With limited budgets at their disposal, and CEOs demanding to focus on cost optimisation while also improving resilience, chief supply chain officer (CSCO) investments must be split in-between capabilities of different maturity, according to Gartner.
Gartner surveyed 199 CEOs and senior business executives in supply-chain-intensive industries in 2020 and found that 17% of respondents see cost optimisation as the top issue that CSCOs should focus on in the near future, followed by resilience.
“In supply chain, at any point in time there are hundreds of competing initiatives and potential investment opportunities. It’s the CSCO’s job to invest in supply chain capabilities that will align with what the CEO wants the CSCO to prioritise,” says Noha Tohamy, distinguished vice-president analyst with the Gartner Supply Chain practice.
“The Hype Cycle is a tool CSCOs can use to evaluate available options and decide how much to invest where. A nascent capability from the Innovation Trigger section should receive limited investments to run a pilot. Then there might be underperforming capabilities from the bottom of the Hype Cycle that warrant reevaluation.
“CSCOs need to scale the solid, mature capabilities that have demonstrated consistent return on investment,” Tohamy adds.
Hype Cycle for Supply Chain Strategy, 2021
Source: Gartner (October 2021)
Nascent Capability: Artificial Intelligence (AI)
AI is a transformational capability that will still take some time to reach maturity, and is at the Innovation Trigger stage of the Hype Cycle. It applies advanced analysis and logic-based techniques, including machine learning (ML), to interpret events, support and automate decisions, and take actions.
“Given its transformation benefits, supply chain organizations should actively seek to understand the potential of AI and invest in small-scale pilots. Before any big investment decisions, supply chain leaders must be clear about organizational readiness, data and talent availability, and the role of AI in supporting supply chain and business priorities,” Tohamy says.
Evolving Capability: Supply Chain Risk Management (SCRM)
SCRM aims to make businesses resilient to supply chain risks across the physical and digital ecosystem. A comprehensive approach to SCRM focuses on the ability to identify and mitigate risks across the extended network footprint. It is strengthened by technology used for risk identification and monitoring, holistic risk impact analysis and coordinated operational mitigation.
In response to COVID-19, risk management has become front and center as companies needed to sense and respond to supply disruptions and shifts in business models. However, organizations have found that existing risk capabilities have largely been ineffective, and it is at the stage of the Trough of Disillusionment. Despite a major stake in managing risk, there is no clear owner of the process across supply chain functions. “SCRM is a capability that many organizations have already invested in – but are now disillusioned as it didn’t fulfill expectations,” Tohamy adds.
CSCOs must re-examine their SCRM strategy and make targeted investments that – for example – help balance the need for resilience with the goal of efficiency when designing a network or that constrains decision-making inputs to improve the quality and speed of decisions in case of a disruption.
Mature Capability: Supply Chain Center of Excellence (SC CoE)
The SC CoE is a physical or virtual center of knowledge, concentrating on existing expertise and resources in a supply chain function, capability or process. CoEs operate adjacent to groups that execute core business functions. They find, design and implement changes to business processes, people or technologies. Gartner research indicates that almost 80% of supply chain organizations have one or more CoEs, indicating a high maturity, and it is at the stage of the Slope of Enlightenment.
“This is the stage where CSCOs can invest in scaling and expanding a capability. Right now, most SC CoEs are focused on IT systems design and technology enablement, but only a few on talent development or change management. This is the next step that will enable the full potential of this capability,” Tohamy concludes.