In a Digitally Integrated Value Chain, Data is Power and Competitive Advantage
To achieve sustained competitive advantage, extending beyond enterprise boundaries is essential.
To achieve sustained competitive advantage, extending beyond enterprise boundaries is essential.
Companies that have the skills and knowledge to have a tighter relationship with the end customer will emerge stronger, more resilient, and more digital
Much has been written about the impact of the COVID-19 pandemic on supply chains and the predicted long-term effect on the global economy. What no one expected to emerge from this disruptive period, however, is clarity into the key attributes that will define success in a post-pandemic global economy.
We have seen many enterprises accomplish more in the last year than they planned, in many cases, to accomplish in the next decade. The digital transformation of businesses, by any measure, has accelerated at speeds previously not thought possible, and while capital investment was tightly controlled, and employees were working remotely. Yes, much was done by government to help keep the economy afloat, and some sectors were more devastated than others, still overall private enterprise accelerated their digital transformation of core functions like supply chain and rethought their operating models. The digital transformation of the supply chain, whether embedding sensors in products and networks, using Artificial Intelligence/Machine Learning (AI/ML) tools, deploying a new generation of robotics, or applying data analytics, is opening new opportunities.
It is our view, backed by our research, that enterprises will emerge post-pandemic stronger, more resilient, and more digital, with a clear focus on what the Digital Supply Chain Institute (DSCI) identifies as, the New Customer. The “New Customer,” whether B2B or B2C, has a fundamentally different way to make purchasing decisions based on criteria that include near-instant delivery, bespoke products and services, dynamic pricing, and among other factors, a delightful user experience.
You can read the complete article here.
To improve your odds of success, here are some performance outcomes you should be targeting before you plan your next digital transformation project.
In talks with our Digital Supply Chain Institute member companies, we’ve found that nearly all of them are engaged in digital transformation projects. Some are large-scale, enterprise-level endeavors, and others are more modest efforts focused on fixing immediate problems. One thing that is frequently missing in the planning and prioritization of these projects is a clear set of targeted performance improvement outcomes. It’s easy to be drawn into simply creating a short-term workaround or become lost in building large-scale infrastructure while overlooking the critical improvements and outcomes that a digital supply chain offers.
One of the most mission-critical performance metrics for supply chain leaders has always been lowering costs, especially inventory holding costs. Much of supply chain research has focused on minimizing inventory cost while at the same time being able to quickly satisfy customer demand. Digital supply chain projects promise to reduce the inevitable trade-offs between controlling costs and delighting customers.
To make sure that your next supply chain transformation project makes the most of what digital initiatives offer, make a shortlist of expected performance outcomes. Here are a few of the questions you should ask before green-lighting a project proposal:
Does the project promise a performance shift to reduce trade-offs between cost and customer satisfaction?
Finding a digital solution to reduce costs should not be a one-dimensional exercise. Projects should at a minimum deliver the same level of customer satisfaction they did before any changes are implemented. If your actions cut costs but might lower customer satisfaction, rethink your approach. Digital transformation promises to unlock the ability to reduce inevitable tradeoffs by delivering new enhanced processes and business models. Make this a consistent goal of your initiatives and you will have a good chance of realizing better performance outcomes. A more accurate demand forecast, enabled using unstructured social media data, for example, may allow for ripple effects of cost savings, while at the same time minimizing out-of-stock situations, even improving customer satisfaction.
Will your project enable new business models that create growth through new revenues that were not accessible under the traditional model?
A digital supply chain project that aims to simply digitize an existing process or business model will likely miss the mark in performance improvements. Instead, take some time to review the business model itself before you implement technology solutions. By investing in digital data that uncovers more insights into customer preferences and needs, you might be able to adapt your business model to new segments. This way, the supply chain function may be able to access and drive growth into customer segments that might not have been available under the more traditional business models.
Will your digital transformation sustain competitive advantage through ‘hard to replicate’ integrated capabilities?
Before taking on a digital supply chain transformation project ask yourself if it takes advantage of opportunities to integrate processes and information across your enterprise. To sustain an advantage over competitors, your transformation initiatives should be hard to replicate by others. Integration across functions in organizations is often difficult, but this is precisely why you should aim to do it. It means you can build a capability your competitor lacks, giving you a chance to outperform them. Convincing your sales and marketing departments to share consumer insights with managers in the supply chain might give you a unique ability to design a strategy that can meet customer needs in entirely new ways.
By addressing these questions before you hit the go button on your next digital supply chain project, you might be able to get beyond simple incremental performance. Instead, you may realize the true performance promise of what digital supply chain transformation offers.
