Digital transformation promises to alter the very structure of the supply chain, creating a "mesh" instead of a linear model, says Jeffrey Miller, vice president of digital transformation with Inspirage.
SCB: How does digital transformation affect the structure of the supply chain today?
Miller: The traditional supply chain structure that we're all familiar with is the linear model of design, plan, procure, make, sell, deliver and service. We built supply networks using available technologies, by which we integrated suppliers and manufacturers. That gave us incremental improvement in the performance of the supply chain. Now comes digital, with technologies that allow for greater collaboration and visibility, and a more effective sharing of information.
The best way to leverage those technologies is to rethink the construction of the supply chain. Instead of the serial model, why don't we think of it node by node, function by function, as a network itself? Instead of seeing the network as composed of the sourcing and planning functions, we need to ask, why aren’t they talking to field service? How about engineering talking to field service, or field service and sparing programs talking back to procurement? By creating a mesh or network, you engage the network effect, which people may recognize as the Metcalfe network effect of value. We can leverage these technologies much more effectively.
SCB: Help me to understand more about what we mean when we talk about a digital supply chain. How does that lend itself to this vision that you just described?
Miller: We use the phrase “organic interfaces.” There are too many humans involved, very often converting data that's collected from the field, about the performance of an asset or the location of goods in transit. What if we use these digital technologies to connect physical and digital information? That removes cycle time. It removes propensity for error. And it speeds up the flow of operations of the supply chain. These are all things that have been the Holy Grails of logisticians and supply-chain officers for years.
SCB: What’s more challenging — achieving network interoperability and communications within a company, or externally with supply-chain partners?
Miller: That's a great question, because the supply network model originated as an enterprise model. The idea was to have a network where it's enterprise-centric, with tentacles that go out to trading partners. Our view is that you move from an enterprise-centric to a network-centric model, where you’re talking with suppliers and they're able to see into your production schedule. There are issues of trust, but this is where a distributed ledger and blockchain can play a role for security purposes.
SCB: Doesn't blockchain eliminate the need for trust? It gives you an immutable record of transactions. You don't need to “trust” it.
Miller: In my view, there's a limited use case for that in logistics, because it has its origins in financial transactions. I find that the idea of the distributed ledger is very useful for goods tracking. Yes, you can have levels of trust that are imbued into the blockchain model. However, when you're talking to suppliers who serve competing customers, the issues of trust don't just stop at confirmation of the data. It's about what can you do with that data.
SCB: Do you think that companies are doing a good job at embracing a comprehensive technology strategy, as opposed to just picking up all the dazzling, attractive tools that they could be bringing into the organization?
Miller: It's another great point, because there's always an inherent liability with new technologies. We try to flatten that out by strongly recommending to companies that they take an ordered view. Don't become enamored with the technology for its sake.
SCB: What additional guidance do you give companies in this area?
Miller: As you evolve a digital transformation strategy for your supply chain, make sure it’s aligned to the corporate strategy. It sounds simple and almost trivial, but it's often overlooked. That's one way to ensure against chasing the next shiny object of technology. The second thing is make sure that the digital strategy itself, your I.T. infrastructure, will match. Too many such programs go down rabbit holes because they don't work well with existing investments.
We're strong believers in the idea of early proof of value, not proof of concept. Once you've built the use cases, then you have to assemble them into a roadmap, a series of successive improvements which may go across multiple functions. For example, it doesn't make much sense to try to improve spare-parts planning if you don't have visibility into the performance of the fielded asset.
The last component is to ensure that you don't just chase the technology, that you have to have a value-realization plan. Sometimes executives will roll their eyes and say, “That's intrinsic to the program plan," but it's not. Somebody has to sign up for the value, either as improvement in the customer experience and on-time fill rate, or in the cost and revenue model, which speaks to another reason for the digital transformation of the supply chain. That’s the best way to ensure against taking on a piece of technology for the technology's sake.
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