The Digital Supply Chain Road, or Supply Chain 4.0, is the way forward.
Enabled by highly publicized technologies such as blockchain, big data, IoT, autonomous vehicles, cloud computing, artificial intelligence, virtual/augmented reality, 3D printing and more, the digital supply chain offers promising and exciting opportunities.
But even with established technologies, the path to implementation can be challenging to say the least.
As you develop your digital supply chain strategies, it’s important to understand, consider, and address the inevitable issues and roadblocks that will test your resolve and leadership skills.
It is an extremely exciting time to work in the supply chain. The range of new technologies directly applicable to operations, logistics, procurement, sales, planning, management and all end-to-end supply chain activities is overwhelming and unprecedented.
But anyone who’s been in the supply chain long enough and has endured the experience and pain that comes with implementing new processes, systems, or technologies knows that problems abound. Even with established technologies such as ERP, TMS or WMS systems, the survival of a system implementation can be a miracle.
Given that there are many past experiences of obstacles and hurdles that come with trying something new, it’s best to consider those experiences, learnings, and battle scars as you shape your strategies and plans for implementing new digital develop technologies.
1. lack of a strategy
It can be very exciting to think about all these new technologies and just jump in and start implementing. But the scope and responsibility of the supply chain is so vast, and there is so much technology and complexity, that a knee-jerk approach to digitization without a larger plan is bound to fail.
First, develop a thoughtful overarching supply chain strategy for your business, including the deployment of a digital supply chain, and from there you will have a plan and approach to invest and implement these technologies in a more calculated and impactful manner. This can be an iterative process, refining your strategy as knowledge increases and circumstances change over time.
2. Technological immaturity
Technology is constantly changing, improving and evolving. It can be difficult to keep up with the latest advances, which invariably outperform whatever you implement. Those thinking of developing in-house, home-grown systems will quickly realize that not only is this a resource-intensive and time-consuming approach, it is also costly and will soon become obsolete.
There are enough companies that develop software as a service (SaaS) to cover all technology needs so that you can buy or rent software more cheaply than doing it yourself.
Furthermore, the company providing the software does all the work to keep it up to date and manage all the back office work.
This approach allows you to keep up with all technological advances. And if you wait for the technology to mature, you will never make changes. Even well-known systems such as ERP and TMS are constantly being improved.
Another problem is the lack of standards. As technologies evolve, it is crucial that there is a set of standards. For example, implementing blockchain requires literally tens of thousands of suppliers to operate on the same blockchain platform. We discuss this in Maritime Industry in Search of Blockchain Orchestrator. A failure to adopt standards will impede the adoption and advancement of technologies.
3. fear of failure
Implementing new systems, making major changes, and adopting technology can be daunting. And there is absolutely no guarantee that these investments will be successful. In fact, there’s a very good chance that at least one aspect of what you’re trying to change will fail, or at least fall short of expectations.
And especially those who are driving change are and should be held accountable. Leaders will want answers, and some of them genuinely pay lip service to the idea of understanding and accepting failure.
But doing nothing or just making safe changes won’t do anyone any good. True leaders will be bold and bold, driving change that is not 100% guaranteed to succeed.
When there are mistakes, it’s important to understand what went wrong, learn from those mistakes, mitigate the impact, and make course corrections if necessary.
4. Cost and return on investment hurdles
Implementing new supply chain systems can be expensive. Depending on the changes you make, millions of dollars could be required. Especially when you’re making physical changes (e.g., conveyors, sorting systems) in warehouses or distribution centers, the dollars can add up pretty quickly.
Every new investment inevitably has to overcome financial hurdles in your company. Return on investment, payback period, and cash flow are all elements that your finance team will surely want to see in your business case.
While spending money is unavoidable if you want to make a meaningful change in the field of digitization, alternatives might exist.
For example, as mentioned earlier, there are options to rent or lease software (SaaS) and avoid the extensive in-house resources required to develop and maintain homegrown software.
Additionally, we believe there will be a greater proliferation of companies offering services that can meet these needs, bringing these technologies within the reach of more small and medium-sized businesses. We call this Supply Chain as a Service (SCaaS).
Consider outsourcing not only software but also services as a platform to build your digital supply chain.
5. Insufficient resources and skills
Everyone in your organization is busy. So when it comes time to tap people on the back to start working on a new project, there can be real challenges in terms of resource availability.
Additionally, the skills you need to navigate the digital supply chain journey can be vastly different than the skills you need to operate today’s conventional supply chain. In Quantum Leap to the Top 10 Supply Chain Skills of the Future, we discuss the many qualities that need to be developed in your team.
Your investment pays off in the form of resource savings. It simply requires fewer people to perform transactional activities and more people to perform more analytical and high-level activities.
Investing in resource and skill development is essential to executing your digital supply chain strategy.
6. Missing buy-in
Bringing about change is often very difficult. The type of change you make impacts processes, systems, policies and practices, longstanding ways of working, and most importantly, people’s workplaces.
Because of this, as many people can work to make your changes fail as there are trying to make you succeed. In extreme cases, people can actually work to sabotage your project and stop it in its tracks.
This reality cannot be denied. As such, it’s best to face it head-on. For every change you make you need to involve HR and be extremely sensitive to the human aspects of the change and not just the technical aspects. Because of this, we believe you need to incorporate a change management workstream into every project.
It is also very important to obtain executive sponsorship for your program. For example, having the CEO act as a vocal supporter and advocate for the digital transformation you are undertaking will help smooth out disagreements and get people on board. You need to take the time to educate leaders, keep them informed, and convince them of the importance of your digital supply chain strategy.
7. No focus on process improvement
Most people think that there are opportunities to improve systems, work tasks and operational procedures. Unfortunately, many people also think that installing a new system in addition to the current way of doing things will make things better.
It will not!
Merely automating the existing process will not improve it or make it more efficient. It will only cause the existing bad process to produce bad results faster.
Before ANY system change, it is absolutely crucial to map both the current state and the future state processes. Optimize the process FIRST and then install a system that supports and drives the new process, not the old!
8th. Time is not on your side!
Unlike the song, time must not be on your side. There could be issues with business survival, competitiveness, cash flow, resource constraints, and more.
And an ambitious digital supply chain strategy can be very complex and require the use of multiple technologies. By definition, this can be very time consuming.
If you’re under pressure to make changes faster, then lack of consent may not be your problem. So you need to consider alternatives to shorten the timeframe to implementation.
As mentioned earlier, Supply Chain as a Service (SCaas), SaaS, outsourcing and more are strategic options that will get you up and running faster.
The road of the digital supply chain
The prospects for a digital supply chain are incredibly exciting. It’s the future. It’s only a matter of time before your competitors will use a digital supply chain platform to thrive.
But as exciting as the digital supply chain road is, it’s also full of potholes and obstacles. It is important to be aware of these challenges and to include strategic elements to mitigate, avoid or overcome them.