The Colonial Pipeline, SolarWinds, and Microsoft Exchange cyber breaches are the latest vivid reminders that cybersecurity is a core supply chain issue and a threat that is growing in frequency and impact. Colonial Pipeline epitomizes supply chains in the truest sense, providing 45 percent of the fuel to the East Coast of the U.S. SolarWinds had its software development supply chain compromised, affecting an update to 18,000 users of its network management software, including several key U.S. government agencies. Meanwhile, the Microsoft Exchange attack affected at least 30,000 users.
These are perfect examples of why supply chain cybersecurity is so critical. Hackers are systematically disrupting organizations directly and using indirect supply chain companies as a gateway to access high-value targets.
All this is taking place at a time of workplace disruption driven by the COVID-19 pandemic. Companies are accelerating their digital transformation to build greater visibility, agility, and resilience into how they go to market and meet the needs of their customers. More critical data is being shared every day in far-reaching global supply chains. All companies today are connected. No company is, nor can be, an information castle surrounded by an impenetrable moat.
SolarWinds is an ugly reminder that if the companies in your ecosystem are vulnerable, you are vulnerable too. From this moment on, you should never again think about cybersecurity without considering third-party risk. And conversely, the companies in your supply chain, even small ones, should never think they’re safe because you “don’t have anything hackers would want.”
In today’s inter-connected increasingly digital supply chain world, every organization of any size is a potential target. Hackers will try to go through you to get to another company and they will try to go through your customers or suppliers to get to you. The whole situation is made much more complicated because of new hybrid business models. Your employees may be rotating from home to office, using different devices and connections. Although you may feel you have the situation under control, what about your suppliers, partners, and other third parties in your supply chain?
For large companies, here are some basic steps you should immediately take with your supply chain stakeholders to help them protect themselves and ultimately protect you.
First and foremost, you should ensure that you and every company in your supply chain has an incident response plan that includes regularly scheduled backups of critical data. As the Colonial incident highlights, knowing what to do during and after an event—and having essential data backed up in the case of a ransomware attack—could mean the difference between a major blow to your business and a mild annoyance.
To help implement this and other actions, the companies in your supply chain should have a designated, trained Cyber Leader. A person that is responsible for building a culture of cybersecurity by focusing on human behavior. They don’t need to be technology experts. They need to be able to communicate how important it is for everyone to develop good cyber habits. They need to make sure that the company puts some simple policies in place around four core issues:
These basic things and other recommendations developed jointly by the Digital Supply Chain Institute (DSCI) and the Cyber Readiness Institute (CRI) can help you begin fortifying your security and that of your supply chain by building an operating culture of cybersecurity. Start today by raising awareness among your third parties. Push them to develop good cyber habits. It is critical to your company and every company you touch. By working together, we can improve cybersecurity for all.
At the Digital Supply Chain Institute (DSCI), we have been conducting a series of discussions with supply chain leaders as part of our Women Leading Digital Supply Chain Transformations initiative. On January 27, we were fortunate to have Julie Hamilton, chief commercial officer at Diageo, the global beverage company, join Sugathri Kolluru, DSCI manager, emerging technologies, for a discussion of the leadership lessons from the pandemic. Here are some snippets from the conversation edited for brevity and clarity. You can watch the entire 30-minute program here.
Break Down the Silos!
One of the key things we’re finding is that we have to break down the silos. Working and being successful today requires the ability to work cross-functionally. The pandemic forced us to collapse those barriers and be much more integrated. You really see the supply chain becoming much more integrated into the day-to-day of the business.
More women find a career in supply chain
Supply chains have moved from being production focused and shipment focused to being a much more strategic and integral piece of the business. That is helping recruit women into supply chain. There’s more science and technology and collaboration and customer focus that goes into it. That’s helping broaden the appeal of the traditional supply chain career to people. More women are choosing to make supply chain a career and a great opportunity for them to learn and grow
COVID-19 has forced digitization
We’ve embarked on a huge digitization of our supply chain. The pandemic has accelerated the need to do it now. We don’t have the luxury of doing this over the next three to five years. We can already see the impact. Everybody sees the same version of the truth. If you’re in sales and you’re waiting to have a discussion with your customers about where your product is and your inventory, you’re seeing the same thing as the supply chain–who sent it out and who’s ordering, as well as our finance team so that they know where those investments and costs are.
Supply chains have a seat at the table
Supply chain now has seats at the table with our customer discussions. We have supply chain sitting in the meeting so that the salesperson, supply chain, and the customer can understand where inventory is and what’s coming in.
