As supply chain leaders continue to build resilient frameworks to combat disruptions, they know they can’t mitigate risk without enhancing their operations through data, analytics and technology. Still, many also know a digital transformation is easier said than done. They are often wary of repeating the mistakes of others, including large companies like GE. In 2015, GE formed a separate entity, GE Digital, to centralize digital initiatives within the company. In the following months and years, however, it became apparent a number of foundational problems—including the lack of a comprehensive strategy, an inadequate change management plan and a fixation on short-term results—would make attaining success difficult for GE Digital.
Thankfully, there are straightforward tactics supply chain leaders can take to avoid similar failures. While gold standards in supply chain digitization are constantly evolving, for many manufacturers, even incremental improvements can make a significant difference. One strategy to move forward is to use a plan-source-make-deliver framework (see Figure 1) to determine which actions you could take to build a more resilient supply chain. Following this strategy can also make it easier to both identify quick wins and long-term roadmap activities.
What do companies that successfully digitally transform their supply chains have in common? We’ve noticed many of them share some or all of the characteristics below. These companies:
- Ensure leadership alignment on the purpose and drivers of transformation. Is the goal to drive down production costs? Realize supply chain and manufacturing efficiencies? Support a corporate sustainability initiative? Or make operations more resilient? It’s critical for leadership to be on the same page.
- Enable a robust framework for the selection and evaluation of digital projects and to understand how those projects are contributing value toward business objectives. Without a proper mechanism in place, organizations will struggle with competing priorities and won’t be aware of how a project is performing.
- Invest in core capabilities that provide a foundation for advanced technology and analytics. Enterprise resource planning, manufacturing execution systems and system integration will set the stage for more advanced use cases like autonomous production and remote asset monitoring.
- Invest in data standardization capabilities that enhance the value of other initiatives. Investment in data alone may not be glamorous or the biggest value driver, but technology is only as good as the data it’s using.
- Identify and develop applications that can provide immediate value and turn digital transformation into a self-funded enterprise. Because digital transformations are an ongoing process, we recommend engaging employees by identifying short- and long-term high-value applications. These can be implemented to allow the team to quickly see value, while also encouraging them to look forward to long-term success.
- Prioritize digital talent across the organization to encourage team members to drive and adopt change. Supply chains are complicated and the expansive, global nature of today’s networks makes it more difficult to use a one-size-fits-all solution.
- Develop a robust change management process that can support both small- and large-scale operational changes. Change management is critical to prepare team members for a digital transformation and it should include executive support, appropriate communications plans, adequate training and post-change support.
A strong digital foundation also offers companies the opportunity to take their operations to new heights through evolving technologies, like digital twins, which alone can lead to 10-20% reductions in supply chain expenses. Other technologies that digitally resilient supply chains can pursue include dark factories, which can help increase productivity and decrease errors. Dark factories can also help supply chains operate with far fewer workers without compromising quality.
Blockchain is another technology supply chains are pursuing, with the World Economic Forum estimating that it can help logistics operations cut their documentation costs by 85%. Blockchain can also help reduce trade barriers and the risk of loss, theft and damage to bills of lading, while making it easier to handle drastic increases in customer spending.
While GE showed that digital transformation can be difficult, it is worth the effort. Procter & Gamble (P&G) underwent a large supply chain transformation, implementing AI-enabled planning software and scenario planning capabilities. In 2017, in the days before Hurricane Irma made landfall, P&G was able to see which plants, suppliers and distribution centers would be hardest hit. Their planning tools allowed them to understand which SKUs would run out and when, while repositioning inventory to mitigate the hurricane’s impact. Ultimately, P&G was able to keep continuity in its supply chain and deliver much needed material to all its customers.
It’s possible that digital transformation feels like a fantasy for your supply chain, but as we’ve established, even small changes can make a difference. As we look ahead, it will no longer be a competitive advantage to digitize your supply chain—it will instead be an operational necessity. No matter the length of your first step, the time to act is now.