Jeremy Hammant takes a look at the connected supply chain and advises food and beverage manufacturers to get started on this process sooner rather than later
Worldwide spending on technologies and services that enable digital transformation is forecast to reach $1.97 trillion in 2022, according to a market study by International Data Corporation (IDC). Does this mean that we are at the dawn of a ‘digital revolution’ or is digital technology just an enabler of a continuing evolutionary improvement in supply chain performance? For businesses operating in the food supply chain the answer is probably the latter – although that’s not to say that for many the improvement is likely to feel more revolutionary than evolutionary.
For many supply chain executives, the first word that comes to mind when they think about the impact of digital technologies is ‘speed.’ A constant stream of new digital technologies (social, mobile, analytics, cloud, Internet of Things, autonomous vehicles, artificial intelligence, blockchain) is introducing previously unimagined levels of connectivity, data access, and automation across the supply chain. These capabilities are providing greater transparency and eliminating information bottlenecks. In doing so, they are uncovering opportunities across an extended Connected Supply Chain.
The potential for business benefit through implementing Connected Supply Chain applications is huge. The Internet of Things (IoT) will enable objects from shipping containers to individual items to communicate across organisational boundaries. This will lead to effective real-time shipment tracking and inventory visibility. The IoT will also contribute to better control over a range of other assets. Downtime and ineffective usage will be evident, and damage caused by operators can be more closely monitored. The wealth of data created by the IoT coupled with secure blockchain transaction processing and the burgeoning field of data analytics will provide new supply chain opportunities.
There is also huge potential for useable demand information as items that have reached the end consumer will continue to provide data about how they are used, and when they reach the end of their lifespan. The Connected Supply Chain will enable companies to track and count products and assets, and greatly reduce waste, loss, fraud and cost. Companies will know when things need replacing, repairing or recalling, and whether they are fresh or past their best. These benefits can be brought together to create process efficiencies through the opportunities that ‘smarter, highly integrated, secure networks’ can drive. The Connected Supply Chain enables the discrete processes that currently take place in silos (functional and organisational) to be observed and managed through the analysis of the data provided: the ‘holy grail’ of dynamic supply chain optimisation may now be within reach.
However, while digital technologies are now capable of supporting the Connected Supply Chain and delivering dynamic supply chain optimisation they are only gradually coming to fruition. This is because companies have already invested, over many years, in technology to improve their supply chain performance. Indeed, it can be argued that companies have been digitising for over 20 years. For many this has led to ‘islands of digital technologies’, with no clear strategy of how these can be combined to deliver the Connected Supply Chain. This means that most supply chain digital transformations will be challenging, as they will need to anticipate future technology developments whilst responding to market changes – in a 2017 Gartner survey of 318 supply chain organisations, 75 per cent reported concerns about the governance of digital projects. In addition, the Connected Supply Chain requires potentially different ways of working between organisations across the supply chain. It’s time to have another discussion about collaboration!
If you haven’t started on the Connected Supply Chain journey here are four key questions to think about:
- Do you have a strong operational IT backbone? To be part of the Connected Supply Chain, you must have accurate, accessible customer and product data, and disciplined end-to-end transaction processes.
- Do you have a digital strategy? Developing a digital strategy is no different to developing any other technology strategy – it’s just that the pace needs to be faster! You need an understanding of the existing digital capabilities of the business (the ‘islands of digital technologies’), what digital capabilities are required to enable the Connected Supply Chain and the roadmap to get there.
- Do you have a data-driven decision- making culture? To take advantage of the Connected Supply Chain you need a culture that values data and is comfortable with gathering and interpreting data to make better decisions. This isn’t about just having a few data scientists – the data-driven culture must be at the heart of the company.
- Are you prepared to collaborate? There will be benefits from implementing the Connected Supply Chain within the confines of your own organisation but the game changing benefits will come through optimising an extended supply chain. This will require closer, collaborative relationships with your customers and suppliers. Not all will want to collaborate and join you on the journey – concentrate on the ones that do.
The Connected Supply Chain is in reach, and dynamic optimisation has the potential to deliver a step change in supply chain performance. The digital technologies that enable the Connected Supply Chain are developing and maturing at pace – not all will be successful. But you can’t just wait and watch, you may end up too far behind to participate. Start the journey now.
Jeremy Hammant is an Associate Director at BearingPoint. BearingPoint is an independent management and technology consultancy with European roots and a global reach. The company operates in three units: Consulting, Solutions and Ventures. BearingPoint’s clients include many of the world’s leading companies. The firm has a global consulting network with more than 10,000 people and supports clients in over 75 countries, engaging with them to achieve measurable and sustainable success.