The DSC Transformation Framework
Transforming supply chains is a complicated business that requires studying multiple layers of customer needs and forecasting, servicing requirements, manufacturing, transportation networks, amongst others. Many decisions regarding how a supply chain will look in a given segment are interdependent and will require integrated actions across functions. Coordinating across functions in large global firms is not something that happens easily or by itself. Looking at the entire picture is too complex for even the best supply chain leaders to develop actions plans for. To help break down the complexity into a framework, decisions must be made about what to include and exclude. Figure 1.2, is a DSC Transformation Framework, a tool to help organize, plan, and develop action plans for the most significant aspects of leading meaningful changes in your own supply chain.
The model is divided into two larger sets of supply chain performance factors from which supply chain leaders can develop plans for.
Digital Technology Performance Factors
The first set of performance factors fall under what we might call “Digital Technology” factors. Being a DSC means taking advantage of core technologies such as Internet of Things (IoT), Robotics, 3-D printing from generative designs, and, eventually, autonomous vehicles. These technologies, when deployed strategically in the appropriate business segments, may yield business performance improvements. Before these improvements are realized, however, we must recognize that digital technologies alone may fall short of providing the intended benefits. To be effective in delivering the desired performance changes, some mastery of data analytics is needed. Of the technologies mentioned, IoT, in particular, will generate enormous volumes of data that will need to be managed well to extract timely and high-quality business insights supporting decisions. Well-designed data architectures, data cleansing, alignment, and ready availability are essential to being able to support more accurate predictive models, forecasts, in addition to machine learning and artificial intelligence processes.
In summary, the digital supply chain must strategically deploy technologies that generate and use analytic data. These core factors have the highest opportunity to produce an outsized impact on supply chain performance.
Employee and Organizational Performance Factors
The DSC Transformation Framework acknowledges that supply chain leaders cannot rely on technology investments alone to meet performance improvement expectations. The second set of key performance factors for supply chain leaders to consider are aligned to employee and organizational issues. Supply chain leaders have recognized that developing digital strategies and deploying technology using data-driven analytics will require access to new skills and capabilities, some of which a firm may not have. Supply chain leaders must develop plans on how to close this talent gap if they are to realize the benefits of the digital supply chain. The right capabilities, deployed in a tailored and, perhaps, newly designed organizational environment are a key part of the performance improvement mix. Just as investments in technology may be blunted or limited by weak efforts in data analytics, so too must digital talent be added to new business models for the digital supply chain to flourish. One of the hallmarks of a mature and high- performance supply chain is its ability to help develop and implement entirely new business models. Business models that utilize a mix of technology and data in ways that respond quickly and creatively to the competitive environment are essential to moving the performance step function for firms.
Transformational Performance Outcomes
This chapter began with a discussion of what digital supply is and the components of a digital supply chain transformation. To close this chapter we now take a look at a proposed list of digital supply chain transformational performance outcomes. Instead of using the term “transformation” broadly, supply chain leaders should be more specific about what their goals are when investing in digital supply chain. The following is a list of outcomes that should be targeted and we propose that they are uniquely attainable by strategic digital actions in the performance areas we have described. This is where the traditional supply chain ends and the digital one takes over. Well-deployed digital actions should enable:
- • Performance function shifts to reflect fewer trade-offs between costs and customer satisfaction
- • New business models to foster growth through new revenues that were not accessible in traditional practice
- • Sustained competitive advantage through “hard-to-replicate” integrated capabilities
Our recommendation is that supply chain leaders keep these performance outcome targets handy as they evaluate digital supply chain investments. If a proposed investment cannot be traced to one or more of these outcomes, it may not meet the threshold of efficacy needed.
- 1. Do you believe a digital strategy will significantly improve your supply chain efficiency and provide a competitive advantage?
- 2. Is the move to a digital supply chain a new, transformative strategy, or simply the decades-long continuation of the digitization of most business processes?
• Digital transformation is about making a shift from traditional ways of operating, to ones that use data, technology, and business models in innovative ways.
- • Digital transformation calls for strong leadership, as it requires more integrated business processes and collaboration.
- • Digital transformation is happening globally across most industries. Firms that are slow to react or ignore digital transformation are likely to fall behind their more agile digital competitors.
- • The term “Digital Supply Chain” began to gather attention around 2015. It usually refers to the strategic transformation of supply chains, rather than the simple digitization of legacy business processes.
- • The benefits of a DSC for firms can be summarized as uniquely reducing the amount of trade-off between costs and customer satisfaction.
- • The challenges, complexity, and management demands involved in transforming to a DSC have slowed many firms in their implementation.
- • Transformational performance outcomes should foster growth that would be inaccessible in traditional practice and should create sustainable competitive advantage through hard-to-replicate integrated capabilities.
- • The key to unlocking this value and advantage is a new, robust, and digitally aware supply chain leadership mindset.
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