Theme Two: Data Issues are Pervasive
At a large global consumer products firm, one senior marketing executive told us that if data is the new oil, then they do not have enough refineries. This metaphor tells us a lot about how digitally oriented leaders are recognizing that firms are on the verge of becoming more data-driven and of leveraging data analytics for better and faster decisions. They are excited about the idea of introducing new data sources to help improve the resolution of analytic and predictive power. What they also speak of is the almost universal struggle to realize these visions for a large part of the problem is due to legacy system data constraints. Traditional firms commonly continue to grapple with disparate transactional system data, and while advances have been made in data quality management in recent decades, the task of aligning master data, improving accessibility of data from siloed sources, and obtaining meaningful new sources of data that can be validly modeled is still beyond the reach of many.
Theme Two: Data Issues and What Is Being Done
Data issues in large organizations are an evergreen problem. The volume, velocity, and variety of data being generated, stored, processed, and utilized continue to grow exponentially and will continue to do so in the foreseeable future. For firms that not only have legacy systems and sources, but data governance practices that are late to the game, or nonexistent, this could form a significant barrier to digital supply chain transformation. Most firms we have spoken to have undertaken some data quality initiatives and have established new data governance practices, appointed data quality champions, and have some master data management projects in flight. Objectives are being set for data accessibility and provisioning, with a mindset of providing data consumers in firms with access to the best sources of data closest to the original records. The question is, however, is it really enough? Data lakes, the current term for an idealized repository of high quality and accessible one-stop shopping for data, are not up and running in many traditional firms and if they are in production, they are often limited in scope, or quality, or type of data made available to the firms’ analysts. Technology improvements may still be untapped, in cloud-based connectivity to multiple, and often unstructured, data sources, yet many supply chain leaders insist that having a fully operational and trustworthy data lake would vastly improve their speed to realize the digital supply chain benefits. If this seems to be a highly significant and high-impact challenge for firms seeking to change, what is the core issue? Our perspective is twofold. One issue pertains to creating a data culture at firms having a sense of data as a core strategic asset for the firm, thereby requiring extreme care in its handling. Digital native companies have seemingly grown up on the central importance of data to their operations where data was the engine on which they ran their companies, made decisions, and executed their business models. Traditional firms need to adopt this way of thinking and operating from the ground up and it will constitute a leadership challenge of the first order. The second issue is more practical: firms need to adopt standardized data governance practices across their firms. Clearly, this is easier to say than to execute as most supply chain leaders report. One of the key challenges to enterprise data governance is the need for the firm to act in concert, to apply governance principles across functions to enable actual data lake benefits. The driving of enterprise data governance that spans functions and allows for accessibility of customer information to the supply chain should be one of the top leadership priorities of supply chain executives.
Theme Three: What Are We Measuring?
The third theme emerging from conversations with supply chain leaders is the clear need to measure performance in new ways. It is not that the key metrics of supply chain performance have changed. Inventory turns, On-Time-In-Full, Transportation Costs, amongst others, will continue to be key performance metrics for supply chains. As we mentioned in Chapter 7, understanding how supply chain performance metrics impact the overall financial performance metrics of the firm is a wise strategy for engaging across organizational boundaries. What we are referring to in this theme, however, is more about new measures. Digital supply chain may require new metrics and new ways of interpreting the results of the metrics. For instance, one of the key objectives of the digital supply chain is to reduce costs while retaining customer satisfaction. We have heard firms say they are concerned about not sacrificing quality for the sake of efficiency, yet supply chain leaders are under constant pressure to reduce costs. This goes back to the idea of shrinking, reducing, or better managing trade-offs. Supply chain leaders are well aware of these tradeoffs. Why aren’t they measuring movements along these curves more often? Some firms speak of developing new, more integrated measure models. Some technological innovations, such as IoT, offer the possibilities of new data points to help gauge the life cycles of products more effectively, with greater transparency and resolution. We can only speculate on when these new data points will become part of new metrics that provide greater insights into more integrated business performance.
