Aligning Digital Transformation strategy with Supply Chain strategy- I/III

Recap

In one of the previous posts (Link below), I introduced the ten building blocks of any Supply Chain strategy . As mentioned in the post, the idea was to gently introduce you to the building blocks for this post on Digital Transformation. In this post, we will review how Digital Transformation can be incorporated for each of those building blocks

Link: Ten building blocks of your Supply Chain strategy

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Understanding Digital Transformation

Many  “Digital Transformation experts” use the terms digitization, digitalization and digital transformation  interchangeably. However, they have distinct meanings, particularly in the context of Supply Chain. From a Supply Chain perspective, they can be treated as steps in a process, starting with a literal conversion and ending with the creation of new capabilities.

The process of incorporating Digital Transformation is a three step process, as defined in the article (Link below) and illustrated in the picture below. It is critical that you familiarize yourself with these steps before going through rest of this article.

Link: What Exactly is Digital Transformation ? A Supply Chain context

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The very first block, Customer Value alignment falls in Marketing and Sales domain so we will skip that here but it has been covered at a high level in the Appendix section of this post.

Incorporating Digital in Structural building blocks: Block 1- Channel Design

Often, “experts” propagate the technology as the solution to your Supply Chain woes but technology is just one of the enablers. As I consistently mention in my various posts, having robust and best in class processes and channel structure is more critical than having just best in class technology. That is why having the right channel design in place is critical. Once you have right channel structure in place, you can start your digital journey.

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Assuming that the channel design in place is optimal in terms of structure and processes, the two key aspects that are critical in any channel are:

  • Visibility
  • Collaboration

Incorporate planning systems that aligns with your channel design: Collaboration is the key to a successful Supply Chain and lack of it is the reason for Supply Chain failures most of the time.

Incorporate visibility technology that aligns with your channel design: Visibility is a critical aspect and often a major pain point in Supply Chains. Visibility needs to be provided to not only the Supply Chain partners but also to the customers in many aspects.Implementing planning systems is a four step process:

Step 1: Implement best in class system for each planning area (Digitization and Digitalisation)

A typical example of best in class landscape of planning systems in channel design, in a simplified Supply Chain channel structure, is shown below. Note that this represents the core systems landscape and this capability will be the foundational basis of any Digital Supply Chain. With all the talks about Supply Chain 4.0 and Manufacturing 4.0, some of these systems will evolve into the Supply Chain intelligence systems of the future but that should be a phased approach and will come much later . In subsequent sections of this post, we will get into details of each function and explore the corresponding systems in detail, and will cover the 4.0 aspect as well.

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Step 2: Ensure that these systems can share information with each other (Digitalisation)

All these systems will not deliver their true value if they operate in Silo. It is critical that these systems “talk” to each other. In best of class integrations, output from one system can act as an input to the other system. This not only ensures data integrity and consistency across the Supply Chain, but also provides one function (ex: Transportation) get visibility into other function (ex: Customer order management). A high level example flow of data across integrated Supply Chain systems landscape will look like the illustration below:

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Step 3: Develop visibility platforms that can tap into the information generated by these systems  (Digitalisation)

This visibility is the most critical aspect of any successful Supply Chain infrastructure. Ideally, you would want to have a centralized view into all the data from your various systems in one place. This is where the concept of Supply Chain Control tower comes into play.

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Control tower is a fancy term for a centralized visibility and planning center of excellence. The Sci-Fi version of this is a highly automated central systems that makes many basic to mid level Supply Chain decisions without any human intervention but we are currently far away from that scenario.

 

Step 4: Use the Digitalized infrastructure to run, analyze, optimize and predict : Supply Chain 4.0 (True Digital Transformation)

This version is still years away. Even though companies have started experimenting with leveraging AI in Supply Chain and Transportation, it is still at a very nascent stage.

If we envision a scenario where smart, centralized algorithms control major planning aspects of your Supply Chain from a Control Tower, we are maybe a decade away from that but the journey needs to start now.

However, we will still dig deeper into those “future state” scenario of true automation as we map the digital journey of the “Operational” aspects of Supply Chain strategy, in the next part of this post.

Incorporating Digital in Structural building blocks: Block 2- Network Optimization

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Develop a Digital Twin of your Network

If you are a mid to large size company, it is important that you have an in-house team that manages a Digital Twin of your Supply Chain Network. Such teams are generally called Supply Chain design teams and individuals who are members of such a team need to wear many hats. Supply Chain design professionals need to be holistic thinkers with consideration to an end-to-end network.

Supply Chain design teams are best equipped to provide a total landed cost view to the executive team as they are modeling all the details of an end-to-end network including all the fixed, variable, and step-wise costs. They essentially create a digital twin of the network in the process, on which one can run a variety of scenarios and simulations. These professionals are significantly upping the game for their organizations, in the process enjoying tremendous professional success and rise in profile.

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Digital twin models should get updated on a regular basis, generally in an automated way, like the one suggested below. Since these studies are not just about opening and closing DCs, they are slowly evolving from being Strategic planning to Operational planning tools. Often, off the shelf Network optimization solutions also bundle Inventory and Transportation optimization modules, thereby providing an holistic view of the network.

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In the next part of this post, we will do a deep dive into incorporating digital transformation aspects  in the operational building blocks of your Supply Chain strategy. The link to the second part will be provided below, once available.

Appendix:

Incorporating Digital in Strategic building block: Customer Value alignment

Even though this block (Customer value alignment) falls more into Marketing and sales domain, we will still look, at a high level,  how you can incorporate Digital to streamline your customer value alignment, since this is the apex block of your Supply Chain strategy. Your Supply Chain (or Chains), exist to serve your customers, in an optimal way that, at a high level, maximizes customer satisfaction and minimizes cost.

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The process of incorporating Digital for customer value alignment is a four step process:

Step 1: Evaluate your existing Digital Channels

Your first step in a digital transformation is to assess the value of your current marketing tools and channels. Take a close look at your website, social media, automation tools, analytics platforms and customer database.

  • What does your current Digital Marketing channel portfolios look like?
  • Could you be better leveraging these platforms?
  • Are there better options for your needs?
  • Are there any critical channels missing in your current digital channels portfolio?

Step 2: Add new Digital channels (Digitization and Digitalization)

A thorough review of these tools and channels will ensure you’re adequately armed to drive your company to success. If there is a critical channel missing, the initial step should be to build presence in that channel before moving forward.

Step 3: Be Omnichannel – Break the silos between the channels (Digitalisation and Digital Transformation))

In addition to optimizing your digital channels, you need to make sure all of these systems are talking to each other and working together. When your digital tools are operating in a siloed fashion, you’re missing out on the bigger picture. Logging in and out of five different accounts to track a customer’s journey is not an efficient or sustainable way to operate. A customer data platform (CDP) can act as the connective tissue that joins these platforms together, providing you with a holistic view of your entire customer base.

Step 4: Optimize the customer journey (Digital Transformation)

The advanced insights you’ll obtain from improved channel integrations will assist you in pivoting your strategy for success. Equipped with a holistic view of your marketing funnel, you can easily identify weak spots and opportunities for improvement. You’ll also be able to provide a more personalized, relevant experience for leads and customers alike.

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