To enable the activation of these strategies, the case firm created working
teams aligned to critical business operations. Some teams are:
- • End-to-End Initiative team which focused on service levels and inventory, seeking savings opportunities while reducing trade-offs
- • Data analytics team which developed the right competencies to drive faster and more data driven decision making
- • Leadership and Change team which focused on the mindset change, helping associates move away from historically asset utilization driven decisions, that is simply “how much produce”, and behave based on more synchronized supply and demand
Digital Supply Chain Implications - Actions
To illustrate the complexity and integration of the global supply chain function that was envision, the following chart shows the different working levels and some of the associated technology supporting them. The case company invested millions of dollars in technologies, pilot programs, process redesign, and systems integration. The chart should give some indication of how sophisticated the workflows of a global integrated supply chain look like (Figure 3.5).
Digital Supply Chain Readiness
On looking at Figure 3.5, the question might be, where does the DSC begin, and where does it end? Or is digital just the new way of doing supply chain business? While there are no specific technologies listed in the chart, imagine modules from firms like, SAP are adapted, developed, and support several of the work functions. Imagine leading a supply chain if this scope and magnitude without some degree of integration. Here are some of the key elements of the integrated model:
Demand Sensing: Timely knowledge of customer sales and analytics. Sales Inventory Sc Operations Planning (SISeOP) consensus used as
Figure 3.5 An Integrated Demand Management Model.
initial forecast. Updated by Demand Sensing. Removes latency delay. Improves inventory placement.
SI&OP: Agreed upon single, rolling forecast over a time horizon using finance number, sales number, and demand plan (APO) number to get the consensus plan/number (unless changed, populated by sales number).
Constraint Planning: Develops capacity limitations of the manufacturing and distribution network. Integrated Business Planning (IBP) for supply is related but longer term.
Network Design: Where do we put plants? Where should we put warehouses & storage?
Inventory Optimization: Tool that helps determine desired amount of inventory
Control Tower: Controlling entire network—manufacturing and distribution. Show stock availability and tracks inventory goals against actual. Moving inventory in network to avoid emergency manufacturing plan. Control Tower is used to manage alerts.
Control tower is an up to the minute example of where the DSC is going. Control is a tool that is by very definition is dependent on the successful implementation of a more digital and integrated supply chain function. It receives the inputs of the Inventory Optimization module, which tracks orders, in transit goods, and inventories in aggregated warehouses. To operate effectively, Control Tower requires a lot of timely processed information from all around the customer distribution region under consideration. If control tower is working well, it is providing real time, or close to real time, aggregated information about where inventories are located and where they are going to be. As a supply chain manager faced with a decision about whether to send out of stock items to a customer using expedited freight, a costly decision, I need to know the answers to questions like, “is this inventory anywhere else nearby”, and “how profitable and critical is this customer, do I incur a shipping cost margin hit on its behalf, or not?” Without timely integrated information as the control tower might provide, I may need to make supply chain decisions with less than high quality information. At the time of this writing, during the COVID-19 pandemic, firms that have been slowing moving to develop the complex and sophisticated systems required to enable control tower, have started to say they will actually do it.
The final point to make in this case before we ask some questions overall is “how to we enable our supply chain associates to trust the data our sophisticated systems are producing?” The case firm invested years and millions of dollars into developing a more integrated digital end-to- end supply chain. In the end, many benefits of this investment rely on the behaviors and actions of supply chain associates. In a firm with a long history, and associates with many years of experience, there is likely some challenge in getting them to trust the data outputs generated by the new demand planning systems. If I’m a plant manager who has been prioritizing manufacturing runs based on relationships I have built over many years with regional sales managers. How easy will it be for me to now make decisions based on the recommendations of the demand planning algorithms? Will I immediately trust this data over what my regional contacts are asking for?
Digital Supply Chain Case Questions
- 1. How did the case company obtain the support, both operational and financial, to undertake such a large-scale integrated supply chain initiative?
- 2. Is this case example a true example of the digital supply chain we have defined it in this book? Or is it more traditional?
- 3. What are some examples of competitive threats that the case firm should be aware of? What kinds of digital supply chain strategies might they be competing with?
- 4. Is the case presenting challenges that are technology focused, or more about organizational behavior?
- 5. How could the case company ensure that there is support and compliance from its associates as they begin to transition over to utilizing data and information generated by the end-to-end systems and algorithms?
- 6. How much support do you think this firm’s supply chain leadership will need in order to accomplish its stated goals and experience performance improvements?
7. Does this case firm’s strategy also account for developing innovative products that will delight customers, increase satisfaction, and increase revenues?
- • The DSC represents a shift away from an order fulfillment orientation, to one that is more focused on demand stimulation while managing costs.
- • Demand management addresses how firms plan, react, and fulfill customer and consumer orders of its products and services.
- • A Customer-Centric supply chain looks more deeply into the front- end of transaction processes and reacts faster to customer behaviors and signals coming from outside the firm.
- • To realize the goals of demand sensing, stimulation, improved visibility, and satisfaction requires new sources of low latency data and more integrated analytics capability.
- • Supply chain leaders need to collaborate more closely and effectively with marketing, sales, and product development within firms in order to realize DSC benefits.
- • Supply chain leaders also need to develop greater capacities to collaborate with, learn about, and share information with customers and partners.
- • Supply chain leaders should enable the development of more predictive forecasting, going beyond traditional planning.
- • Supply chain leaders seeking new sources of information in the quest for better forecasting should practice digital data negotiations techniques, which utilize classic techniques of negotiations and apply them to the acquisition and trading of data with internal and value chain partners.
- • A set of demand data actions that will focus attention and efficiently improve operations involves; 1) determining high-value segments,
- 2) determining which data will help execute the segment design,
- 3) developing a plan to acquire the data, and 4) planning actions on how to use the insights and results.
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