The supply chain ecosystem
At most companies, products are delivered to customers through a very standardized process. Marketing analyzes customer demand and tries to predict sales for the coming period. With that information, manufacturing orders raw materials, components, and parts for the anticipated capacity. Distribution accounts for upcoming changes in the amount of product coming down the pipeline, and customers are told when to expect shipment. If all goes well, the gap between demand and supply at every point in the system is small.
This rarely happens, of course. Forecasting remains an inexact science, and the data it depends on can be inconsistent and incomplete. Too often, manufacturing operates independently from marketing, from customers, and from suppliers and other partners. Lack of transparency means that none of the links in the supply chain really understand what any other link is doing, or needs. Inevitably, it seems, the orderly flow from marketing to customer is disrupted somewhere.
Over the course of the next few years, this will all start to change. This will not be because we will have fewer disruptive weather events, flat tires, or outsourcing snafus. No, what is changing is the supply chain itself. With the advent of the digital supply chain, silos will dissolve and every link will have full visibility into the needs and challenges of the others. Supply and demand signals will originate at any point and travel immediately throughout the network. Low levels of a critical raw material, the shutdown of a major plant, a sudden increase in customer demand — all such information will be visible throughout the system, in real time. That in turn will allow all players — and most important, the customer — to plan accordingly.
Better yet, transparency will enable companies not just to react to disruptions but to anticipate them, modeling the network, creating “what-if” scenarios, and adjusting the supply chain immediately as conditions change.
The goal of the digital supply chain is ambitious: to build an altogether new kind of supply network that’s both resilient and responsive.
But if companies are to make the digital supply chain — or perhaps more properly, the digital supply chain ecosystem — a reality, they can’t just gather technologies and build capabilities. They must also find people with the right skills, and manage the shift to a culture that’s willing to carry out the effort. In other words, they must transform their entire organization.
The digital supply chain, as we envision it, consists of eight key elements: integrated planning and execution, logistics visibility, Procurement 4.0, smart warehousing, efficient spare parts management, autonomous and B2C logistics, prescriptive supply chain analytics, and digital supply chain enablers. Companies that can put together these pieces into a coherent and fully transparent whole will gain huge advantages in customer service, flexibility, efficiency, and cost reduction; those that delay will be left further and further behind.
How these elements work to enable the digital supply chain, and, more important, how they work together, is the subject of this report.