You’re sitting on a balcony, scanning the news on your mobile. You tap the app of your favorite local coffee house to order your caffeinated beverage of choice. Based on your preferences, the app recommends an exotic coffee sourced from Indonesia, and you decide to try it. Ten minutes later, you hear a distinctive buzz coming towards you. You take your double latte from the drone hovering at your elbow, sip and sigh. Life is good.
Hype? Hardly. This scenario represents a brave new digital supply chain world that is turning traditional business models on their head, and it’s happening today. It’s an exciting new world that means profound structural, strategic and executional changes for your business and your supply chain.
A wave overtaking all industries
Consider Nike, which recently started to deliver customized-to-spec shoes in just 3-5 weeks to customers who order online. This new sales model basically blows up the traditional footwear supply chain of global low-cost sourcing, merchants buying and building inventory for a season, and clearing excess inventory through markdowns and factory outlets.
These changes aren’t limited to the retail industry. Banks, which once enjoyed the luxury of established brands and higher margins, are challenged by FinTech to keep up with digital-based competitors; the advent of self-driving trucks, robotics and the Internet of Things means big changes for the logistics industry; and the list goes on. Different industries are at different places in this transformation, but it will affect us all.
It’s the era of small
Gone are the days of putting products on the shelf that you innovate—your customers are doing the innovating. It’s the era of small brands producing smaller lot sizes and distributing smaller quantities through different channels to reach customers directly. Same-day delivery is here, and the true holy grail of commerce—producing and delivering a lot size of one—is within reach. The barriers to entry for sleek digital competitors are getting lower and lower.
Supply chains calibrated to cost reductions through global volume-based sourcing, manufacturing, transportation, and warehousing efficiency, must become demand driven. “Demand driven” isn’t a buzzword; it’s a necessity, and companies must figure out how to adjust, plan and execute their supply chains accordingly.
What does this mean for your business? A sea change in the way you use technology; make decisions about sourcing, manufacturing, distributing and customer servicing; and collaborate with vendors and customers. You’ll need to buy differently, make differently and sell differently when innovation and constant change are the new normal.
It’s no wonder that executing the digital supply chain is the biggest challenge we hear from customers. How can you prepare? Here are some areas to consider:
- Stop using the “D” word: We’ve used the data excuse long enough. No one is going to wake up one morning and fix their data for all future needs. In this case, necessity truly is the mother of invention: Roll out the analytics initiative you want to tackle and fix your data as part of it. Leverage technology advances in big data infrastructure that can help you streamline data governance without having to the change the underpinnings.
- Advanced planning systems have let us down long enough: Stop accepting excuses from the IT department about your planning system capability. Integration with ERP, a robust system of record, the one-vendor approach—they’re all overrated. Advances in cloud software and APIs are breaking down technology barriers. Focus on getting as much data into your advanced planning system as possible, hire data scientists and domain experts, and empower them to work together to mine data, get insights and deliver them in simple, powerful dashboards. All you need is a platform that lets smart people continuously improve the way you plan.
- Collaborate like your life depends on it, within your organization, and with your customers and vendors. Heard of blockchain? This simple, powerful technology is challenging the way transactions are executed. Prototype blockchain within your organization: How about using it to record purchasing, manufacturing and warehousing transactions? That’s the best way to get ready to use the technology with your partners. The open source technologies around blockchain make this a lot easier.
- Start taking IOT seriously: You’re already using it —for example, you’ve got telematics on your trucks and RFID in your warehouse. You just need to add analytics to the mix to glean insights from it. Look at use cases in your industry and start trying it out. IOT platforms like IBM Watson and GE Predix have significantly reduced the entry barrier by providing dependable, subscription-based platforms.