Think before you begin: three prerequisites for digital supply chain transformation
Léo Ducrot and Steven Depue - August 17, 2020
Supply chain leaders commonly believe that a digital transformation journey is key to making their businesses more efficient, agile and resilient in a changing landscape. Digital supply chain planning helps them optimize asset and means of transportation usage, as well as increase levels of service and reduce costs.
But the right foundations need to be in place before it makes sense to embark on any such journey. Here are the three essential prerequisites for a successful digital supply chain transformation.
1. Aligning with corporate strategy
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The need to align a supply chain project with corporate strategy looks like it’s stating the obvious. Yet we’ve seen quite a lot of digital transformation projects at odds with a company’s fundamental strategic decision-making. How could that happen?
One reason could be that the project was pitched as merely ‘moving from spreadsheet- to software-based planning’, narrowing its scope to configuring tools and integrating data. The project might be budgeted in terms of ROI as a result, and would therefore receive only modest attention from senior management. Opportunities to better align operational practices with strategic goals would then have been missed.
Which is not to say that senior management being fully engaged guarantees a good strategic fit.
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For example, a company going through a fundamental shift in strategy not yet fully translated into operational practices will not be able to reap the anticipated benefits from automating its supply chain planning. Indeed, it does not make much sense to automate existing tactics and operations where corporate management just decided, for whatever reason, to turn to a fundamentally different market.
The target tactical and operational processes should be in place first. We strongly recommend that supply chain leaders firmly align their processes with corporate strategy prior to implementing supply chain planning intelligence.
2. Ensuring your organization is equipped to meet the challenge
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An additional pitfall observed in digital transformation projects arises from the false assumption that an organization is sufficiently mature and ready for the journey. While the supply chain organization may have defined the necessary processes in line with corporate strategy, reality could lag behind.
Are the processes used systematically everywhere in the supply chain? Are there any weaknesses? Are there parts of the organization or functional areas that are not up to standard?
These are tough questions that are difficult to answer. Most supply chain leaders have a general understanding of the level of maturity of their organization, but they are not always fully aware of maturity deficiencies that might exist in some areas. Yet it is essential to identify and mitigate all the weaknesses before attempting to implement a digital supply chain solution, or the project is bound to disappoint.
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3. Building a strong business case
The third pillar that needs to be in place before embarking on a digital supply chain transformation is a solid and formally outlined business case. We’ve seen how companies launch projects without first clearly defining their ambitions.
What are the strategic benefits expected from the project? What KPIs do we expect to improve? What are the expected quantitative and qualitative gains for each area of the organization?
All of this has to be described in sufficient detail and agreed upon by all parties involved. It’s also important to clearly communicate the business case to the project team so that they can consistently make the right decisions in the course of the project, remaining focused without getting lost in the technicalities.
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Conclusion
Digital supply chain transformation is a unique opportunity to take operations to a higher level. However, a transformation program only makes sense if the right foundations are in place: the project must be perfectly aligned with corporate strategy, the organization’s maturity must be at a high enough level, and a clear business case with all its anticipated benefits must be established and communicated. We discuss each foundational pillar in greater detail in other blog posts, including what organizations can do if they face issues in the following areas:
- Ensuring a perfect strategic fit
- Assessing and improving organizational maturity
- Developing and communicating a business case for supply chain transformation
One common factor is the crucial importance of senior management being fully engaged when laying these foundations.
Is your organization all set for a digital supply chain transformation?
Léo Ducrot
Advisory Manager
Biography
With his acknowledged expertise in supply chain planning and inventory optimization, Léo assists companies worldwide to improve their planning processes, aligning them more successfully with their corporate strategies.
Steven Depue
Advisory Manager at OMP BE
Biography
With a background in management consulting and technology implementations, Steven delivers strategic and operational planning advice and customized solutions to meet the supply chain challenges faced by customers worldwide.
