The digital supply chain: technology plus human talent

The digital supply chain has been a much talked about plan for several years, with digital technologies like Internet of Things (IoT) and artificial intelligence (AI) tools emerging to help make supply chains more efficient. For example, the potential for machines and digital tool solutions to help predict when parts need to be repaired or replaced is highly attractive. The latest data analytics tools can help companies improve inventory management like never before. Automation using digital has helped make manufacturing processes more cost effective and more efficient, too.

What digital technologies are impacting the supply chain?

The rise of cloud computing is a central pillar of the digital supply chain, and the Internet of Things is also having a profound effect on traditional supply chain operations. Factor in other state-of-the-art digital advances, like next-generation robotics, artificial intelligence (AI), automated vehicles (AVs), blockchain, big data analytics and IoT sensors, and it becomes clearer that companies who want to thrive need to digitally transform their traditional supply chain operations and strategies.

According to the results of a global survey conducted by logistics specialist DHL, 95 percent of companies are not yet fully capitalizing on the potential benefits available from digital supply chains, but they do recognize the need for them. Over 75 percent of businesses recognize the potential cost reduction benefits of information technologies and also see the importance of digital solutions to giving them a supply chain for the modern era.

Big data analytics was rated as the most important digital solution, with 73 percent of respondents saying their company is investing in this technology, ahead of cloud technology with 63 percent, IoT tools and devices with 54 percent and blockchain with 51 percent. In terms of actual physical hardware, robotics was ranked top for its importance to a digital supply chain, with 63 percent placing it ahead of AVs, 3D printing, augmented reality (AR) and drones respectively.

So the awareness of digital supply chain appears to be there, but companies need to decide which digital solutions are most suitable and start deployment to maximize digital supply chain’s benefits.

Security remains vital

As with all things in the digital era, the next-generation supply chain, while being transformed for the better by digital technology, also needs to ensure security is up to scratch. Global shipping giant Maersk has one of the most progressive logistics operations in the world and operates a tight supply chain that utilizes just-in-time delivery to remain efficient and cost effective. In last year's NotPetya ransomware cyberattack, however, Maersk was forced to reinstall over 4,000 servers and 45,000 PCs, costing them an estimated $200 million. This example illustrates the catastrophic impact cyber attacks can have. Appropriate cybersecurity in the digital supply chain is crucial, not an afterthought.

The human element of the supply chain transformation

While digital technology will play an increasingly larger role in the transformation and automation of supply chains, people still have an important part to play – simply because they are needed to plan, take actions and make decisions; however advantageous the technology, not all tasks can or should be automated.

For example, while big data analytics was considered the most important digital tool in the next-generation supply chain, it still requires human skills and interpretation to make intelligent decisions at the end of the analysis. A successful digital supply chain transformation is one that combines the appropriate levels of digital technologies with human intelligence so that logistics processes result in a more efficient, effective, connected and agile supply chain that is better equipped to meet the needs of today’s real-time connected economy.

Companies need to ensure they strike the right balance between self-organizing and autonomous systems and human planning, since there are skills that humans possess that digital solutions simply do not – simply put, it is human intelligence that finds innovative uses of digital technologies. Often the most overlooked thing in supply chain transformation is the human capital that a company already has.

Other things to consider? The leadership angle

As in other key business areas, organizations have appointed dedicated chief officers – Chief Information Security Officer is a relatively new role created in response to cybercrime threats, for example. In the digital era, and to successfully transform a supply chain, companies should think about appointing a Chief Supply Chain Officer (CSCO) who reports directly to the CEO and who oversees the digitization of the supply chain operation. Furthermore, thanks to their wide-ranging overall view of the business, the CSCO can also develop the digital supply chain to be integrated into and made a part of the overall business strategy, not only making supply chain management more efficient but also leveraging its digital elements to the benefit of other areas of the business.

Companies that have appointed CSCOs have already begun reaping the benefits in the shape of a dedicated strategic thinker who can be the "glue" of the company across all business units and having someone in charge of the supply chain who can take a customer-centric outlook. A digital CSCO can have a marked impact on the customer experience if done correctly.

The whole, not just the sum of the technology

Companies that will thrive in the digital era are those that understand that digitizing their supply chain is a business strategy, not "just" a technology deployment. The most effective supply chains no longer operate in silos; they are fluid, interconnected operations. According to IDC, by 2020, 60 percent of leading manufacturers will rely on digital platforms that will support as much as 30 percent of their overall revenue.

But it is important to remember that digital solutions and devices are used best when they augment the human factor in the supply chain, not to supplant it or replace it entirely. A "smarter" digital supply chain, led by a next-generation CSCO and leveraging existing human skills within the organization, can help companies improve overall and remain competitive in a very dynamic business environment. It is time to embrace the digital supply chain.

To read about how Asia Pacific companies can transform their supply chains using the latest digital technologies, download the PwC report Building connected supply chains.