Digital supply chains are crucial for business success. Many companies try to implement them - and fail miserably. [shutterstock: 1221358780, Travel mania]
A new study from the Capgemini research institute titled “The digital supply chain’s missing link: focus” has identified a clear gap between expectations of what supply chain digitization can deliver, and the reality of what companies are currently achieving.
Exactly half of the organizations surveyed consider supply chain digitization to be one of their top three corporate priorities. However, most are still struggling to get projects beyond the testing stage.
The top goals for supply chain digitization
Over three quarters of companies said the motivation for their supply chain investments was the desire for cost savings, with increasing revenues and supporting new business models also frequently cited. Organizations, especially in the UK, Italy, The Netherlands and Germany, have supply chain digitization as one of their top priorities.
One explanation for the broad enthusiasm for focusing on digital supply chain initiatives is the prospect of the return on investment (ROI) that they offer. The research finds that ROI on automation in supply chain and procurement averaged 18 percent. According to the report, the average pay back period for supply chain automation is just twelve months.
The struggle to scale pilot initiatives
The organizations surveyed have an average of 29 digital supply chain projects at the ideation, proof-of-concept or pilot stage. Just 14 percent have succeeded in scaling even one of their initiatives to multi-site or full-scale deployment. However, for those that have achieved scale, 94 percent report that these efforts have led directly to an uplift in revenue.
The evidence from those who have moved to implementation suggests two things. One, that companies are taking on too much, and two, that they are not focusing enough on strategic priorities. The organizations who successfully scaled initiatives had an average of 6 projects at proof-of-concept stage while those who failed to scale averaged 11 projects.
There was also a clear gap in procedure and methodology between organizations that were successful and those who were not. The vast majority of companies to have successfully scaled said they had a clear procedure in place to evaluate the success of pilot projects and had clear guidelines for prioritizing those projects that needed investment.
Steps to unlock value in supply chain transformation
The report recommends learning from organizations that have successfully scaled supply chain initiatives. Furthermore, it also recommends that companies looking to make progress should focus on three key areas:
- Advocate and Align. Ensure transformation efforts are driven by C-suite leadership and senior management. Supply chain digitization is a complex process that spans planning, procurement, IT and HR. Therefore, it cannot be led by any one business unit and must be driven from the top to succeed. Leadership needs to advocate for this transformation, and to provide strategic focus on objectives and what to prioritize.
- Build. For supply chain digitization to be successful, both upstream and downstream partners (suppliers and distributors/logistics providers) need to be onboarded and made part of the digitization efforts. Breaking the silos among the various supply chain functions as well as the technology teams is also critical to the success of supply chain initiatives.
- Enable. While the above help in starting the digitization, in order to sustain it, organizations also need to invest in key areas of building a customer-centric mindset and developing a talent base. They need to devise approaches to attract, retain and upskill their employees.
RPA and IoT represent viable use cases
In terms of specific use cases, Capgemini’s report reviews the 25 most popular use cases for supply chain digitization today. Moreover, it analyzes each in terms of how easy it is to implement, and benefits realized. The goal is to produce the top recommended use cases that can become strategic wins.
RPA and IoT feature more often in use cases like order processing and smart sensors to monitor product conditions. Based on working examples from across today’s supply chain, these use cases have been shown to save time and money on supply chain processes.