Unlocking the Potential of Digital Supply Chains

Aerial top view container ship Park for import export logistics in pier, thailand.

Most global companies have made substantial investments in digital solutions and building deep functional excellence across the supply chain. But few have balanced those efforts with a corresponding push to develop the new talent competencies required to unlock the full value of digital. Many firms are also failing to adapt their supply chain organizations to connect their main operational towers with one another, not to mention commercial and R&D partners, so they can effectively orchestrate their response to changing demands.

As a result, performance improvement has not kept pace with digital investments. And as the COVID-19 pandemic has clearly shown, even the most technologically advanced supply chains remain highly vulnerable to unanticipated disruptions.

Chaos is normal. With this unfortunate reality in mind, Kearney introduced the pivoting supply chain concept in July 2018. As noted in the MIT Sloan Management Review article “Why Supply Chains Must Pivot,” executing against ongoing uncertainty requires making supply chain investments that mirror the advance from paper roadmaps to modern GPS technology that monitor variables and inform drivers when they need to course correct. And yet, despite all the investments made in the past two years, too many organizations still have digital supply chains that function like the earliest GPS which helped drivers navigate a predetermined route but did not account for traffic jams, road hazards, or other variables.

Simply put, to build a supply chain that can sense unforeseen events and nimbly pivot in response, you must do more than retool with a range of the best available new technologies. You must also rethink and reskill your supply chain.

In order to rethink a supply chain, you must move from viewing it as an inanimate mechanism built to execute against a plan to perceiving it as a living organism that is sentient, resilient, and highly adaptive. A pivoting supply chain moves beyond traditional concepts of optimization to make your supply chain highly attuned to its ever-changing environment and utterly free of a silo mentality, like a living body responding to its central nervous system.

What about reskilling? A mechanical concept of supply chains casts people primarily as machines, executing against plans and conforming to established operating parameters, while occasionally resorting to intuition in the absence of facts. In contrast, a living supply chain actively taps your people’s collective judgement, based on access to shared data and real-time analytics. This begins with a concerted effort to expand the skillset of your supply chain’s talent, by actively cultivating three key abilities. You need to develop people who can skillfully scout the landscape for new data sources (e.g., social listening, weather, web traffic, consumer sentiment, commodity trends, tariffs). You need people with the ability to quickly interpret such data to identify potential disruptions, channel shifts, demand surges, and other significant events. And you need people to nimbly and cohesively incorporate data-based insights into shared operational decisions, while working seamlessly with R&D and commercial partners to shape the end-to-end strategy for serving customers and creating a competitive advantage.

“A mechanical concept of supply chains casts people primarily as machines, executing against plans and conforming to established operating parameters, while occasionally resorting to intuition in the absence of facts. In contrast, a living supply chain actively taps your people’s collective judgement.”

In practical terms, you bring your supply chain to life via:

  • Uncompromising vision. Anchor the rethinking of your supply chain on a “north star” vision that vividly conveys your organization’s ambition to fundamentally change your operations.
  • Real-life learning. Immerse learning initiatives and tools into everyday work to create a real-life environment for step change. Make the most of tools such as digital twins to try out new ways of working with controlled consequences.
  • Sprints. Use a minimum viable product approach, staging out small and achievable portions of capability building to rapidly roll out and refine while capturing quick wins. Sprints are the fastest way for all parts of your supply chain to adopt new ways of working and to master new technologies, tools, and platforms.

We have seen a few companies moving decisively to rethink and reskill (as well as retool) their supply chains. A global healthcare manufacturer, for example, recognized that engineering talent would be crucial to making its supply chain more nimble and agile, and wanted greater clarity on how engineering competencies must evolve. We sharpened the view of which engineering proficiencies (e.g., 3D printing, sensors, the Internet of Things, human–machine interaction) should be focused on to drive future advantage. These insights were then converted into a strategic roadmap for building an engineering organization capable of creating and supporting the future supply chain. A survey of the company’s current engineering organization revealed pockets of current talent who already commanded some of the targeted competencies, while a career technical ladder offered people across engineering clear pathways toward the future roles.

We also helped senior operations leaders at a global consumer packaged goods company to develop a future-focused competency model for the entire supply chain. The project commenced with breaking down the supply chain function into sub-functions (e.g., planning, warehousing, trade compliance, etc.) as well as sub-sub-functions (e.g., planning sub-functions such as demand planning and supply planning). We then viewed each function level through the lens of emerging trends most relevant to the organization to specify competency areas that supply chain talent would need in order to sense and pivot. Examples of these competencies include third-party logistics management, analytics & reporting, master data management, next-generation infrastructure/automation, commercial intelligence, and customer supply chain networking.

We then assessed their supply chain talent’s current competency levels in terms of a five-stage maturity model:

  1. Build (entry-level/tactical tasks)
  2. Develop (emerging analytics, POV)
  3. Proficient (robust analytics, recommendations)
  4. Expert (mastery, stakeholder mgmt.)
  5. Visionary (next-gen POV)

The organization now has a clear view of how it must reskill to perform over the long term, under unpredictable conditions.

A global beauty company was experiencing high stockouts and excessive inventory across its portfolio of high-margin seasonal products. The root problem was demand planning, which was not accurate at the store level. Store delivery schedules were pre-determined, based on historical rather than real-time data. During a 12-week sprint with the company’s supply chain leaders, we built and piloted a solution that leveraged real-time point-of-sale data to sense changing demand at the store-SKU level and automatically allocate inventory to optimize margin performance. This dynamic inventory allocation model was built using the Anaplan platform, then tested using a digital twin approach, which simulated the spring sales season (January to June) across a subset of pilot SKUs and locations. The pilot project demonstrated that the sense and pivot solution reduced excess inventory by ~40 per cent and improved gross margins by 11 per cent, allowing the company to test and prove the solution before making large-scale technology investments.

A major personal care products company was struggling to pivot to online commerce, mainly because its large distribution network was not fit for purpose and was too rigid to readily adapt to rapidly evolving customer and consumer requirements. We began by helping the company fundamentally rethink its distribution organization, primarily to remove silos between functional pillars that hindered the company’s ability to fully engage in e-commerce. We then jumpstarted the organization’s transition to the new ways of working through a network immersion experience.

The immersion project assembled high-potential talent from across operations—as well as from key commercial business partners and several innovative logistics and digital firms―to co-create a future network capable of nearly seamless end-to-end supply chain orchestration. The immersion gave these previously siloed participants the opportunity to “live into” the principles of the new operating model through action learning, hands-on coaching, and continuous collaboration. The result was a far more cohesive and flexible distribution network, with the end-to-end mindset required to nimbly adapt to the new and diverse demands of e-commerce.

COVID-19 has delivered costly but telling lessons on the strategic importance of supply chain agility, spurring companies to move beyond retooling their operations for traditional optimization, toward rethinking their basic assumptions about how their supply chains should operate, and toward reskilling their people with a focus on fresh competencies that help supply chains sense and pivot. These efforts are long past due.

In a world that complies with no one’s assumptions or plans, you need more than a finely tooled machine. You need to bring your supply chain to life.

The authors thank their colleague, Suketu Gandhi, for his contributions to this article.

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