The world has awakened to the critical importance of global supply chains. In 2022, business and IT leaders align supply chains with core lines of business, operational risks, and even customer experiences more than ever before. Supply chain digitization is accelerating as risk and operations experts prepare for future disruptions as a result.
Still, most companies are only beginning their supply chain digital transformation journey. The average level of supply chain digitization was only 43% in 2017, according to McKisney—the least advanced of five business areas measured in their study.
In order to evolve, companies across verticals must move on from traditional, “linear” approaches to supply chain strategy and adopt new digital infrastructure. New technologies will support the communications, data sharing, and logistics requirements of future supply chains, eliminating risk and improving both collaboration and performance that are now critical to supply chain ecosystems. Here we take a closer look at how leadership, digital tools, talent, and partnerships make this transition possible.
The State of Modern Supply Chains
Before the COVID-19 pandemic took hold, supply chains were all but invisible to most consumers. Even business leaders often thought of supply chain strategy “as wholly independent from business strategy, and risk management strategy as an altogether separate abstraction layer,” as Forrester describes.
But the connection between supply chains and business performance are now clear, where risks in the former introduce risks to the latter. “If the mechanisms, processes, and partners that power our value chain suddenly come to a grinding halt and we’re unable to deliver to our customers, then effectively, we have no business,” as Forrester describes. Digital transformation matters because the success of supply chain performance—like the success of all business functions—depends inordinately on IT functions.
The Role of IT Leadership
As a result, CIOs and other IT leaders must take part in strategic planning and execution of supply chain digital transformation. CIOs who think strategically both in terms of digital maturity and how IT aligns with core business initiatives can become strategic drivers and enact positive change—beyond technology adoption alone.
Specifically, CIOs can work with other C-Suite executives to boost business value through digital transformation, and align supply chain digital initiatives with others throughout the company. In fact, the supply chain management technology market grew by 8.9% in 2019, where “cloud revenue grew 2.5 times faster than the overall market,” Gartner Reports. IT leadership will play an essential role in risk management and operational reliability, where technology plays an increasing role in both capacities.
Four Focus Ares for Successful Supply Chain Digital Transformation
Advanced digital tools, next-generation skills, and dynamic connectivity are essential aspects of modern supply chain management. But not all companies can realize these requirements successfully. Here we explore how four factors contribute to successful digital transformation of modern supply chains.
Successful digital transformation of modern supply chains starts with a top-down approach from leadership. Traditional supply chain, risk management, and procurement leaders must collaborate with IT leaders to optimize supply chain management in the broader context of the company’s digital transformation efforts. Companies therefore need visionary thought leadership on both the business and IT sides of the organization.
Companies that involve IT leaders early on during the transformation process are more likely to unify decision making and ensure technology benefits supply chain and risk management operations. “Outstanding CIOs collaborate with their functional counterparts across the organization [and] focus on gaining visibility into these additional layers of the supply chain—to illuminate the tiers of a supply chain far beyond what a business normally sees,” as CIO Dive describes.
Innovation through Technology
Modern supply chains cannot function without powerful, connected digital tools, let alone evolve to build resilience against future disruptions. “Considering the vast range of variables that manufacturers and distributors are trying to synchronize, technology is indispensable to make supply chains as efficient as they can be,” Forbes describes.
Fortunately, there are myriad technologies available to IT and supply chain leaders that can support their strategic visions of an optimized, “future proofed” supply chain operation. Advanced analytics, Internet of Things (IoT) sensors, artificial intelligence (AI), and blockchain can all play powerful roles.
Applied cognitive technologies like AI, for example, can help mitigate the risks associated with industrywide disruptions through predictive forecasting and proactive recommendations. In one example, a cognitive technology helped a company avoid a revenue impact of $60 million or more thanks to its anticipation of late customer order shipments, Forrester reports. AI can “use sophisticated analytics to fulfill orders from the best locations, taking into account order urgency and landed cost elements such as duty or freight cost,” among other capabilities as well.
In addition to cognition, digital tools can boost supply chain management agility—enabling companies to adapt to changing conditions even as predictive analytics identifies them. Emerging low-code or no-code cloud-based supply chain management tools mean powerful digital capabilities are no longer exclusive to highly technical users, for example; business users can increasingly take sophisticated approaches to solve emerging problems on their own.
Optimizing Human Intelligence
Creating a culture of technological trust and agility means business and IT leaders must cultivate the right internal skills, or supplement those that are lacking through third-party resources. Leaders should align existing talent with new digital transformation initiatives through upskilling and reskilling, thereby getting the most from their existing employee relationships and talent investments. In doing so, those leaders are preparing internal teams for new technology and strategy adoption, incorporating them early in the transformation process.
Even so, it’s difficult to secure all the expertise companies need internally, let alone remain agile in terms of talent when new needs arise. Leaders must also consider how partnerships can help fill talent gaps within the organization, and provide flexibility in terms of access to talent when new challenges and requirements emerge.
Partnerships are a critical aspect of today’s digital business ecosystems, and the supply chain management space is no exception. “[These] digital supply chains… make it possible for companies to work with a broader array of partners and deliver products and services in a more focused way,” says Forbes. “And because digital tools enable smoother communication and collaboration, they allow companies to be more flexible and responsive.”
Indeed, it is intelligent digital tools like blockchain that will secure the flow of information and transactions; analytics and automation will connect partners to the same insights and drive data exchanges at rates that are unattainable through manual efforts. And as suggested, partnerships can provide supplementary skillsets that companies cannot achieve via their own internal means.
Conclusion: Optimizing Outcomes and Removing Risk
Business and IT leaders must acknowledge digital transformation not as a task but as a journey, where companies must “continue to deliver on [their] brand promise while striking the balance between optimizing efficiency and proper risk management,” as Forrester describes. This especially apples to supply chains, where global disruptions are rarely isolated to a single region or industry.
Fortunately, as supply chain partners strengthen their relationships, trust, communication, and collaboration through digital tools, they can continue improving operations and both minimizing and mitigating risk. It’s through these efforts that partner ecosystems can facilitate the more resilient, cost-effective supply chains of tomorrow.
Partner with Uvation for Your Supply Chain Digital Transformation
Uvation works with enterprise companies to optimize performance and minimize risk in supply chain management, leveraging the most sophisticated strategies and digital tools to help them realize lasting business value. Contact one of our supply chain experts today to learn more about our capabilities.