Fit for purpose
We said, ‘Let’s not waste this crisis’ and look at how do we leapfrog and set up a fit for purpose supply chain and a route to the consumer that may look very different from today. We’re putting the supply chain much more front and center than it used to be.
Watch video here.
I bet you never imagined you would see the video game Fortnite mentioned in the same sentence as the words supply chain leadership. But the massive multiplayer videogame that has grown to over 350 million players in only a few years, holds the key to a new approach to the classic change leadership model that no longer produces the results that we want and need? The truth is that the way you play Fortnite is a good model for how you should make change happen. Don’t worry, even if the last video game you played was Pac-Man or Galaga you will find that Fortnite is a great example of Change Leadership in the Digital Era. Follow this new approach to change and you will be able to make breakthrough improvements in your supply chain around the world. But first, let me remind you what we have been doing….
Change is not an email campaign
The classic change leadership approach starts with top management, and select senior staff, crafting a brilliant supply chain strategy. The strategy is handed off to the communications experts and summarized with a catchy name and logo. The top people hold a Town Hall for employees and send out an email to a massive distribution list. The change message is based on a “burning platform” and cascaded down the hierarchy. All too often the results are less than spectacular. Change does not really happen where the rubber meets the road. In fact, the basic work process of most employees does not change, work attitudes and culture do not change, and our customers and suppliers fail to notice a significant improvement. Inventory stays flat, costs remain within budget and we drift along until the next top management missile is launched. Different versions of this story play out for any new initiative such as launching a new risk management application or supplier visibility tool. People become cynical and go along to get along.
We don’t listen to all the lies as well as we used to
The world has changed, and our customer has changed. (read about the New Customer). Technology has advanced rapidly enabling things that we could not even dream about 5 years ago. More than half of the population on the planet has access to information that they have never had in the past. The old top-down creation of a plan, top-down directives, and cascading communication does not work in a 140-character world where any of dozens of social media apps can be the agent that derails your strategy. Besides, people no longer believe in the stories that they hear from the leaders of government or organizations. The reality is that an organization that relies on a comprehensive strategy and massive communications campaign will not succeed. The world changes too fast every day.
Ready up!
Look at how change should happen based on how your 10-year-old plays Fortnite. Fortnite grew to 350 million users without a Super Bowl ad. Why? Because the principles of Fortnite are based on how people live, work, and think today. Fortnite enables you to accomplish exceptionally hard missions, in an extremely competitive environment…. and have fun doing so. It turns out that people like working hard if they have a clear mission and an appropriate way of accomplishing it.
Here are a few of the Fortnite principles (that are also Supply Chain leadership principles):
Leadership is dynamic and based on skill. The Leader forms a squad and gets them to show up on the Battle Bus. After that, leadership shifts as the game progresses. One person may be the best shooter. Another teammate might be the best builder and still, another might be excellent at spotting problems and opportunities. Rigid hierarchies are too slow and too ineffective to keep up with the current pace of change. Supply chain leaders should adopt this flexible approach to leadership. New Leaders should be able to develop an agile game plan for the supply chain and willing to dynamically adjust it every day, if need be, to keep the pace of change.
Here is what the CEO of a famous global video game development company says –
“Just like in Fortnite gameplay, people can win in their business or role when they have a dynamic peer-to-peer frequent communication which helps identify organic leadership to drive change.” – Alexander L. Fernandez, CEO, Streamline Media Group, Inc
Does the Fortnite way of managing and keeping the changing pace sound good to you? Please let me know… or ask your 10-year-old for help!
At the Digital Supply Chain Institute, we have done a lot of work helping companies do a “Frontside Flip” and focus their supply chains on the “New Customer.” Frontside Flip is a term that snowboarders (and skateboarders) use to describe a cool stunt that has the front side of the board facing the snow. It’s an apt analogy for business because you can’t win a snowboard competition without a Frontside Flip and you can’t win in the marketplace unless your supply chain faces the customer in a way that drives market share and revenue. While this is still true, there may be a better metaphor than snowboarding given the tremendous stress that supply chains around the world are currently experiencing.
Surfing is a sport that involves riding waves. When you have a large set of waves surfers say that the surf is “going off.” It appears that “Wave 2” of the COVID-19 pandemic might be even more disruptive than Wave 1. Surfers would say: “Wave 2 is going off.” Companies will need to do a much better job responding to the next wave. Wave 1 resulted in product shortages, wrong demand plans, and cash flow issues. And infection rates are increasing in many countries even before we enter the more dangerous flu season of late Fall and Winter. We simply cannot afford to be unprepared for a Wave 2 of COVID-19!
