When the great American poet Robert Frost penned the words “…and miles to go before I sleep” in 1922, he wasn’t referring to the long path to digitization that many companies and their procurement departments are traveling on right now. However, nearly 100 years after Frost included this famous line in Stopping by Woods on a Snowy Evening, the words are relevant for the organization traveling down that path.
Fast-forward to 2019 and a new report from Capgemini outlines just how far companies have come and how far they have to go on the supply chain digitization path. In “The Digital Supply Chain’s Missing Link: Focus”, the consulting firm pinpoints the digitization of the supply chain as one of the top drivers of growth and value for organizations. The problem, it says, is that many current approaches lack direction and focus.
“Initiatives are failing to scale up effectively because organizations are attempting to digitalize everything at once,” Capgemini points out, “and spreading themselves too thinly.”
Tackling the Complexities
For its report, Capgemini’s Research Institute surveyed supply chain executives at 1,000 consumer product, manufacturing, and retail organizations. About 63% of these firms said that their management teams understand that the supply chain digitization is “continuous”, and that it takes time to both develop and benefit from it.
“Boeing’s supply chain provides an illustration of why so many recognize the complexity involved in digitizing an organization’s supply chain,” Capgemini points out in its report. “Its worldwide manufacturing facilities receive around three million parts daily from some 5,400 suppliers.”
According to Capgemini, 50% of companies place supply chain digitization on their list of “top three priorities” at the organizational level. “The size of the prize explains why supply chain is one of the top priorities for organizations,” the firm points out, noting that its recent research pinpoints automation initiatives in procurement and supply chain functions as delivering the highest returns (vs. other functions).
“We found a return on investment (ROI) of 18% for supply chain, three percentage points more than for human resources and four percentage points more than IT,” Capgemini reports, adding that the rewards of supply chain and procurement digitization are biggest for the companies that implement key strategic initiatives and then deploy those initiatives at scale.
Too Much on Their Plates?
While experimenting with new technologies is necessary, Capgemini says that an unfocused approach creates risk and diverts investment and resources from what is strategically important. On average, organizations currently have:
- 10 digital supply chain projects in ideation
- 11 in proof of concept
- 8 at the pilot level
- A total of 29 at the pre-deployment stage
Capgemini says these numbers prove the difficulties that companies run into when attempting to “trim” the number of initiatives that are on their plates. A better approach is to start with numerous different ideas, it says, select a handful that best address the firm’s strategic requirements, and then funnel out the rest.
Consider the Tier 1 European automotive supplier that followed this approach while transforming its production and supply chain. “We started with 200 project proposals and 42 proofs of concept, which we reviewed with great care to understand what value could be extracted from them,” a program leader told Capgemini. “From there, we decided to focus on five main initiatives.”
Moving the Needle
So, just how many miles does the typical organization still have to go down the path to digitalization? According to Capgemini, there could be a long trip ahead. To strike the best balance between experimentation and focus while moving that needle, organizations should strive for a systematic approach. Capgemini tells companies to focus on these three areas:
- Strategize and plan: Advocate digitization from the top and align the supply chain’s vision with the enterprise’s vision.
- Build a supportive ecosystem: Onboard your partners to realize the maximum benefits, foster collaboration across functions, and strive to establish a data-driven organization.
- Enable the digitization: Drive a customer-centric mindset in supply chain while also attracting, retaining, and upskilling supply chain employees.
“While most large organizations clearly grasp the importance of supply chain digitization, few appear to have implemented the necessary mechanisms and procedures to turn it into a reality,” Capgemini’s Dharmendra Patwardhan said. “Companies are typically running too many projects, without enough infrastructure in place, and lack the kind of focused, long-term approach that has delivered success for market leaders in this area.”