Digital supply chain is the “in” thing! Don’t take my word for it, though. Just google the term. You will come across many articles talking about how supply chains are being remade by industry 4.0, internet of things (IoT), 3D printing, big data analytics, cloud computing and so on. But what most of these articles focus on are the means rather than the ends for the digital supply chain. On a day-to-day basis I speak to a number of supply chain practitioners. Most of them tell me they are at some stage of evolution with their digitization strategy. However, much confusion exists in terms of what constitutes a digital supply chain. So, I decided to write this blog to share my point of view on the topic.
Supply chain digitization is not simply taking existing information and capturing it in a digital format. It is not about automating your existing SCM processes. It is not about layering in Sales & Operations Planning (S&OP) as a band aid to connect disjointed processes. It is about having the most current information to run your supply chain effectively, available on demand, so you can service your customers and grow profitably. In other words, think of a Google search for supply chain. You ask questions and you get answers!
Here, I will introduce 6 design principles that make up a digital supply chain. I will lean on the example of Uber, how it digitized the taxi experience, and draw parallels to digital supply chain. Let us take a look at these design principles:
- Connect the supply chain data: The strength of Uber is providing a platform to easily onboard drivers and riders, and establish connections between them as needed. When I signed up for Uber, all it took was to set up my name, contact, and credit card information. I was up and running in two minutes. The biggest impediment to digital supply chains is siloed information in disparate systems that needs to be surfaced for consumption. A digital supply chain should provide the ease of onboarding of relevant data and draw connections. These connections will help transform the data into information.
- Match demand and supply at the point of need: When I call for a ride on Uber, it matches me to the nearest driver and sends him my way. It does this by knowing my geolocation and the kind of ride I need (e.g., UberX vs UberXL). In other words, it understands my context. Likewise, a digital supply chain should understand the context of the demand (where it needs to be filled, when, priority of the customer placing the demand, etc.) and match supply in the most profitable manner. This calls for visibility into not just finished goods inventory, but all the way to raw materials, available capacities, and into suppliers’ worlds if it makes business sense. Also, just as Uber notifies me of an estimate time of arrival (ETA) the moment I call for a ride, a digital supply chain should provide an immediate reliable match to demand with an ETA.
- Effectively utilize assets by elevating visibility: Through providing visibility to an asset that can be shared (i.e., a ride share vehicle), Uber significantly increases the utilization of the asset. Likewise, a digital supply chain should fully make visible all the available assets, their current utilization, effective run rate, and availability to process additional work content. Such visibility enables better utilization of enterprise assets. In some cases, available capacity can be made visible to external parties for consumption (e.g., available capacity on trucks for transportation), taking shared economies in supply chain to the next level. Visibility to on hand and projected inventory is also enabled by the digital supply chain to ensure pull from upstream nodes after factoring in inventory.
- Expose and remove non-value added links: Uber completely disintermediated the human taxi dispatchers, relegating those functions to the platform. If we take the supply chain planning example, many organizations are significantly hampered by siloed, batch oriented processes. In such environments, demand planners plan a promotion and throw it over the fence to the supply planners to figure out the material and capacity availability. Material and capacity availability checks are done in their own silos. This causes latency of information, delayed decisions with a lot of non-value added human touch along the way. A fully digital supply chain should cut across the functional silos, and concurrently plan for demand, supply (materials and capacity), inventory, and financials in real time, eliminating the need for batch oriented, latency ridden, error prone communications and associated spreadsheets.
- Enable instant collaboration: Before the Uber driver gets to me, at the touch of a button, I have the option of calling the driver to let him know of my whereabouts. I find this particularly useful when I get ride from an airport. The driver can do the same. In essence we are able to collaborate and cooperate instantaneously, on demand! Why should supply chain collaboration be any less? In today’s complex and volatile world, collaboration across the various actors is a must for the smooth functioning of a supply chain. A digital supply chain should allow users to instantaneously collaborate, run scenarios, and resolve problems.
- Enable transparent and frictionless supply chains: Through its mapping and frictionless financial settlement, Uber provides a truly transparent experience. A digital supply chain should provide such transparency by enabling end to end visibility. If there is a supply disruption, the digital supply chain should immediately propagate the effects end to end and show the impact on order book or in meeting the forecast. Likewise, if there is a spike or drop in demand, the digital supply chain should allow for the business community to understand the effects on inventories, capacity utilization, and supplier schedules.
In essence, the power of Uber lies in its platform. Similarly, a digital supply chain effort should be supported by strong supply chain platform capability that can connect data, process, and people. In this day and age of smart phones, shared economies, and social networks, why should the supply chain community settle for antiquated, batch oriented, non-transparent supply chain processes? Take a hard look at your digital supply chain efforts. Make sure the above 6 design principles are integral to your digital supply chain strategy!