Embracing Supply Chain Transformation: Are You Ready?
By Simon Ellis, Program Vice President, IDC
Today’s “good enough” performance will not suffice for tomorrow – companies that rest on their laurels will quickly find themselves surpassed by those that do not.
Let’s look at digital transformation (DX) and the supply chain. DX in the supply chain requires more than incremental technology investments: it requires an exponential shift. Organizations need to look beyond what competitors currently do to focus on delivering differentiated supply chain processes and capabilities for next-generation efficiency, better serving their markets as well as to best position themselves to embrace external disruption. They must reimagine and modernize processes to enable efficient and effective operations within an increasingly more complex and demanding supply chain and ensure technology-enabled global visibility - knowing what is where, when, and where it’s going.
Indeed, supply chain modernization with digital technologies allows previously aspirational supply chain goals to become practical ones. Companies can now innovate by using tools such as visibility, or real-time response and location intelligence to meet new service-level expectations. Digital also lets companies differentiate/personalize the customer/consumer experience, drive next-level operational efficiency and effectiveness, explore new approaches to enable new business models, and simulate network modifications to work around environmental limitations.
The digitally-enabled thinking supply chain is one that successfully enables visibility and transparency, adopts comprehensive analytics, and employs cognitive technologies as integrated capabilities that unlock business value. These modern supply chains use location intelligence from supplier to plant to distributor to buyer, tracking and alerting on disruptions in real time, and product tracing from source to end user – thus delivering predictive supply chain capabilities based on spatial data. Indeed, these supply chains will have a step up on competitors that do not adopt similar digital technologies.
The digitally-enabled, thinking supply chain is already underway for some companies, yet it remains in the distant future for others. At IDC, we'd argue that it should be an urgent opportunity for all. We are already seeing companies affected by digitally-enabled competitors. A recent IDC survey found that more than half of the companies surveyed felt that they had already been disrupted or would be within 12 months.
If we accept that supply chain transformation is critical, what holds companies back? The answer is one that is both varied and nuanced. In some cases, companies are unable to articulate the necessary strategy or feel that the benefits of a supply chain transformation initiative are elusive. In the IDC supply chain survey, it is interesting to note that the number of companies that cited large transformational efforts as the primary trigger for technology investment has increased by 20 percentage points in the last two years. Clearly, there has been some shift in companies' ability to justify transformation based on their strategy.
In other cases, supply chain leaders are kept from focusing on transformation by the cost, change management, or lack of strategic vision. Regardless of the reason, it is critical that companies focus on the supply chain capabilities that both support and enable strategic direction while being aware of the escalating risks of inaction. And solutions such as location intelligence are one of those technologies that can help organizations bridge the gap from traditional “good enough” operations to innovative global supply networks.