with the help of machine learning and artificial intelligence, making smarter decisions today based on our predictions for the supply chain. 

The pace of change is not going to slow. More and more data sources are becoming available, and the power of machine learning allows us to ingest those data sources in newer, smarter ways, with far greater opportunities for insights we can act upon. If companies incorporate data in a way that accelerates their supply chain transformation and enables faster, more intelligent decision-making, they will be in a far better position to compete amid new disruptive forces. 

Benefits of digitalising the supply chain are increasingly clear: improved data, better connected supply chains, more efficient production and lower working capital to name a few. 

“It also enhances visibility across the supply chain, detecting and predicting risks to internal processes, such as a decline in factory productivity, or external risks, such as adverse weather conditions, which may result in significant slowdowns from suppliers,” says Ian Washington, supply chain and network operations leader at Deloitte. 

“Additionally, it improves the flexibility of processes, for instance by allowing businesses to easily switch their focus to manufacturing specific limited-edition products for a short period, before moving back to their usual tasks.”

However, it is not always easy to convince the board about the need for change. The immediate benefits of going digital might be more obvious in other parts of the company. 

“Some board members might simply see investment as a needless cost as they don’t really understand the benefits digitalising the process will bring to the business,” says Daniel Ball, business development director at procurement software provider Wax Digital.

Supply chain executives need to highlight that the supply chain is a digital opportunity, not just a cost

As the fourth industrial revolution unfolds, it is becoming increasingly important that organisations embrace digital transformation to keep up with the pace of change and remain competitive. Supply chain executives need to highlight that the supply chain is a digital opportunity, not just a cost.

Investing in technology enables businesses to manage the supply chain more efficiently, in order to better to satisfy customer needs, gain a competitive edge and ultimately increase revenue.

To ensure they secure the board’s backing for digitalising the supply chain, executives need to articulate how the new system would operate and establish a clear financial case for its rollout, Mr Washington adds. Leaders from across the organisation need to be involved because digitalising the supply chain will affect different teams.

Emphasising the financial benefits of technology in supply chain processes is an obvious way to make the case for digital. A survey by Wax Digital found that 61 per cent of respondents saved money by using e-procurement software, while 57 per cent said they had reduced their risks. 

But most compellingly, 82 per cent reported that for every £10 invested in digitalising their supplier sourcing process, they saved at least £38. “Digitalising the supply chain also helps the procurement team achieve cost-savings by identifying more cost-effective suppliers through tendering activities or e-auction events,” Mr Ball adds.

However, it is important not to gloss over the risks a switch to digital can introduce, from skills shortages, to incompatibility with legacy technology, to cyberattacks. There will also be additional regulatory requirements such as General Data Protection Regulation and the potential reputational risk if clients’ personal data is stolen. Effective data management is essential to successful supply chain management. 

When communicating potential risks to the board, think about the benefits and risks through their eyes, considering the board’s priorities and pain points. 

But ultimately, the greatest risk is in not digitalising supply chains and being left behind. “Resistance is futile and boards must take the opportunity to seize the initiative and lead change,” says Patrick Barlow, manager at Logistics Reply. “The risk lies in staying with old, outdated systems and methods.”

1. Cultivating the right talent

For a digital business model to succeed there must be a balance between new technical talent and traditional skills. The new tech-savvy generation are essential in this move towards digitalisation, but the wisdom of those who have shaped the industry is also fundamental. Peter Louden, business solutions director at Clipper Logistics, emphasises that upskilling is key. “If organisations don’t have the proper skilled human resources to make the best possible use of this technology, then the technology runs the risk of not turning into an asset and instead becoming a liability.”

2. Business-wide approach 

Marcus Würker, chief information officer, UK and Ireland, at DHL Supply Chain, says that although there is nothing wrong with one area of the business leading while the other follows, it is important the entire company adapts. He recommends this over an isolated digitalisation department. “The whole organisation needs to be involved with any system changes and be fully briefed on when any changeovers may happen to minimise disruption and output,” says Mr Würker. From buyer to supplier, sales to commercial, all elements of the supply chain must be aligned. 

3. Customer’s digital destination

The customer, and what their own customers are demanding, must not be forgotten when implementing a digital business model. “This gives you remarkable insight into how your own company needs to respond to change, both in depth and pace,” says Nick Eades, chief marketing officer at Wincanton.