Metrics that offer insight into greater enterprise performance and add insight to important, yet hard to measure, factors such as human and product safety are still, it seems, on the drawing board. Metrics that support, and encourage behaviors that benefit the whole, even if individual performance is compromised, are needed if leaders are to enact integrated supply chain strategies.
Once new metrics are developed, tracked, and reported, leaders will need to demonstrate that they are paying attention to them and basing decisions on them. To bring this idea of new metrics to life, we have included a proposed set of digital supply chain metrics in the appendix of this book. The metrics are merely thought experiments, based on research conducted by the Digital Supply Chain Institute in 2017. We have not seen companies using these types of metrics yet. Perhaps a shift to measuring digital actions will lead to more rapid transformation to the digital supply chain.
Theme Four: Developing a Supply Chain Leadership Mindset
In the time just before the age of digital supply chain began to emerge and take hold, one of the world’s largest consumer product brands was establishing a well-publicized supply chain leadership program. They shared their idea and successes publicly at several supply chain conferences. Articles were published about this leadership initiative, and Gartner even mentioned it in their annual ranking of supply chain excellence. The rationale for the program, as it was explained to the public was tied to business growth. The firm stated its desire to grow its business rapidly by doubling or tripling its size in global markets in the upcoming decade. At the same time, the firm realized it was not sustainable, or even possible to do so if the supply chain supporting this growth also doubled in size and cost. Recognizing this functional dilemma, that business growth must not carry with it a lockstep growth in supply chain cost is an eye-opening insight. If your finished goods utilize a natural resource as an input to production, does it mean you can simply count on doubling or tripling your use of that perishable resource to support your revenues? What if the resource required for the products was becoming scarce, perhaps shrinking, or causing less- developed parts of the world to suffer? The firm realized this approach was not sustainable.
But then how this growth could be managed in a more sustainable way? Product innovation might come into play, as well as efforts to promote and conserve natural resources. The supply chain plays a particularly important role as a majority of a firm’s costs are tied up in product manufacturing, distribution, and transportation. Supply chain leaders are, in fact, accountable for a large portion of managing this dilemma. The idea of a supply chain leader dealing with this dilemma, these trade-offs, the innovation required, the problem-solving needed to overcome demands of sustainable growth has come to be called the supply chain leadership mindset. The supply chain leadership mindset concerns not simply taking orders from the upstream functions and passing products downstream. It is about thinking across boundaries. It is about looking for ways to eliminate waste. It is about finding ways of becoming more efficient without losing quality and of continuing to satisfy customers. Breaking down functional silos, improving end-to- end visibility, improving processes through innovation, communication, and problem-solving, are all part of a supply chain leadership mindset. Great supply chain leaders have always worked on reducing bullwhip, improving forecast accuracy, finding more efficient transportation networks, and differentiating supply chain designs based on segments and channels. They have always thought of ways of becoming more customer-centric, of focusing on innovation that better meets customer needs, and of working in more integrated ways with value chain partners.
They attract better and better supply chain talent and work with the suppliers of talent in productive ways. They invest in leadership development programs for their key talent while improving alignment with the goals and strategies of the firm. They realize that firms often compete with one another based on the quality and efficiency of their supply chains.
Great supply chain leaders were focused on end-to-end supply chain before the “digital” appendage appeared. They were, in short, doing all of the right things, and moving the needle on the challenges that were important. To close this volume then, we will address and summarize what is truly different about supply chain in a digital world. In a digital-, data- and technology-driven business, one that relies on a more seamless integration of the value chain, old leadership behaviors will not deliver success. The difference between traditional leadership, and digital comes down to the supply chain leadership mindset. The mindset that inspires all of your firm’s associates to demonstrate the courage and have the confidence to step across the threshold of functions. It is a collective leadership. It cannot be accomplished alone. Setting your teams on the same pathway, the same journey, to a more digitally integrated approach to business performance is the essence of leading the digital supply chain.