Surfers know that they can use the power of the wave to ride. Here are the things that good surfers and good business people do:
Executing the four items mentioned above will help your customers and your company. Companies that take bold action now will succeed. Those that do not will wipe-out. And make sure you keep your supply chain focused on creating super high customer value!
COVID-19 pandemic has stress-tested the supply chains and Germany is no exception. This article highlights three industries in Germany ( Pharmaceutical, Automotive & Chemicals) that are hit by the pandemic, recommends potential actions and insights business leaders, can take to increase resilience, and navigate through these challenging times.
Download report here.
Covid-19 is having a devastating impact on world health. It is also hammering the world economy as demand is down, supplies have evaporated, and cash flow has become a challenge for many companies. Companies around the world are struggling to keep their supply chain viable, their financials healthy, and their customers happy. None of these things are easy, but executed correctly can create new industry leadership. Below are some solutions for supply chain leaders to consider.
Suppliers are hurting
Problem: Suppliers for many industries are scattered across the globe. Many of them are experiencing an unprecedented decline in demand. A significant percentage of these companies will not make it, despite government aid.
Solution: Decide which suppliers are crucial and do whatever is possible to keep them afloat. Sometimes this means ordering more from the supplier (at a lower price), even if your company may have to carry excess inventory. Often it means deciding which suppliers are crucial and channeling business to them at the expense of other less-critical suppliers. Sometimes it means using non-interest loans or other measures to help keep a supplier viable.
Demand is at catastrophically low (and sometimes super high) levels
Problem: With many of the world’s economies facing demand that is catastrophically lower than they have ever experienced, change is afoot. Unless you’re in the video conferencing business, few companies have unprecedented high demand and if they are fortunate to be in that position, they are unsure of how long that level of demand will last. Demand is uncertain and ranges from almost non-existent (airlines), to greatly impeded (footwear), to high but uncertain (flour).
Solution: Get fanatical about understanding true demand and encouraging new demand, where possible. This probably means upgrading your ability to collect and use new types and sources of data. Consolidate SKUs so that you can make and deliver something important. Dynamically price what you sell.
Cash flow is TIGHT
Problem: With demand off and costs high companies are having trouble making budgets or even having sufficient cash flow.
Solution: Reduce labor costs, seek government aid, trim extra expenses, BUT make the right investments in the Digital Supply Chain and your future workforce. It is important to invest in things that will help customers and create a new level of digital efficiency. It is also important that all costs be trimmed to a level that allows your company to deliver whatever it does without facing credit issues.
Customers are frustrated
Problem: Some customers can’t get what they want, and then they can’t assemble and sell what their customers need. Some customers are unhappy with their future “agreement to buy” contracts. They just don’t need the volume anymore.
Solution: Take a deep dive into the New Customer requirements. Most companies will benefit by taking a fresh look at their customer base and deciding what new factors are important. The market has changed in some fundamental ways! Decide how your Digital Supply Chain strategy will change. Make sure that your supply chain creates a better way for customers to buy. Think about new business models that give the customer what they need.
Employees and shareholders are worried
Problem: It is no surprise that employees are worried about job security. It is also not surprising that shareholders are worried about preserving and growing the value of their investments.
Solution: Recognize high-performing front-line employees for their contributions, even to the extent of increasing their pay. Give careful thought to the type of skills that are needed in the future and make sure to retain the people that fit that talent profile. One important skill area that needs attention is data science/analytics. These skills are often hard to find and may require additional compensation to attract and retain employees. It is also very important to allow people with specialized data skills to work closely with line management. That way the manager gets the advantage of the numbers and the numbers people get to learn the business!
Companies are taking action, and it is helping!
Problem: Organization silos always create issues, and in a pandemic, they are extremely problematic. You must find a way to work across silos to make the customer happy.
Solution: Setting up a war room is a good short-term way to handle this. Cross-functional teams that are motivated to make the customer happy and improve financials are being deployed at many companies. The most effective companies find a way to work across organizational silos. This means that they have supply chain, marketing, finance, and HR working together on the same issues. The focus of these cross-silo teams is on improving service to the customer, making financial plans work, and out-performing the competition.
Some companies are well on their way to changing how they manage their supply chains to keep customers happy and improve the balance sheet. The companies that can successfully execute new digital supply chain strategies will be the ones that emerge as an industry leader.
COVID-19 pandemic has taken a huge hit on supply chains and India is no exception. This article highlights three industries in India that are heavily hit by the pandemic, proposes potential actions Indian leaders can take to increase resilience, and provide insights that can help businesses through this challenging period.
Download report here.