The supply chain has come a long way since the days it functioned mainly as a tool for resource management, logistics and optimization. With today’s digital tools and technologies available, it has become easier to take the function of supply chain to a next level. Enhancing digitalization in the supply chain helps you to balance between service, cash and costs. Making sure your supply chain is agile, intelligent and responsive.
To make your mark as a company in this economic environment, and be prepared for harsh competition, companies will need to adopt an agile digital supply chain, which can efficiently address shifts in both supply and demand.
Digitalization, is often seen as a hype or trend word, which creates buzz, but more frequently confusion. What is needed to digitalize your supply chain?
Digitalize your supply chain
Today digitalization in the supply chain, something which is necessary for all companies who would like to step ahead and grow, is limited to a small amount of companies which have taken their supply chain in the direction of digitalization. All too frequently we see companies struggle with robust, inefficient systems, which fail to add value, but which are integrated in their entire supply chain. Why is that?
In one of our webinars, we discussed the human averseness to algorithms (have a look at the webinar here). This is an issue which we need to overcome in order to drive the digitalization process within your supply chain. What do we mean with algorithm aversion? Let’s clarify with an example: Imagine the following situation: you’re in your car and you need to get to your work. However on your way to work there is a traffic jam reported. You have a GPS in your car. If you try to avoid the traffic jam by using an alternative route your GPS is suggesting you, and it ultimately takes you longer then first suggested, you won’t trust these suggestions as much anymore. On the other hand, if you yourself try to avoid the traffic jam by going on another small road you know, but it doesn’t work out, you will be more forgiving for your own judgement: this mistake doesn’t mean you’ll never trust your own judgement anymore. People tend to be more forgiving if they themselves make mistakes, then if a digital tool does.
The main reason why we have difficulties to put trust in digital tools, is because we don’t understand them. We don’t understand what is driving the suggestions or actions a digital system makes. That’s why it is very important to provide context in the digitalization process.
One of the other important hurdles to overcome is to get your company in a digitalization “state of mind”, the presence and support from top management in the digitalization process is crucial. To function in a connected, informed, smart and automated way, the supply chain will be further and further embedded into every other function. Mature companies which are at the front of digitalizing their supply chain processes have integrated their supply chains into functions such as finance, procurement or marketing. This thus requires top leadership to play an integral role in the success of the supply chain digitization, which is becoming an enterprise-wide transformation.
From our experience, a lot of companies want to save, but saving on digitalization, is just a bad idea. Continuity of investment in supply chain digitization will continue to be key to achieving optimal results. Mature companies recognize this, and know that investing will help them creating competitive advantage and value.
- Create an open mind to new technologies: Make sure to create a company culture that embraces change and embraces new and innovative ways to enhance companies’ processes.
- Don’t underestimate the supply chain: The supply chain is a key instrument to create value. It helps you balance cost, service and cash.
- Be clear about objectives: how is your supply chain structured today? Take it step by step, this is not a one-shot action, it is vision. Which are the actions you can take to start the process? Work with the Pareto principle: how can I create most value with minimal effort? But also don’t let it paralyze you. Dare to invest in new technologies which can lead you the way to growth.
- Ensure your top management is engaged. Supply chain digitization should be driven by your companies’ management. While it can be devised and managed by the top supply chain executives, it requires support from C-level.
Don’t let algorithm aversion make you lag behind. Make sure to build trust and give context in the digitalization process!
Learn more? Watch our on-demand webinar discussing this topic.