The change to supply chain 4.0 must be managed: are we doing it right?

By Ndabeni Bagosi

As companies embrace opportunities presented by the Fourth Industrial Revolution (Industry 4.0), many are moving towards digitalising their processes. The question is: are they doing it right?

"In supply chain management, digital means mind flow, data flow, information flow, knowledge flow, idea flow and business flow," said digital visionary and commentator on digital leadership, Pearl Zhu.

Are companies getting the business flow right by implementing digital solutions? Are their efforts synchronised as well as focused on enhancing customer value?

Evidence from many corporate initiatives is that although companies are implementing digital solutions, these solutions are implemented in silos: they are incoherent and not linked to the corporates' digital master plans. In some instances, the master plan, which is supposed to anchor digital strategies, does not even exist.

Despite this seemingly prevalent disconnect, many corporates have placed digitalisation and agility at the top of their agenda. But, why? What makes digitalisation so urgent? Possible reasons could be:
- Most business is conducted online
- Accurate information is required to make the correct decisions
- Bespoke services are key for customers
- Speed is key to enhancing customer value
- Greater supply chain agility can be introduced, which, in turn, is a catalyst to unleash value

Traditional supply chain vs. supply chain 4.0
While everybody acknowledges the inevitable impact of digital transformation in supply chain, it is worth comparing the traditional supply chain to supply chain 4.0.

In 2016, a PricewaterhouseCoopers (PwC) report highlighted a few key differences between the traditional supply chain model and the integrated supply chain 'ecosystem' that is 4.0 (depicted in the table):

Traditional_vs_Integrated_supply_500.jpg

However, even if the table is viewed as a task-list of changes required to leap-frog towards an integrated supply chain ecosystem, there are additional steps that organisations must take to ensure that the transformation is successful. These steps include:
- Have a clear digitalisation strategy and vision for the organisation
- Know the organisation's skills and capabilities
- Set clear implementation objectives
- Determine how success will be measured

Which attributes are required to make digital transformation a reality?
Many organisations driving digital transformation in supply chain have failed to achieve the value that they expected, because their focus was on technology while ignoring the people factor. The mix between technology, people and processes is a condition for success.

According to The Hackett Group, the success of a digital transformation deployment depends on whether supply chain professionals possess certain attributes:

Digital_transformation_attributes_500.jpg

Digitalisation does not require supply chain and procurement professionals to be data scientists; it requires them to be informed, understand the trends and appreciate the impact on the top and bottom lines. A business' digitalisation investment must be deliberate, as the benefits far outweigh the burden of doing it right as well as for the right reasons.

Approaches to implementing digital solutions
One size does not fit all when creating and deploying collaborative value in digital solutions, as organisations are at different phases of their maturity. When assessing the maturity of an organisation for readiness, the focus remains the same:
- Optimising processes
- Using the right technology and systems
- Up-skilling people
- Adapting the organisational structure

The aforementioned should give you an indication of an organisation's level of maturity and whether it is ready to take on the burden of digital transformation.

Implementing digital transformation takes place at both internal and external levels:

Internal_and_external_500.jpg

This parallel approach enables companies to manage digital transformation effectively, within the framework of a digital transformation roadmap. Well implemented, a roadmap could lead to entirely new business models, such as Uber, Amazon, B2B and Airbnb.

In supply chain 4.0, the objectives of advanced digital initiatives can assist organisations to reduce working capital, improve cash positions through smart warehousing and contain costs through predictive shipping and robotics. The benefits of digital transformation are many.

Organisations that have successfully implemented digital transformation in their supply chain are:
- Strategic: they have a clear vision around deploying technology (holding functionaries accountable)
- Insight-driven: by having information available and data analytics they are able to make better decisions
- Collaborative: through increased visibility they enforce a collaborative culture across the business

Conclusion
There is value in pursuing digital transformation. However, when implementing digital solutions to boost operational excellence, the focus has been on technology - an approach that misses a critical component of business, namely the people who work in an organisation along with their skills.

Thus, to gain maximum value out of digital transformation, people's skills and attitudes towards technology are key success factors. Change management principles tell us that barriers to change are resistance to change and a lack of skills to implement solutions. The change to supply chain 4.0 is no different.

Finally, a digital transformation roadmap is a fundamental requirement when it comes to digital initiatives. This roadmap must answer the following questions:
- Where is the organisation right now in terms of implementing digital solutions?
- Where does the organisation want to go?
- What is needed to get there?
- What organisational capabilities does the organisation have?
- How is this benefitting our customers?
- How do we measure success?

Once these questions have been answered, it will be easy for an organisation to implement digital solutions.

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