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LATEST THINKING


Digital supply network—The new standard for modern supply chain management

A more connected, intelligent, scalable and rapid supply network.

Overview

Every high performing supply chain is a digital supply chain.

Digital technology is disrupting traditional operations and now every business is a digital business. The impact on supply chain management is particularly great. Businesses cannot unlock the full potential of digital without reinventing their supply chain strategy.

Many companies understand the elemental nature of these changes and are already working to introduce digital technology into their operations. However, simply adding digital technology is not the answer.

This approach overlooks the fundamental difference between traditional supply chains that have been “digitally enhanced” and truly integrated, re-invented supply chains whose DNA is fundamentally digital.

For digital technology to create significant improvement in business outcomes, businesses need to:

  • Reinvent their supply chain strategy

  • Reimagine supply chain as a digital supply network (DSN) that unites not just physical flows but also talent, information and finance

This new breed of supply chain is more connected, intelligent, scalable and rapid than traditional supply chain management.

In a metaphorical sense, the DSN enables people and data—as well as materials, products and supplies—to travel together across the extended enterprise.

This is vastly different from digitally enhanced supply chains which (because they are never stronger than their weakest links) have less potential to help companies:

  • Develop new synergies

  • Relate more fully to customers

  • Rapidly reach new markets and quickly build and scale new offerings

Key Findings

This Point of View highlights how digital technology is changing the supply chain. Explaining why digital supply networks have a distinct advantage over traditional supply chains when companies embed it into their operations. Here are some of the key findings:

  • Digital technology can engender organizational change; alter the nature of the company’s control points; change the role and value of data; shift the level of value creation at each stage of the value chain; create or destroy businesses and/or operating models. In essence, digital can render traditional supply chain models obsolete.

  • Four of our era’s most disruptive technologies—social media, mobile communications, analytics and cloud computing—set the stage for the emergence of the digital supply network. And reap billions of dollars in new revenue and savings.

  • The digital supply network is more connected, intelligent, scalable and rapid. Companies that realize more of these advantages have a better market and finance performance.

  • Digital technology can help companies mass-produce capabilities as effectively as they mass-customize products or services.

  • The difference between a digitally “enhanced” supply chain methodology and a wholly re-invented digital supply network is immense.

Recommendations

The modern customer is very aware, very connected and uses the latest digital technologies. Companies must consider transforming their supply chains to cater to such customers and be ready to serve the growing list of such customers. If they do not do it, they risk losing their market leading position.

Moreover, the modern supply chain—the digital supply network—is built with digital DNA. Companies may choose to adopt a proven digital technology directly, which may be useful, but its ability to unleash the full value potential of the organization’s supply chain is questionable.

It is essential to follow a systematic process to transform a traditional supply chain into a digital supply network. Organizations need to:

  • Determine the digital supply network vision for the organization. This becomes the holy grail which will drive the transformation.

  • Convert the vision into the actual business outcomes which need to be realized.

  • Create a digital blue-print based on the business outcomes. The blue-print identifies the people, process, technology and governance aspects of the transformation.

  • Break the digital blue-print into the tasks and technologies that need to be implemented across organization to realize the digital supply network vision.

A recommended approach for starting such a transformation is conducting a Prime Value Chain (PVC) analysis. The PVC analysis is a top down approach which consolidates all activities and inputs required to help realize a business outcome regardless of their function or process origin. Using the PVC analysis, the organization can determine the priority business outcomes, establish the digital blueprint and identify the individual changes that would need to be made across the organization.