Digital Trendsetters: Secrets of the Most Successful Supply Chains

Oct 5, 2016Kris Timmermans, Gary Hanifan and Stéphane Crosnier

What is in this article?:

• Digital Trendsetters: Secrets of the Most Successful Supply Chains
• Never Walk Alone

Having a super-flexible supply chain is as critical as having a super-efficient one.

Digital disruption is changing markets everywhere, and a highly efficient supply chain is only half of the story. Today's digital customers, in both B2C and B2B environments, want experiences as unique as they are, delivered "on demand"—and at hyperspeed. That makes a super-flexible supply chain as critical as a super-efficient one and digital capabilities have a critical role to play.

Although 85% of organizations have introduced the digital technologies that help enable supply chain flexibility, or plan to do so within a year, most still haven't realized the full, value-driving potential of these technologies.

One group, however, is different. We call them "digital trendsetters," and they are the top performers in terms of both profitability and revenue growth in our survey of 400 senior supply chain executives across 14 countries. These trendsetters are breaking away from the pack of "digital followers" because they are responding to digital disruption differently. Here's how.

Think Enterprise, Not Just Supply Chain

Digital trendsetters look at things differently. They use digital to own the customer experience, end-to-end, across the ecosystem. Unlike digital followers, whose approach is transactional and focused on providing an improved shopping and buying process, and faster and more flexible fulfilment, trendsetters take a more strategic view. They look to strengthen their ongoing customer relationships with regular updates about products and services, online self-service, support and feedback. In short, they use digital to enhance existing business models and develop new ones. By taking this strategic approach, trendsetters also drive value for the enterprise as a whole versus only for the supply chain organization.

Although 63% of trendsetters expect digital technologies to drive revenues, they haven't abandoned traditional processes and operational efficiencies—to the contrary. Cost reduction and on-time delivery remain important key performance indicators (KPIs) for them. But trendsetters have transcended these measures. They systematically use such additional KPIs as cost-to-serve, customer satisfaction and market share—and significantly outperform digital followers on these measures.

Raise Your Technology Game

By embracing controlled volatility, digital trendsetters aim to treat customers, products and suppliers differently—on purpose and on their own terms. They design their supply chain operations around the intersection of suppliers, products and customers, all the way to the end consumer.

However, unlike digital followers, who say that giving their customers a unified experience remains their primary supply chain objective, trendsetters strive to deliver a hyper-tailored customer experience: highly individualized, focused products and completely customized services providing buy-anywhere, collect-anywhere, return-anywhere capabilities via flexible channels.

For example, global energy management company Schneider Electric has leveraged digital to identify 10 different customer segments based on need, and it operates four different supply chain models for a hyper-tailored customer experience.

Hyper-tailored products and services require hyper-flexible capabilities, and trendsetters know that leveraging the full spectrum of digital technologies is key to enabling them. They continue to invest in analytics, mobility and the cloud—the digital technologies most highly favored by digital followers. But trendsetters also take digital further, investing significantly more than followers in the higher-order digital technologies that facilitate hyper-flexibility.

In fact, almost three times as many trendsetters as followers invest in artificial intelligence. Nearly twice as many trendsetters invest in the Industrial Internet of Things (IIoT) and intelligent products. Bottom line: Trendsetters outspend followers on digital 8:1 overall.

Cases in point: General Electric's Brilliant Manufacturing initiative leverages IIoT technology and advanced real-time analytics. The system enables decision-makers with the real-time visibility and deep operational intelligence needed to respond more quickly to unexpected events, as well as to balance plant production with quality and profitability objectives.

Amazon.com's patent for an "anticipatory shipping" system draws on a deep knowledge of customer preferences to ship orders before the customer has clicked "buy." The system also minimizes returns costs by giving discounts or allowing customers to convert unwanted deliveries into gifts.
As ownership of technology decision-making shifts from the CIO to the C-suite, executives responsible for individual business areas, COOs and CSCOs will also need to raise their technology game.

Never Walk Alone

Digital trendsetters are leveraging their digital investments to build new levels of collaboration—well beyond their four walls. Creating a flexible ecosystem where everyone has access to the right information to work together collaboratively toward a common goal is a top priority for as many as two-thirds of them. Unlike followers, whose focus remains on enabling collaboration among internal functions, trendsetters' ecosystems encompass all stakeholders, including start-ups, in a broad, fluid and proactively managed network.

One global aircraft maker, for instance, uses a cloud-based platform to track and manage supplier risks across a number of KPIs. The platform has enabled the company to secure the operational performance of a multi-tier network of suppliers challenged to keep pace as new aircraft production ramps up.

Trendsetters recognize the risks of data sharing, but they have used digital to enable safe, swift and easy access to information. By engaging proactively across a broad and fluid ecosystem, trendsetters are driving significant innovation.

An automotive company, meanwhile, incubates internal start-up groups that provide a means of rapidly developing and testing novel business opportunities in the mobility segment. Ideas can come from in-house "intrapreneurs" or outside sources, including a network of start-ups.

A Way Forward

Only the digital trendsetters have successfully combined all enabling digital technologies to drive superior performance. Coupled with their strategic focus and the courage to collaborate openly with outsiders, their digital capabilities help them gain a first-mover advantage in today's on-demand markets.

Trendsetters follow a predictable pattern: They pinpoint what capabilities they need next, take action to implement them in a meaningful way, and capture the benefits.

By taking the following steps, businesses can respond differently to digital disruption and transform their supply chain into a driver of significant new value:

Reinvent your supply chain business case. Preserve basic efficiencies—but examine how you could change your value proposition with digital and enable growth at speed for the enterprise as a whole. You can't, and shouldn't, do it all. Go after what can make a disproportionate impact on growth and profitability. New areas of focus, additional KPIs that capture market share and revenue generation, new tracking tools, and even more cross-functional governance will be needed.

Rethink your operating model. Scan your supply chain for digital enablement and let digital inform how you can reimagine your supply chain to truly reap its benefits. Up your spending on the more sophisticated technologies but don't fall prey to "bolting on" new technology to an old model—only a fraction of your potential will be realized. Look at the high financial impact technologies and ask, "What bold new moves should we make in our strategy, processes and organization to push far beyond today's reality?" And remember: If supply chain organizations cannot proactively propose capabilities to enable new models, the rest of the business will source them elsewhere.

Reimagine your ecosystem. Expand your ecosystem beyond your four walls and leverage digital to access and share data, while managing cyber-security risk. Engage proactively with strategic partners, including third-party partners and digital start-ups, to help you jumpstart innovative, value-enhancing capabilities.

Trendsetters know that what constituted a great supply chain yesterday is no longer good enough today. By doing digital differently, they are transforming their supply chains into superfast, digitally disruptive, hyper-flexible and highly collaborative enablers of superior customer service and profitable enterprise growth.