The term digital supply chain has been around for a few years and may have, historically, conjured images of an economic utopia. Within this utopia, partners are completely interconnected, products and services move from provider to customer to end user effortlessly with only a thought, and there are no challenges – ever. After all, this is a utopia, right? The reality is much more complex than that and while many organizations are on the cutting edge of digitizing their supply chains, many more are woefully behind.
With the advent of the Internet almost 30 years ago, greater interconnectivity has become the norm. This interconnectivity is so pervasive that we often don’t notice it until well after the fact. Fold in advances in Artificial Intelligence and Blockchain and before you know it, we find ourselves in an environment that is not only digital, but increasingly intelligent.
Of course, many of us would find these advances wonderful – until we stop to think whether we and our organizations are equipped for such an environment. Organizations that are not prepared for advances in technology, true interconnectivity and the digital supply chain risk not only missing out on opportunities, they risk going out of business. The digitization of our world – especially as it relates to how we conduct business – is real. In fact, there are 3 realities associated with this notion of a digital supply chain.
First, the digital supply chain is already here
Customer organizations espousing digitization, real-time analytics and cloud technology, are miles ahead of those who still rely on paper. As a result, they discover their customers’ wants and needs early and are able to nimbly move to deliver. Not only are they nimble, their supplier base is nimble. Their suppliers align themselves in ways that connect seamlessly to their customers, facilitating efficient operations with little to no waste, redundancy and errors. Customers don’t want to slow down and wait for suppliers that continue to operate in an analog, paper and manual world.
Second, customers will look for suppliers that fit, remove suppliers that don’t
Since more customers are transitioning to digital supply chains with greater frequency, they desire relationships with suppliers that are currently equipped to connect and operate within their digital universe or they want suppliers who are willing to adapt to such an environment and adapt quickly. This adaptation would include aligning with customers’ process automation capabilities, integrating with their operation’s IT configuration, data sharing through customer’s Internet of Things (IoT) devices, and allowing for customer data analysis to refine purchase price and frequency. At ground level, these integrations might include connectivity with customer portals, or invoicing and payment networks. It could also include operating within their chosen Blockchain platform.
Third, the digital supply chain will only get…well…more digital
Although many customer organizations have transitioned to digital environments, we’ve only scratched the surface. The advent of artificial intelligence has told us what’s possible from a process and problem-solving perspective, but the technology, for all intents and purposes, is in its infancy. Additionally, Blockchain technology is also in its infancy, as a number of Blockchain platforms have built and implemented 1.0 versions of their environments with the first use cases being rolled out and used now. Over the next five years, A.I. and Blockchain will complete their respective revolutions and marry their capabilities where every element of the supply chain will be interconnected. At that point, business can move, literally, at the speed of light.
What does this all mean for supplier organizations? It means suppliers must be prepared for what’s coming. Following are 4 areas of preparation these organizations must prepare for to ensure they take full advantage of the current digital revolution and to maximize their competitiveness.
- Determine who owns digitization in your organization
Establishing ownership of any organizational transformation must be done prior to any real work. To ensure alignment with customer digital supply chains, the responsibility could fall to any member of leadership. The CFO, for example, could take overall ownership in order to monitor and protect the organization’s revenue stream. The CIO could spearhead the initiative, as alignment with new and fledgling technologies should fit neatly into their area of expertise. Members of the sales and customer support teams are major stakeholders in the effort to maintain and maximize customer relationships. They could take partial ownership of the initiative as well. Whoever takes ownership must not only interact well with customer-side relationships, they must be able to establish and maintain buy-in with key members of their own organization during the process.
- Have a digital vision
It’s one thing to agree that your organization should do something in order to align with your customers’ digital supply chain. It’s a completely different issue determining what that alignment would look like. Having a vision should entail developing a strategy that encompasses where the organization currently is, where the organization should be, what needs to change in order to transition the organization to its goal, ensuring buy-in from key stakeholders and explaining the vision to staff and customers.
- Understand what’s important to your customers
Any transformation must also take into account the integration of organizational digitization with current and future customer needs. Some customers may require integration with commercial solutions readily available to any supplier organization while some may build their own – requiring a more tailored (and possibly costlier) approach. Understanding what’s required by those customers that are most important to your organization’s bottom line will be a key component that should be incorporated into your roadmap.
- Develop a digital roadmap
Once your organization has a clear vision, it’s critical to begin laying the steps necessary to bring that vision to fruition. Even if the vision is clear, developing a roadmap can be a significant challenge for any organization. A roadmap usually involves doing analysis around cost, organizational risk, impact on staff and resource requirements – just to name a few. It’s important to note that addressing staff competency during an organizational transition, especially one that involves nascent technology, is vital but can be a sensitive topic. Often, organizations find themselves ill equipped to engage in such transitions and may need to secure additional staff while potentially displacing existing staff. Other organizations may initiate a hybrid approach, where existing staff are trained on necessary technology while gaps are filled with new hires. Normally, it’s difficult for staff to embrace change, but proper leadership, thoughtful execution and effective communication can mitigate discomfort while keeping everyone’s eye on the objective.
- Ensure Digitization Resolves Company Inefficiencies
While alignment with customer supply chains is paramount to maintain good client relationships and position for future growth, it’s just as important to ensure any digitization efforts also resolve inefficiencies within your own organization. That may sound obvious, but when it comes to envisioning where the organization needs to be, developing the road map and executing that vision, suppliers must make sure they are refining and digitizing their own operation for greater efficiency and not just implementing ill-fitting technology that only pleases the customer. Implementing technology that also drives internal efficiency leads higher margins, increased revenue, better competitive positioning and greater opportunities.
The digital revolution is currently upon us in relation to customer supply chains. Supplier organizations must prepare themselves for this new reality or risk being left behind
Ernie Martin is Founder and Managing Director of Receivable Savvy. He brings over 25 years of experience in financial supply chain management, marketing and communications and draws upon his extensive experience to share knowledge and best practices with AR professionals. He currently chairs the Vendor Forum of the Federal Reserve Bank of Minneapolis and his resume includes time at several well-known brands and companies such as Tungsten Network, Delta Airlines, CIGNA Healthcare and Georgia Pacific as well as a number of years as an independent consultant.