The Digital Supply Chain road, or Supply Chain 4.0, is the path to the future.
Enabled by highly publicized technologies such as Blockchain, Big Data, the Internet of Things, Autonomous Vehicles, Cloud Computing, Artificial Intelligence, Virtual/Augmented Reality, 3D Printing and more the Digital Supply Chain holds great promise and exciting opportunities.
But even with established technologies the road to implementation can be challenging to say the very least.
As you are developing your Digital Supply Chain strategies it is important to understand, consider, and account for the inevitable problems and obstacles that will test your resolve and your leadership.
It is an extremely exciting time to be in Supply Chain. The range of new technologies that have direct applicability to Operations, Logistics, Procurement, Distribution, Planning, Management, and all end to end Supply Chain activities is staggering and unprecedented.
But anyone who has been in Supply Chain long enough and has gone through the experience and pain associated with implementation of new processes, systems or technologies knows that there are problems galore. Even with established technologies such as ERP, TMS, or WMS systems just surviving a system implementation can be a miracle.
Given that there is a lot of past experience with obstacles and hurdles associated with trying something new it is most appropriate to consider those experiences, learnings and battle scars as you develop your strategies and plans to implement new Digital technologies.
1. Lack of a Strategy
It can be very exciting to think about all of these new technologies and just jump in and start implementing things. But Supply Chain’s scope and responsibility is so vast, and there is so much technology and complexity involved, that a knee jerk approach to going Digital without a larger plan will inevitably fail.
Develop a thoughtful overarching Supply Chain strategy for your business first, including deployment of a Digital Supply Chain, and from there you will have a plan and approach to invest and implement these technologies in a more calculated and impactful manner. This can be an iterative process whereby you refine your strategy as knowledge increases and circumstances change over time.
2. Technological Immaturity
Technology is always changing, improving and advancing. It can be difficult to try and keep up with the latest advancements which will invariably surpass whatever you implement. For those who are thinking of developing internal, home made systems they will soon find that this is not only a resource intensive and time consuming approach but it is costly and will be soon outdated.
There are enough companies out there developing Software as a Service (SaaS) covering all technological needs that you can buy or rent software more cost effectively than doing it yourself.
Further the company providing the software will do all of the work keeping it up to date and managing all of the back office work.
This approach will allow you to keep up with any and all technological advances. And if you wait until technology is full developed you will never make any changes. Even well understood systems like ERP and TMS are constantly being improved.
Another issue is the lack of standards. As the technologies evolve it is critical that there be some set of standards. Implementing Blockchain, for instance, requires that literally tens of thousands of suppliers be operating on the same Blockchain platform. We discuss this in Maritime Industry in Search of Blockchain Orchestrator. A failure to adopt standards will impede technology adoption and progression.
3. Fear of Failure
Implementing new systems, making big changes, and introducing technologies can be scary. And there is absolutely no guarantee that these investments will be successful. In fact there is a very good chance that at least some aspect of what you are trying to change will fail or at the very least fall short of expectations.
And especially for those who are leading the change they are, and should be, held accountable. Executives will want answers and some of them truly do give lip service to the idea of understanding and accepting failures.
But doing nothing or only making safe changes will do no one any good. True leaders will be courageous and bold and drive changes that are not 100% guaranteed to succeed.
If there are failures then the key is to understand what went wrong, to learn from these mistakes, mitigate impacts, and make course correction as needed.
4. Cost and Return on Investment Hurdles
New Supply Chain systems can cost a lot to implement. Depending on what changes you are making millions of dollars can be required. Especially when you get in to making physical changes (eg. conveyor, sortation systems) in Warehouse or Distribution Centers the dollars can add up pretty fast.
Any new investment must also inevitably clear financial hurdles within your company. Return on Investment, payback period, and cash flow are all items your finance team will certainly want to see in your business case.
While the expenditure of money is unavoidable if you are going to make any meaningful change in the area of digitalization there could be alternatives.
As discussed earlier there are options to rent, or lease, software (SaaS) for instance and avoid the extensive internal resources required with developing and maintaining home grown software.
Additionally we believe that to bring these technologies into the reach of more small to mid size companies there will be a greater proliferation of companies offering services which can serve these needs. We call this Supply Chain as a Service (SCaaS).
Think about outsourcing not only software but services as the platform to create your Digital Supply Chain.
5. Inadequate Resources and Skills
Everyone in your organization is busy. So when it comes time to tap people on the shoulder to work on a new project there is can be real challenges in terms of resource availability.
On top of that the skills that you will need on the Digital Supply Chain road can be significantly different from the skills you need to run today’s conventional Supply Chain. In Quantum Leap to the Top 10 Supply Chain Skills of the Future we discuss the many characteristics that need to be developed in your team.
There will be a return on your investment in terms of resource savings. Simply there will be fewer people needed to do transactional activities and more people required to do more analytical and higher level activities.
Investment in resources and skills development is essential to realizing your Digital Supply Chain strategy.
6. Lack of Buy-In
Making change happen is often very difficult. The type of change you are making affects processes, systems, policies and practices, long standing ways of operation, and most significantly people’s jobs.
For that reason there can be just as many people working to make your changes fail as there are trying to help you succeed. At its extreme people can actually work to sabotage your project and stop it in its tracks.
There is no denying this reality. As such it is best to face it head on. For any change that you are making you must engage Human Resources and be ultra sensitive to the human aspects of the change and not just the technical aspects. For that reason we believe that you must incorporate a Change Management Work Stream into any project.
It is also most important to get Executive Sponsorship for your program. Having the CEO, for instance, acting as a vocal supporter and advocate for the Digital transformation you are undertaking will help to quiet dissension and bring people on board. You must spend the time to educate, update, and convince Executives of the importance of your Digital Supply Chain strategy.
7. No Process Improvement Focus
Most people think that there are opportunities to improve systems, job tasks and operating procedures. Unfortunately many people also think that just installing a new system on top of the current way of doing things will make things better.
Just automating the existing process will not improve it or make it more efficient. It will only make the existing bad process produce bad results more quickly.
Before ANY system change it is absolutely critical to map out both the Current State and Future state processes. Optimize the process FIRST and then install a system that supports, and advances, the new process, not the old process!
8. Time is Not on Your Side!
Unlike the song time may not be on your side. There could be issues of company survival, competitiveness, cash flow, resource constraints and more.
And an ambitious Digital Supply Chain strategy can be very complex requiring the deployment of multiple technologies. By definition this can be very time consuming.
If you do have the pressure to make changes faster then lack of buy-in may not be your issue. So you do need to consider alternatives to help shrink the time line to implementation.
As discussed previously Supply Chain as a Service (SCaas), SaaS, Outsourcing and more are all strategic options that will enable you to get going faster.
The Digital Supply Chain Road
The prospects for a Digital Supply Chain are incredible exciting. It is the future. It only a matter of time before your competitors will be leveraging a Digital Supply Chain platform to succeed.
But as exciting as the Digital Supply Chain road is it is also full of potholes and obstacles. It is important to be cognizant of these challenges and incorporate strategic elements to mitigate, to avoid, or to overcome these.