Forrester research has found that companies with high levels of digital maturity are four times more likely to achieve double-digit revenue growth.
To meet the challenges of a second wave of digital disruption, where technologies like mobile, cloud and analytics are converging with advancements in blockchain, AI, and IoT to drive new value, both B2B and B2C organisations need to transition from fragile supply chains to resilient supply networks.
A new report from Forrester shows CIOs how to engage new technologies to re-master supply chains to boost customer experience and long-term value from supply networks.
“The first wave of digital disruption enabled brands to sell directly to online consumers, and even allowed manufacturers to engage directly with industrial customers,” explains Forrester VP and principal analyst, George Lawrie in his report “Digitally Remaster Your Supply Chain”.
“But now we can use machines to help accelerate and scale response to fluctuations in demand and supply. Companies can share information within a network securely and privately, transforming traditionally brittle hierarchical supply chains.”
According to Lawrie, while the first wave of digital disruption gave us winners such as Amazon, despite the rapid diffusion of new economy offerings, only a few companies have seen all the benefits in terms of productivity, higher revenue or profitability. In fact, the limitation of legacy supply chain applications can frustrate companies in a host of ways.
Eroding economies of scale – today’s digital customers expect a high degree of choice. However with a traditional supply chain this reduces the scope for long production runs and bulk purchasing or transportation. What’s more, providing low-volume items to meet that choice requires more warehouse and transportation capacity than high-volume bestsellers.
Devouring capital – Organisations have to hold more assets because legacy supply chain applications lack the ability to match supply and demand at the same granularity as newer systems.
Damaging the customer experience – projecting historical trends, as is usual with legacy applications, exposes customers to supply disruption when events ranging from epidemics to hurricanes disrupt historical patterns of supply or demand.
Jeopardising growth prospects – Legacy supply chains struggle to onboard new suppliers and new products at the rate expected from customers, frustrating attempts to boost digital maturity.
Lawrie points out that legacy, vertical supply chains view supply and demand from the perspective of a single company, making them too rigid to react and respond to crisis. The report uses the analogy of trying to update an old black and white movie, stating that while digitally remastering an old classic requires sound and colour enhancement, remastering our supply chains will require more than simply digitising the legacy processes.
To the future: Creating a collaborative supply network
Lawrie believes CIOs should lead the effort to remaster digital supply chains by boosting their organisations’ event orientation and ability to collaborate.
In order to boost event orientation and deal with increased supply and demand volatility, Lawrie recommends CIOs should:
* Complement historic sales with predictive variables;
* Identify vendors and platforms to help continuously replan inventory and assets; and
* Build event pipelines, for example monitoring supplier and customer credit worthiness, natural disasters disrupting production, and transportation.
Lawrie also advises CIOs to be less obsessed by the minutiae of data around supply and demand and rather focus on probabilities in terms of business outcomes.
Three steps to remaster the digital supply chain
Focussing on the shift towards supply chain networks, the report takes a deep dive into how CIOs should be collaborating in order to solve the problem of escalating demand and supply variability. This includes exploiting network advantage and upgrading supplier onboarding capabilities. Looking at how CIOs can begin remastering their digital supply chain, Lawrie puts forward three steps.
First, he says CIOs should revisit all existing supply chain parameters embedded in their applications. They should also consider alternate vendor and alternate bill of material settings, as well as parameters that split procurement between vendors to reduce risk and dependency.
Second, Lawrie says CIOs should identify the leading indicators that signal a coming change in supply or demand. They should also bring on board a systems integrator or forecasting software specialist who can build demand models that can factor in econometric and historic indicators.
Finally, he says CIOs should re-evaluate supply chain control tower and network options and consider the options for joining multi-enterprise networks to boost overall supply chain resilience.
“Vertical supply chains lack transparency and resilience and have proved brittle in the face of Covid-19 disruption. Fast-growth companies invest in innovation and CIOs must establish a ‘fail fast’ culture that supports rapid experimentation and idea iteration,” Lawrie sums up.