Digitalization in the service supply chain – making the investment case

Leading organizations who choose to adopt new technology tools to digitize their supply chains are enjoying a competitive advantage in their respective markets. Perhaps especially when it comes to the supply chain, end-to-end transparency is the key factor in driving measurable improvement. Increased visibility and connectedness of data means knowing what is happening in your organization now and some clue as to what may happen in the future. With this invaluable insight and the increased automation that digitalization can provide, there is power not only to create operational efficiencies but also make better decisions faster.  The net result – a better customer experience and improved business outcomes.

Agility is the new watchword

Today’s global marketplace is volatile and fast-moving.  Adaptability and agility in the supply chain are crucial in responding to fluctuations in demand and dealing with shorter product cycles. Unpredictable markets require a responsive supply chain equipped to deal with any sudden variations.  In large part, the level of responsiveness an organization can achieve depends on the ease of access to real-time, connected information and concrete ways to take action or share across multiple stakeholders and actors throughout various siloes.   Three success factors have been identified within today’s effective and agile supply chains: your supplier relationships, your people, and the effective application of digitalization.

Why is digitalization important?

Traditional supply chains are a one-way combination of unconnected steps from demand planning, through product development, manufacturing, and onward distribution to the customer.  The service supply chain introduces additional complexity and also requires the logistics infrastructure to return products for repair, servicing, replacement or recycling necessary to provide on-time and efficient customer service while maintaining acceptable inventory levels.  Further to the balancing of financial and sustainability costs, in some cases there is also the opportunity to generate revenue through remarketing of used equipment or the capture of OEM warranty credits.  And all this additional complexity only strengthens the case for digitalization which provides specific opportunities in the management and distribution of spare parts and related maintenance services.

Digitalization is a key enabler of agility. It can provide a way of melding together discrete pieces of data that, when converted into information, is available and transparent to all users including not only your internal team, but also suppliers, contracted third parties and customers.  When the relevant parties have reliable, real-time information available via multiple communication channels, you can flag risks, determine next best actions, properly set expectations, and provide the additional assurance that only the right level of visibility can provide.  Digitalization aims to achieve that full end-to-end visibility and needless to say – drives serious financial results and deeper relationships of trust with your customers and partners.

Gartner’s recent research shows that the Covid-19 pandemic has only increased the urgency for digitalization.  “Many CEOs expect to accelerate digital initiatives, and the vast majority intend to dramatically speed up their supply chain digital maturity progress over the next five years.” Their recent report states that through 2024, 50% of supply chain organizations will invest in applications that support artificial intelligence (AI) and advanced analytics capabilities.

Making the business case for investment technology

For those interested in taking steps towards a more digital strategy, it is key to start by connecting the various parts of your supply chain.  Leveraging tools capable of ingesting, cleansing, processing, and updating data from and to disparate sources and formats helps to close the gaps between the previously siloed areas of the end-to-end processes and customer experience. From there, patterns can be identified and powerful insights with clear calls to action can be surfaced and made visible to your internal and external stakeholders.  Customer expectations and preferences have continued to evolve in recent years and the demand for improved accuracy and availability of information in a variety of user friendly and flexible formats is unprecedented.  Finding solutions and digital tools which enable the synchronization of all this complexity allows for dynamic decisions to be made which continually reduce waste and drive increased customer satisfaction.

Selecting the right solutions for your organization depends on your risk tolerance, the internal appetite for change and the budget.  Areas to target first could be:

• Product design: reduce development time and increase speed-to-market
• Streamline sales and operational planning (S&OP) using predictive analytics
• Customer service focus: provide real-time updates, improve personalization which recognizes and honors customer preferences
• Logistics: reduce variation and speed up on-time deliveries and returns
• Inventory management: improve visibility across the network which allows for consistent rebalancing and optimization

Recent supply chain disruptions, including the economic fall-out from the pandemic and global transport delays, provide an ideal opportunity to get buy-in for digital transformation.  The problem is how to clearly demonstrate to budget holders that the investment will deliver business value, especially where there have been previous digitalization initiatives that were less than successful.  The usual approach is by calculating return on investment (ROI), e.g., where are the cost savings because of this investment?

However, short-term financial measures do not consider the holistic picture.  The digital business case must be aligned with the organization’s long-term business priorities e.g., growth projections, talent retention and sustainability goals.  If it can be shown that a solution will drive revenue growth through supporting digital businesses such as e-commerce, the path to approval will be easier. Any new technology application or pilot implementation must deliver positive results in the short term to gain acceptance and will provide the energy and funding to continue the digitalization journey.

Service supply chains are extremely complex and coordination of various physical parts and products, transportation modes, and people will always be required.  New business models will continue to emerge requiring different and innovative digital solutions.  Uncertainty will continue to be with us; therefore, it is clear that we must we must continue to devise flexible and forward-looking ways of addressing it.

References: https://www.gartner.com/smarterwithgartner/make-a-compelling-case-for-your-digital-supply-chain-transformation/