4. Where is new tech needed?

While a business-wide approach is key to a successful digital strategy, to avoid unnecessary disruption, businesses should identify where digitalisation can have the greatest impact, and begin with those areas, giving thought to which areas should be the initial priorities and at what stages the rest should follow. “Look at where there is a real business need for digital disruption and which business processes could genuinely be improved, rather than taking a scatter-gun approach,” says Rob Wright, executive director at SCALA Consulting. “Escalating labour issues have led to automated handling and robotics becoming increasingly popular in warehouses, an example of where digitalisation can assist certain processes in a relatively low-risk way, without causing major disruption.”

5. Balancing the supply chain 

There must be a balance between new technology, traditional systems and strategic solutions, including breaking down silos and empowering digital managers to make bold decisions. 

While the technology should always be a focus area, businesses must not overlook the need for top-down support throughout the organisation. This will better ensure the smooth implementation of a supply chain digitalisation project.  

Smart tags allow retailers to track products from source to shelf, drones fly through warehouses carrying out stocktakes and robots assist logistics companies in ensuring deliveries are shipped on schedule. 

This is just a glimpse of how future supply chains will operate. As the global economy becomes more connected, there will be an increased demand for always-on supply chains that are smarter and can provide real-time insights. According to Grand View Research, the global supply chain analytics market will be worth $9.88 billion by 2025. 

You can have the right innovations in place, generating the right data, but you also need the right people working with the data, making sense of it

For suppliers, logistics and vendors, adopting technologies will increase visibility, improve efficiency and risk prediction, and create accountability. But how should stakeholders prepare for supply chain transformation?

Without doubt one of the technologies set to have the biggest impact will be blockchain. 

There is always a risk that any technology can be overhyped. It is therefore essential to have discussions up and down the organisation to ensure that a technology such as blockchain aligns with businesses objectives before making an investment. 

Right skills for the right data

Convergence of blockchain with analytics, big data and artificial intelligence (AI) is opening up supply chains. Investing and piloting new technologies is only part of the solution, though. What’s required is a recruitment drive for new skills. 

“You can have the right innovations in place, generating the right data, but you also need the right people working with the data, making sense of it,” argues Kirsty Braines, managing associate at business planning and supply chain management group Oliver Wight.

Ms Braines says it’s worth hiring specialists who have first-hand experience and knowledge of integrating AI and machine-learning capabilities into supply chains. Upskilling existing employees so they’re more tech and IT-savvy should also be considered. 

Leading by example, major retailers including Asda and Tesco have been recruiting data scientists and analysts for at least the last five years. These roles have been created to improve supply chain relationships between the retailers, customers and suppliers, and to find solutions to forecasting, logistics and pricing problems. 

While a small team of dedicated analysts and data scientists can help to create value from technology investments and pilot projects, it should also help to establish a data-driven culture across a company as a whole, ensuring those at board level see the benefits of investing in AI and other technologies.

Smart solutions to supply problems

Ask any large manufacturer what their biggest supply chain challenges are and most would include a lack of traceability of parts supplied by third parties. 

The problem is made even more complex given the global nature of supply chains. Companies in industries such as aerospace and automotive need to keep pace with changing regulations to ensure their products and services are compliant. 

Artificial intelligence and analytics have the power to take the problem off the hands of manufacturers. For example, when assets in warehouses and factories are equipped with smart sensors, manufacturers can monitor them in real time and carry out maintenance before faults occur. 

Analysts and data scientists can use the insight gleaned from sensors to inform those responsible for making purchasing decisions, who can then adjust procurement strategies accordingly. If a manufacturer can predict possible faults in an asset, they can ensure that spare parts are in stock to prevent operational downtimes, production losses and delays to shipments downstream. 

By inputting the right data from your systems, a digital twin can be created. Underpinned by a combination of the internet of things, cloud computing, and virtual and augmented reality, a digital twin provides a virtual representations of physical assets to help optimise operations. The digital twin market is set to be worth $26.1 billion by 2025, Grand View Research says. 

According to DHL, the ultimate digital twin would be one that models an entire supply chain network, from monitoring containers at ports, to managing spare parts in warehouses, to shortening vendor delivery times.