New Study Uncovers: Top Supply Chain Digital Transformation Trends
Change is happening at an unprecedented rate. Empowered by technological advancements, the demands of customers and ways to serve them have evolved so rapidly that “adapt or die” has become the mantra for corporate senior managers across the globe. With the average lifespan of companies in the Fortune 500 now under 20 years, today’s leading organizations need to be customer-centric, capability- and platform-driven, and have a strong focus on ease of engagement, coupled with relentless innovation.
Supply chains that leverage digital technology and grow and evolve at a rapid pace are foundational to supporting enterprises in the Transformative Age. At EY, we wanted to better understand the current state of digital supply chain transformation and whether companies are keeping up with shifting consumer preferences. We surveyed 500 C-suite and senior level executives at organizations greater than $1 billion in revenue in North, Central and South America, and across multiple sectors.
What we found was interesting, though not surprising —most companies identified themselves in a state of transformation. A resounding 86% of companies are building digital supply chains, and those who are more advanced in digitally networking with suppliers are seeing a direct impact on increasing market share. However, those at the lower end of the spectrum are seeing market share decrease.
An EY survey of 500 executives in the Americas shows success factors in building a successful supply chain, including a few surprises
Our survey discovered the two most important success factors in building a successful supply chain: end-to-end visibility (51%) and real-time responsiveness (46%). This makes sense as the market rewards those who can respond the quickest to changes in demand and supply, which in turn requires visibility to quality information from across supplier networks. Underpinning these capabilities are the latest technologies, such as data analytics, Internet of Things, control towers and artificial intelligence to capture, analyze and respond to the information and support people with “smarter” decision-making.
Many companies are transforming their supply chain capabilities with emerging technologies:
• One of the biggest wine producers in Italy, is using blockchain at scale to provide end-to-end visibility and traceability. Using a digital token and QR code, when scanned with a mobile app, the blockchain provides a full account of the wine’s DNA: when and where grapes were harvested, the bottling date, lot number and even fertilizers used in production. Furthermore, each time the bottle moves, the status of the bottle is also updated. The benefits are not just increased visibility; blockchain-certification proves the lineage of the wine to reduce counterfeiting and other losses.
• A global pharmaceutical company improved its forecast accuracy and responsiveness using machine learning. With the development and production of automated machine learning models, forecast error improved by an average of 15% and unlocked significant value in the form of improved working capital.
Our supply chain research also contained some surprises. For example, productivity and efficiency were the top two justifications cited for digital transformation investment. This suggests that while companies have more strategic end-state goals, such as visibility and responsiveness, they still justify investments in terms of short-term financial outcomes, notably cost savings.
Companies that solely focus their supply chain investments to achieve cost efficiencies are missing the angle of playing the long game of transformation. While there are massive opportunities to extract cost from the supply chain due to the high levels of complexity, information latency, poor data quality, etc., simply layering new, leading-edge capabilities on top of an inefficient supply chain foundation may result in missed opportunities.
In times of market uncertainty, a better strategy is for companies to not only “playitsafe” but also “doubledown” on new supply chain investments. To be sure, enterprises should focus on operational improvements, however, there is also an opportunity to digitally network with additional suppliers, customers, third-party logistics providers and more on cloud-enabled platforms to increase information sharing and overall supply chain visibility. The most successful transformation programs identify the capabilities needed to compete in the future and then prioritize them on a future state roadmap that balances easy fixes with longer-term goals of creating strategic capabilities.
Securing your readiness to survive and thrive in the Transformative Age and in times of uncertainty requires that you play it safe and double down. It essential that enterprises focus on foundational supply chain capabilities to make sure they are executing on the fundamentals.
However, firms should also not be afraid to place big bets on the future regarding their understanding of the latest geopolitics, societal-cultural shifts and digital disruptions. Emerging technologies, such as drones,3D printing, robotics, autonomous vehicles, lights-out planning and much more may end up providing significant competitive advantage. With some large internet-based companies starting to make headway with their advanced planning, distribution and delivery capabilities, now is the time to take supply chain reinvention seriously— before it is too late.
The views expressed by the presenters are their own and not necessarily those of Ernst & Young LLP or other members of the global EY organization.