Digital Supply Chains: Part One – The Digital Supply Chain Imperative

This blog post by ChainLink Research Chief Research Officer Bill McBeath is excerpted from the report “Getting Real with Workflow-Enabled Digital Supply Chains,” available for download here.

Digital transformation is no longer a luxury. Across virtually all sectors, digital transformation is becoming a competitive imperative, crucial for each company’s survival. A core element of digital transformation is moving from manual processes (based on paper documents, email, fax, phone calls, and rekeying of data) to automated, instrumented, fully connected, workflow-driven processes. (See below: Attributes of a Digital Supply Chain).

The impact of digital transformation can be profound. However, most companies struggle to attain the ideal state described by the pundits.

Supply chain is one of the more challenging areas to realize digital transformation, yet also promises some of the highest potential benefits, because it is a highly ‘integrative discipline.

That is, supply chain ties together many different siloed processes, functions, departments, and systems, as well as the extremely diverse world of external trading partners (customers, suppliers, contract manufacturers, and other supply chain service providers such as carriers, 3PLs, brokers, insurance providers, inspection firms, and so forth). Having so many interconnected entities and processes results in a multiplier effect for both the effort and the value of automating supply chain linkages and processes.

Further, most organizations’ universe of trading partners has a wide range of levels and types of technical capabilities, systems, and processes. This heterogeneity makes going fully digital for supply chain processes challenging.

The businesses that are succeeding the most in this endeavor have big visions, but take pragmatic, incremental steps, placing a premium on ease and speed of adoption, combined with adaptability to continually evolve.

Attributes of a Fully Digital Supply Chain

  • Zero data entry redundancy—All data is entered only once, at its origin. Data is never rekeyed as it flows through different parties and systems across the supply chain.
  • Instrumented—Data about various events in the supply chain is automatically generated via instrumentation such as barcode scan, RFID, video analytics, GPS on vehicles, tempera­ture monitors, motion detectors, IoT sensors, and so forth. This data is used to trigger alerts, kick off processes, enrich transactional information, feed analytic engines, and more.
  • Management-by-exception—As many steps as possible in a process are automated and/or decisions made by rules engines (encoded policies) and algorithms (machine intelligence judgment calls). People handle only exceptions that require human judgments and decision-making.
  • Person-to-person interactions fully integrated—Wherever people get involved, their decisions, communications, and interactions are captured and driven/aided by workflow engines to the maximum extent possible. This means integrating notes, email, phone, text messaging, and so forth, binding those to the relevant transactions and data. Systems may also provide a social networking paradigm for people to share information in context. A complete picture of the entire interactive person-to-person process, beyond the formal business transactions, is captured and accessible from/linked to traditional systems of record.
  • Intelligence engines fed by fine-grained data—Fine-grained data is captured about all supply chain processes, including sourcing, procurement, logistics, manufacturing, service, risk management, and so forth, at key points in each process. These data feed analytic engines (machine learning, when appropriate) are used to uncover insights and improve processes.
  • Continual improvement, agile methods & infrastructure—The digital supply chain is designed so that systems, processes, teams, and facilities/capabilities are able to evolve, change, and respond quickly, incrementally, and autonomously, in response to daily fluctuations, mergers and acquisitions, market shifts, major catastrophes, and other types of changes. Rapid adjustability is of prime importance. Highly efficient automation that is unable to adjust quickly does not survive.

The Incremental Path—Workflow as Digital Supply Chain Enabler

Many businesses see the vision of a 100% digital supply chain as a ‘bridge too far.’ They may feel overwhelmed by the distance required to get there. It pays to remember the proverb, “the journey of a thousand miles begins with a single step.

There are, thankfully, ways to start small. In particular, modern workflow technologies have been developed that don’t require installing whole new systems or embarking on bet-the-farm technology projects. Workflow can start as small as making a modest improvement to a single step of a single process and then growing from there. By starting small, results are seen quickly, investment and risks are minimized, and success can be built upon quickly.

ChainLink Supply Chain

Figure 1 – Example ‘Low Hanging Fruit’ Workflow-enabled Starting Points/Steps for Digital Supply Chain Journey

Workflow helps for processes that involve human interactions especially when there are policies that need enforcing, forms to fill, or documents involved. As shown in Figure 1, there are some natural starting points for the digital supply chain journey using workflow technology.

These are common pain points, often not well addressed by existing systems, that can be fixed one piece at a time.

Take for example supplier onboarding. Often this is a largely manual process. Someone, typically in procurement, might send out an email asking the supplier for the various pieces of information and the documents required. Then the phone calls, follow-up emails, and an extended ‘nagathon’ begins. Complicating matters further, different suppliers are usually required to answer different questions and give different pieces of information and certifications.

For example, providers of hosted or SaaS software might be required to have SSAE 16 or ISAE 3402 certification, whereas an electrical contractor may be asked for verification of their electrician’s license and liability insurance. A company can have dozens or hundreds of different supplier types and corresponding variations in onboarding requirements.

For some companies, the manual effort of simply assembling the onboarding packages and doing the follow-up calls can involve many FTEs.1 An automated workflow process offloads much of the ‘grunt work’ from the purchasing professional, so they can focus on value-add activities.

Equally important is the impact on the speed of the business. As shown in Figure 2 below, workflow can take manual work out of the entire process, reducing human involvement to key points where they are necessary and adding value (such as decisions requiring human judgment or dialog).

ChainLink Supply Chain

Figure 2 – Potential Workflow-enabled Supplier Onboarding Process

A company does not have to automate the entire workflow at once. In the above example, they might start with a single type of supplier, without implementing policy rule automation, simply automating the sending of emails to suppliers, and starting within a single location to ensure it works well before rolling out more broadly. That first step can be implemented quickly. Already it saves the buyer manual effort and gets everyone involved comfortable with this new way of doing things. Then they might add more supplier types, next add automated policy rules, and finally add a dashboard and analytics to get more value out of all the information they are now capturing.

Thus, the replacement of manual processes with a fully digital workflow can take place incrementally, one step at a time, addressing the most critical areas first, proving out and gaining value quickly at each step as they go.

In part two of this series, we will look at digitization in two domains: supplier management and field service/MRO, with real-world vignettes of each.

 

Click here to download the full ChainLink report “Getting Real with Workflow-Enabled Digital Supply Chains”.

 

 

Bill McBeath

Bill McBeath leads ChainLink's research efforts, as well as the procurement, strategic sourcing, design collaboration, and online marketplaces practices. With more than 20 years of experience in a variety of roles as a business and technology researcher and consultant, high tech executive, and software architect, Bill is recognized as a leading expert in extended-enterprise business models. Learn more about his research at http://www.chainlinkresearch.com.