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Transforming Supply Chain in a Digital World
By Sanjay Choubey, VP of IT, Johnson Controls [NYSE: JCI]
Seizing Digital Opportunities in Supply Chain:
We are aware of the impact of digital transformation across society in general and business in particular. I would like to define supply chain digital transformation as the redefinition of supply chain processes and data to fully leverage the innovations of digital technologies. Based on my experience, I suggest introducing digital transformation of supply chain within a business in the below mentioned areas:
• Supply Chain Business Processes (consider interconnected or end-to-end processes such as customer fulfillment experience, procurement, warehouse management, supply chain logistics operations, Inventory Planning etc.)
• Business Model and Approach (consider strategy for sales, operation, procurement, customer connect etc.)
• Tangible and Intangible assets (consider traditional assets and non-traditional assets like customers, vendors, contract/ agreements, Routes, prices etc.)
The above areas are quite far-reaching in their scope and may require substantial and sustained investment; hence it is prudent to be selective about the scope and order of digital transformation.
How to Start SCM Transformation?
In my experience, everyone understands the need for digital transformation and how it can add value to their organization, however the challenge lies in how and where to start. I am about to share my experience of how and where to begin a digital initiative in the hope that my lessons learned are useful to others.
My recommendation to senior leaders is to approach supply chain digital transformation by first defining the strategic objective, followed by the definition of a “living” roadmap and corresponding tactical plans with investment analysis. The emerging role of Chief Digital Officer can help to define a vision and fulfill most of the responsibilities; however, for those organizations which have not yet defined a dedicated role for digital transformation; it will be prudent to consider adding certain focused roles skilled to lead and perform these full-time responsibilities.
As a prerequisite to the creation of a digital roadmap, understanding the strategic IT architecture and associated business model and framework is essential. Additionally, analysis of process, people, alliances, IT infrastructure, governance, and assets needs to be done while creating strategy and roadmap. The analysis will help in establishing feasibility of the initiative and prioritization of limited resources through the lens of Risk vs. Rewards.
Due to the combined impact of limited resources and expectations to quickly justify “Return on Investment”, it is essential to identify “Business Value Accelerators” within supply chain processes. I have had great experience in the past in identifying Business Value Accelerators by using Component Based Modeling, where each component of the end-to-end business process is analyzed for its overall impact on the business.
Developing a digital supply chain strategy sooner rather than later will ensure that you stay ahead and not fall behind
Although definition of individual components will vary from industry to industry, examples of components in the supply chain processes could be indirect procurement, customer fulfillment using a particular channel, warehouse management or inventory planning processes. The below mentioned example explains how to consider Business Value Accelerator and components. Using technology as an enabler for Business Value Acceleration, digital transformation will take the desired shape for quicker Return on Investment.
Low Hanging Fruits in Digital Transformation:
As per my general experience, while comparing different business components within a process value chain; investments in supply chain most frequently yield the quickest results when compared to other process areas. For example, a popular topic for consideration could be transformation of end-to-end procurement cycles and inventory planning for cost reduction, transformation of customer experiences and enablement of customers for increased revenue.
We may also entertain the idea of an enhanced new business model, based on new digital capabilities, platforms, and channels. All these components help define the purpose of a “living” vision, always adapting to exploit and leverage rapidly evolving technologies. Once the areas of transformation are selected and aligned with both short and long term strategy, then tactical planning and execution should begin. These plans should continually be revisited in order to ensure optimization at different levels of the enterprise supply chain. As a next step, I would recommend developing a digital roadmap by considering “Total Cost of Ownership” (TCO) that impacts across people, processes, organization, and tools.
Mobility and Cloud Computing—Supply Chain Context:
As an example, there are several transformation approaches for process digitization within supply chain area using off-the-shelf applications such as CRM or SRM solutions. The newer approaches for the applications are now driving digital transformation using enterprise mobility within the cloud as a cost effective option. I have used several of these applications for supply chain in the areas of procurement, material handling/ warehousing, inventory planning and customer fulfillment with good success.
Now is the time when we should consider creating a mobile enterprise, as it helps to facilitate consistent customer and supplier experiences by providing options for interaction such as video, mobile access, and electronic exchanges. These also help in the overall collaborative planning of product and components, resulting in improved forecast and optimized inventory levels across the supply chain.
As a “Business Value Accelerator”, investing in mobility for business partners results in more collaborative and rewarding relationships with those partners. This also may yield data that can be analyzed for much greater insight about their behavior, which can in turn result in dramatic improvement in the approach to marketing of products and services. Investment and collaboration of the mobile enterprise on the customer-facing side offers greater returns.
Use of cloud based applications, storage, etc. has helped my teams to be more agile in responding to business requirements, with higher quality and continuous delivery capabilities for mobile applications. Key benefits include, but are not limited to easier access and improved ability to collaborate and manage data across different platforms. It also helped in more efficient usage of IT resources, often reducing skill gaps.
Based on my personal experience, integration of back-end transactions with mobility-supported—real-time analytics at the front-end becomes easier with cloud architectures as compared to on-premise solutions.
Stay Ahead and Not Fall Behind:
I would recommend to the CIO’s, who are planning for digital transformation, to prioritize supply chain for the faster and higher return on investment. Typically supply chain areas provide greater impact as well as visibility of the rewards of transformation. Identifying key Business Value Accelerators and creating associated strategies are the next necessary steps. Additionally, it is comparatively easier to measure improvements in the supply chain area than other areas, further clarifying and supporting the investment cycle. And, do not learn the hard way about the importance of ensuring robust Master Data Management processes and tools.
In closing, technology demands a digital transformation across all industries and all process areas. This demand is not going away, but will only accelerate. Developing a digital supply chain strategy sooner rather than later will ensure that you stay ahead and not fall behind.