Businesses who resist digitalising their supply chain are at risk of failing to meet customer demands and missing out on significant cost reductions, according to new research from PA Consulting, the global innovation and transformation consultancy.
The need for a robust supply chain is heightened by unforeseen global events such as the coronavirus outbreak or Japanese tsunami, which threaten severe disruption to supply chain infrastructure.
The study of over 100 cross-sector global supply chain leaders shows that despite recognising the business advantages of smart supply chains, converting ambition into action is a challenge; 69% of leaders admit their supply chain strategy is not innovative enough and 79% of organisations don’t currently have the right mix of skills and capabilities.
The report “Power your potential: the value of the smart supply chain”, in partnership with the University of Nottingham, explores the business benefits of digitalisation. Unlike traditional supply chains, a smart supply chain is intelligent, connected, agile and provides businesses with greater insights into how customers use products. This enables them to forecast demand, and supply products more accurately and efficiently – unlocking growth opportunities.
PA evidence reveals early adopters of smart supply chains have seen a 10-15% cost reduction since migrating from a traditional supply chain. Yet less than half of senior leaders surveyed (47%) said they were specifically interested in the potential of smart supply chains to reduce operating costs, suggesting they’re overlooking an opportunity to significantly improve their business’s bottom line.
Another key incentive is that the data from smart supply chains provides leaders with better oversight of customer demand, inventory levels and potential risks. In the midst of the coronavirus outbreak, it is critical that supply chains are robust enough to mitigate disruption. Although the exact consequences are unknown, the virus threatens to impact all areas of the supply chain – from sourcing materials, to logistics to consumer demand. The enhanced visibility provided by smart supply chains leads to earlier risk detection and, ultimately, damage limitation.
George Marinos, smart supply chain expert at PA Consulting, said: “Applying digital technologies in the supply chain enables businesses to break new ground in terms of performance and customer focus, sparking a passion for innovation in a fast-changing world. They create direct, real-time connections with customers so that organisations can give them precisely what they need at the right time. This generates real value. As a result, our clients commonly see benefits that far surpass their original requirements.
“But as the research outlines, these will only be achieved with higher investment and a clear long-term ambition to embrace the full range of technologies and opportunities. Every leader should look to the smart supply chain to power the possible in their organisation – the opportunities are too considerable to ignore.”
PA’s research shows that the appetite for overhauling supply chains exists, with 61% of organisations – across life sciences, industrial, manufacturing and automotive, consumer goods, and aerospace and defence – planning to implement significant technology-led improvements into their supply chain within the next three years. However, concern over the difficulty of implementing such technologies risks stalling progress.
PA has identified four critical actions senior leaders can take to overcome the perceived complexity of the technologies associated with smart supply chains, to ensure their systems are as intelligent and forward-thinking as their ambitions:
- build your smart supply chain vision to suit your purpose and ambition, with the ultimate aim of creating a responsive smart supply chain
- understand the total value opportunity by taking a long-term view of the wider supply chain
- accelerate technology adoption by scanning, assessing, piloting and scaling available options and linking their use to value outcomes
- catalyse the business to execute, developing your processes and people with a relentless focus on efficiency, agility and exceptional service.