Digitization is certainly a hot topic these days. Headlines tout the potential power of digitization technologies like the Internet of Things (IoT), Big Data, mobility and advanced analytics to transform the supply chain of the future. In fact, a recent research study conducted by SCDigest revealed that supply chain digitization is a key focus for nearly 80 percent of the 203 organizations that were surveyed. But what exactly is digitization, and why do these technologies hold so much promise?
At JDA, we refer to digitization as the process of using technology advancements linked with physical and digital assets to redefine and reimagine current business practices to create a significant competitive advantage. This definition, while broad, covers a number of technologies, ranging from advanced analytics, augmented or virtual reality and cloud-based applications to mobile applications, RFID and IoT.
What these technologies have in common is that they enable businesses to get closer to being able to react in real time to unplanned events – whether that’s a supply disruption, a transportation delay or a spike in demand. This ability to react in real time (or near real time) is extremely important in today’s age of hyper-competitiveness. Companies must be able to respond to their customer needs with agility and speed, while at the same time protecting and ideally enhancing the profitability of their operations. Supply chain digitization enables companies to immediately see, recognize and act upon events in real time, across all parts of the end-to-end supply chain.
These survey results have been detailed in “The Future Is Now: Harnessing the Power of Digitization to Drive Greater Supply Chain Performance” white paper and infographic.
What kind of potential impact is digitization likely to have? Sixty-six percent of respondents believe that digitization technologies will provide their organizations with significant competitive advantage over the next five years, and 64 percent anticipate investments in supply chain digitization technologies and capabilities to increase over the next three years. These are certainly numbers that lend support to getting on board with the technology and processes needed.
Survey respondents indicated that the following aspects of digitization have the potential to drive the most value within their organizations:
- Improved supply chain visibility (named by 59 percent of respondents; multiple answers were possible)
- Advanced analytics (52 percent)
- Systems integration with trading partners (44 percent)
- Internal systems integration (35 percent)
- Internet of Things (30 percent)
- Mobile applications (30 percent)
- Digitizing manual processes (29 percent)
- Big Data (15 percent)
- Cloud-based applications (12 percent)
- RFID (6 percent)
- Augmented reality (1 percent)
Even though respondents identified visibility as the top benefit expected, they clearly believe their organizations could improve in this area.
- Few respondents believe their business has near-complete visibility into end consumer/customer demand (5 percent) or major customer forecasts (7 percent).
- Near-complete visibility into constraints that could impact their supply chain execution, as well as near-complete visibility into global freight moves, were only indicated by 6 percent of respondents.
- Only 5 percent believe their business has near-complete visibility into real-time inventory with trading partners, whereas 18 percent have near-complete visibility into real-time inventory internally.
- 15 percent believe their organization has achieved near-complete visibility into manufacturing activity/production levels.
By increasing visibility into both internal and external data, companies will have a better understanding of the opportunities, impacts and risks associated with their supply chain decisions. Better visibility can also lead to better utilization of assets and resources, driving greater efficiencies and greener operations.
Identifying a path forward
While respondents indicated the importance of supply chain digitization as a future capability, most admit that their company could improve on its current focus. Only 10 percent of those surveyed report that their business has a holistic digitization strategy in place today.
While 41 percent are working to develop a holistic digitization strategy, respondents named the following as significant barriers to digitization (with most popular answers listed first):
- Lack of internal systems integration
- Lack of clarity about what to do
- Having available IT resources and budget
- Understanding the return on investment
- Lack of prioritization by executives
One thing is clear: the pace of innovation is moving faster than ever before, and companies that can overcome these barriers and start down the path of digitization will lead the pack. Consumers are fully engaged in digitization — and are leading your path to engagement. It’s critical to get engaged now to not just take advantage of the information and insights available, but to stay ahead of your customers and bring them value.
For companies that are in the beginning stages of this digitization journey, often the simplest way to get started is by adopting sales and operations planning (S&OP), or integrated business planning (IBP) capabilities. Supported by good processes and organizational structure, these capabilities will break down silos and provide stakeholders with end-to-end visibility into one cohesive strategy.
Next week we’ll look into the survey responses around IoT. In the meantime, where are you on your digitization journey?
- Download the “The Future Is Now: Harnessing the Power of Digitization to Drive Greater Supply Chain Performance” white paper
- Access “The Future Is Now: The Power of Supply Chain Digitization” infographic
- Watch a conversation about the power of digitization between SCDigest’s Dan Gilmore and JDA’s Doug Kimball
- Access the 2016 SCDigest Supply Chain Digitization Benchmark Survey data