Components of a Successful Digital Supply Chain Innovation Journey

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The Toyota Way is not a recipe for creating a digital supply chain, writes a McKinsey report. Other companies may become stymied by one singular metric or process, become too IT-driven, or lack a business champion to lead the effort. Others may struggle to find talent and funding. These are all common, but not fatal, obstacles for companies on their journey to digital supply chain success. Today, we will discuss Supply Chain Models and how to transform them into options viable for this digital age

In this Article

Introduction
Supply Chain Models (SCM)
Balancing Resilience
Sustainability
The Human Element
Key takeaways

Introduction

Supply Chain Models (SCM)

The most common Supply Chain models are as follows along with their applications

Agile Model is ideal for businesses that deal in specialty order merchandise
Continuous Flow Model offers stability in high demand market but with little fluctuation
Custom Configured Model provides custom configurations at the production and assembly level
Efficient Chain Model is for businesses that are in competitive markets and end-to-end efficiency is a must
Fast Chain Model is for businesses with products that are trendy and have a short life cycle
Flexible Model provides the freedom to meet high demand peaks and manage long periods of low volume movement
Supply Chain Operations Reference (SCOR) model is to assess waste, establish standards, and continuous improvement in the SCM system

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For strategic decision-making, one of the most promising models is the SCOR Model. It has divided the main business into different processes which creates an environment of constant engagement, and improvement for the business by the management. It further assists firms to improve the processes at the macro as well as the micro-level. The model defines the elements of supply chain management – Top, Configuration, and Process Elements,

Top-level has defined the scope and content of the supply chain
Configuration level has configured the company’s strategy for that supply chain
Process element level fine-tunes the company’s operations tactics and strategies. and contains process element definitions, process performance metrics, and best practices

The Top-level of this Supply Chain Operations Reference (SCOR) model has five different processes which are also known as components of Supply Chain Management – Plan, Source, Make, Deliver and Return. Let’s deep dive into each component:

Plan: It is imperative to plan in order to control inventory and manufacturing processes. Utilizing analytics, companies develop a course of action to match supply with aggregate demand. ‘Source’ refers to procuring what has been planned. ‘Make’ refers to planning what is adequate for production and ‘Deliver’ refers to delivering on time with quoted lead times. In addition, to avoid Bullwhip effects, it is a good idea to keep a close eye on demand variations across the value chain. Companies, for instance, predict market demand using analytical tools and plan raw material requirements using systems like SAP ERP (Material Requirement Planning).
Source: In sourcing, vendors are identified who will provide goods and services most economically and efficiently to meet planned/actual demands. It is necessary for suppliers to meet certain standards so that the firm can deliver quality goods to clients. Both perishable and non-perishable products can be sourced. To support a minimal inventory approach, it is mandatory for perishable products to have a minimum supplier lead time. As opposed to perishable products, non-perishable products must have a quoted lead time less than the number of days until inventory reaches zero, thus preventing revenue loss.
Make: In accordance with the preferences of the consumer, the firm will perform all activities related to the transformation of raw materials into finished products. Supply Chain Management includes activities such as assembling, testing, and packaging. Both (manufacturer and end-user) benefit from consumer feedback because the company is continuously improving its production operations.
Deliver: Direct/indirect integration with consumers is another important component of supply chain management. It contributes significantly to the firm’s brand image. As consumers demand, the company’s delivery channels and logistics services must deliver finished goods and services according to expectations. To have a seamless delivery, firms utilize various freights – road, air, and rail.
Return: It is a post-delivery customer support process that is associated with all kinds of returned products. It is also known as ‘Reverse Logistics’. It is one of the most important components of supply chain management to minimize the potential deterioration of relationships with customers. On the flip side, this process provides the same course of action for the firm towards its suppliers. The firm returns the low quality, defective, expired, or excessive raw materials to the suppliers/vendors.

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Balancing Resilience

While companies have been investing in new technologies and infrastructure to become slimmer, more agile, and more efficient, they have not yet balanced these investments with resilience. Resilience demands a company’s ability to deal with unexpected events. While investing in raw materials may reduce efficiency, it also ensures product availability in case of a disruption. The question is, how can companies achieve this balance?

For a company to benefit from the emergence of a digital supply chain, data analytics should be at the center of the innovation process. Digital supply chain analytics can help companies better direct business operations and increase performance. In a recent survey, 68% of respondents expected to be able to analyze most of their extended supply chain data by 2021. Only 23% said they had already achieved this goal.
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Sustainability

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Often overlooked, supply chain sustainability can be costly, especially for smaller companies. For instance, a road-building company can save up to 40% of its carbon emissions by sourcing locally. Similarly, a fast-food company can cut its supply chain waste by redesigning its packaging to reduce the number of times it is repackaged in the supply chain, avoiding tons of waste. Further, an electronics company can significantly reduce its environmental impact by requiring its suppliers to sign a code of conduct compliance declaration.

The Human Element

When designing a successful digital supply chain, consider the role of humans in the process. In the case of Stonehenge, human collaboration and strategy were critical to the success of the construction process. Although technological advances have given us many tools for automation, they can’t make the relationships between humans and other elements of the supply chain. Without collaboration, context, and conscience, a supply chain cannot be truly successful.

The human element is key to digital transformation, particularly in the early stages. In the early stages, collaboration and communication across all four pillars of an organization are essential.

Technology is only a tool, and without the human element, a digital project will fail. Technology and people should work in harmony to deliver the desired results. This approach will help organizations understand how to use technology for better customer experiences, employee empowerment, and channel partner dynamics.

Key takeaways

In order to successfully scale a digital supply chain innovation initiative, senior supply chain leaders must embrace a holistic approach that aligns people, processes, and structures. This will help them manage the complexity that the digital world imposes while inspiring their organization to develop a distinctive culture.

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Steff The Blogger

Steffi's Blog offers practical advice on managing your finances, updates on the latest business trends, and valuable tips for personal growth. Hosted on goddyarts.com, this platform allows Steffi to connect with readers globally, fostering a sense of community and shared learning.