digital-frontside-supplychain

Supply Chains Need to Turn to the Digital Frontside

An enterprise-wide digital supply chain can lead to a 20% reduction of procurement costs, a 50% reduction in supply chain costs, and an increase in revenue of 10%.

A recent white paper issued by the Center for Global Enterprise, entitled Digital Supply Chains: A Frontside Flip, discusses how forward-looking companies are re-thinking and transforming their supply chains as they see new digital technologies and organizational models coming to the forefront of business. It points out that companies need to take advantage of new and improved management practices, continuously expanding amounts of data, and new technologies relevant to digital supply chains (DSCs) to achieve future competitive advantage and satisfy their customers (Note: At the risk of introducing yet another three-letter acronym, the “DSC” refers to the way that the supply chain process is managed, not whether the products are physical or digital).

The results of the survey, which involved hundreds of leading supply chain practitioners, indicates that an improved enterprise DSC can lead to a 20% reduction of procurement costs, a 50% reduction in supply chain costs, and an increase in revenue of 10%.

These benefits can be gained by the use of a DSC to capture and maximize utilization of real-time date from various sources, enabling demand management, simulation, sensing and shaping to optimize supply chain performance while minimizing risk.

One major trend pointed out by the study is the emergence of “platform” companies, where they provide a foundation for a variety of enterprises and individuals to conduct business. Sharing of this data through collaboration within the company, and with external stakeholders such as suppliers and customers, will be the differentiator of a company’s success.

Companies that are now embracing DSC practices are working to flip their supply chain focus to the frontside, which is enabling a much closer and deeper relationship with customers. DSC provides essential information that allows for goods to be shipped with the speed and quality needed to satisfy the customer and supports the quick and easy return of these products at end-of-life.

The white paper points out that the real game-changers will be:

1) Real-time data analytics (e.g., the increased use of mobile technology, sensors, Internet of Things, social media);

2) Digital impact on manufacturing and delivery (e.g., robotics, drones, driverless vehicles, 3-D printing);

3) Collaboration with a purpose (internally and externally);

4) Managing various forms of risk;

5) Blockchain, a new form of database architecture that allows two or more parties, operating through a trusted network, to increase the speed, security and accuracy of settlements on financial and commercial transactions.

The Center for Global Enterprise study makes the case that now is the time to “flip to the frontside” by focusing on the needs of customers and collaborating with suppliers through the digital supply chain. The whitepaper suggests a roadmap that focuses on four elements: demand, people, technology and risk, which is different from traditional supply chain strategies that have, as a priority, attempted to optimize supply chains by minimizing manufacturing, supply chain and logistics costs.

Ultimately, to gain a competitive advantage using a DSC strategy, leaders will both drive down costs and drive up market share.

Paul Myerson’s latest book, which discusses how technology can enable your supply chain to become lean, agile and efficient, is available now: Lean and Technology: Working Hand in Hand to Enable and Energize Your Global Supply Chain.

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