“This is not a supply chain transformation; this is really a business transformation.”
This simple statement made by Shri Hariharan, Corporate Vice President, Industry Strategy at Blue Yonder, during a recent webcast, perfectly encapsulates the critical role of supply chains for business. In addition, the statement also underlines the paradigm shift in how people and companies think about supply chains today — it can no longer be considered just a back-office cost center but should be considered the powerful strategic differentiator it can be.
The webcast, hosted by Blue Yonder, Microsoft and Ernst and Young LLP, brought together industry leaders who are helping companies maximize in their potential and win in this tough environment:
- Shri Hariharan, Blue Yonder, Corporate Vice President, Industry Strategy
- Yury Gomez, Microsoft, Worldwide Executive Strategy Leader, Industry Solutions, Supply Chain & Life Sciences
- Regenia Sanders, EY, Consulting U.S. – Central Supply Chain and Operations Leader
The discussion, moderated by Dewayne Cotten, EY, Microsoft Alliance GTM Leader — Advanced Manufacturing and Mobility, outlines the three key considerations for strategizing and leading a digital supply chain transformation:
- Why do you need to think of transformation — what are the drivers?
- What are the strategies and technologies for supply chain transformations?
- How to ensure success of digital transformation programs?
Key Consideration No. 1 — Why do you need to think of transformation — what are the drivers?
The three industry leaders brought their unique perspective to the discussion, however there are a couple of clear themes that emerged when talking about the drivers for transformation:
- A non-resilient supply chain is the No. 1 enterprise risk: COVID-19 and the conflict in Ukraine have brought to the forefront the importance of supply chains. A recent article from McKinsey estimates that “supply chain disruptions cost the average organization 45% of one year’s profit over the course of a decade.” The three Vs of big data — volume, velocity and variety — can now be used to describe supply chain disruptions, and all three factors are going up. Disruptions impact every aspect of the business including brand equity, and managing disruption can no longer be a siloed function.
- The supply chain operating model of a cost optimized dark supply chain is not only no longer viable but is harmful to businesses: Over the last two decades, the focus of supply chain professionals has been to drive down costs in every aspect of the function. This has led to a supply chain that is optimized but extremely brittle. One of the key aspects of the cost optimization is the geographically dispersed global supply chain — but these are also characterized by lack of visibility and transparency, which in turn leads to a situation where companies aren’t even aware of the possibility of risk and disruption.
- The need to update and upgrade supply chains to stay competitive: Often-repeated and often-ignored — supply chains aren’t a cost center, but a source of competitive differentiation. To create a resilient and competitive supply chain, organizations need to evaluate investments in leading-edge technology [e.g., cloud, artificial intelligence (AI), machine learning (ML), internet of things (IoT)], enhancing visibility and transparency, embedding data in decision-making, and most importantly upskilling workers.
Key Consideration No. 2 — What are the strategies and technologies for supply chain transformation?
- Optimizing value chains vs. optimizing functions: There is a focus on optimizing individual functions within the organization (manufacturing, fulfillment, supply planning, etc.) with limited concern for how it impacts the overall supply chain — this approach has reached its ceiling in driving value. Today, organizations need to take a holistic approach and look to optimize end-to-end value chains including the multi-tier partner network at both ends of the supply chain.
One of the starting points should be to look at demand and supply planning holistically and end-to-end. There are continuous and significant changes in demand patterns but no drop in customer experience expectations and on the other end, there continues to be a barrage of new disruptions impacting raw material, components, labor and logistics — complicating the supply planning. Given the continuous volatility, a focus on matching demand and supply holistically can result in lower costs, better inventory allocation, higher fill rates and a better customer experience.
- Technology platform and ecosystem play: Given how the market is changing and will continue to change — the technology investments need to keep up with these changes to be able to support businesses. Companies must consider a cloud platform that not only reduces infrastructure costs but also provides the basis for future growth. A cloud platform like Blue Yonder’s Luminate Platform built on Microsoft Azure enables the following key capabilities:
- Democratization of data and collaboration: A cloud platform allows organizations to bring together data from multiple enterprise systems and allows for relevant access to users to drive analytics. Cloud platforms also provide the capability to ingest and logically augment enterprise data with third-party data, be it IoT data streams, partner or supplier data and market. By bringing together data and users on a single working environment, cloud technology platforms accelerate the ability to collaborate within and out of the organization. When everyone is looking at the single source of truth — it removes many practical and philosophical hurdles to collaboration.
- AI and ML: AI and ML capabilities can help supply chains in multiple ways —improving demand forecast accuracy, data management, predictions and alerts, and decision automation. AI and ML can help your employees focus on making important decisions faster while automating time-consuming activities like data collation and analysis.
- Security: Cloud platforms with their inherent architecture are well-suited for disaster recovery and business continuity. In 2021, there were 50% more cyber attack attempts on corporate networks globally compared with 2020. Most recently, the US Cybersecurity & Infrastructure Security Agency (CISA) has issued an unusual warning to businesses that says they should be prepared to defend against cyber attacks originating from Russia. When making investments into cloud platforms, security should a be key assessment parameter.
Key Consideration No. 3 — How to ensure success of digital transformation programs?
The panel highlighted “doing it alone” as one of the key reasons for failure of digital transformation initiatives. Today, many organizations have some in-house skills needed to undertake such projects — however such projects fail due to either lack of expertise, the desire to purpose-build everything from scratch, lack of time and commitments to regular work. Our expert panel provided tips to ensure success:
- Start with a current state assessment: This doesn’t need to be a large time-consuming exercise, as companies already know what their burning needs are. Regenia Sanders suggests that companies address some quick win areas and scale fast; her approach is to stabilize, optimize and transform.
- Understand how transformation projects fit in: It is critical to understand how transformation projects fit into the central organizational business strategy. Shri Hariharan states that new initiatives and new operating models need to be aligned with key organizational metrics driven by the central strategy to ensure that initiatives continue to deliver value over time.
- Think big, start small, be tactical: That’s the suggestion from Yury Gomez, along with identifying desired outcomes, setting up right KPIs and governance, going after quick wins, and ensuring that the team is well-informed and enabled.
- Move away from silos: These projects must consider inter and intra company transformation goals to be truly effective and they should consider the new realities of our work environment. Large transformation projects should be broken down into consumable chunks with value enhancement with every chunk.
- Bring a partner: Partners not only bring process and technology expertise but also bring their extensive experience and learnings from undertaking hundreds of digital transformation projects. Partners can help at every step of the process and confirm that investments are turned into value.
- Put people at the center: At the end (or the start), the success of transformational projects depends on the people whose life they are supposed to improve. Taking input from employees and actual users, ensuring proper enablement and training, and change management can make or break any investment.
In today’s world, supply chains are no longer just about the physical — they combine product flow, information flow and financial flow — and this requires a new paradigm of thinking. When considering digital supply chain transformations, leaders and organizations must understand why it is needed — what are the key drivers, what are the key components of digital transformation and how to succeed when undertaking such projects. When supply chains run effectively and efficiently — they deliver happiness, they deliver security and they keep the world moving forward.
To watch the complete webcast, click here.