In talks with our Digital Supply Chain Institute member companies, we’ve found that nearly all of them are engaged in digital transformation projects. Some are large-scale, enterprise-level endeavors, and others are more modest efforts focused on fixing immediate problems. One thing that is frequently missing in the planning and prioritization of these projects is a clear set of targeted performance improvement outcomes. It’s easy to be drawn into simply creating a short-term workaround or to become lost in building large-scale infrastructure while overlooking the critical improvements and outcomes that a digital supply chain offers.
One of the most mission-critical performance metrics for supply chain leaders has always been lowering costs, especially inventory holding costs. Much of supply chain research has focused on minimizing inventory cost while at the same time being able to quickly satisfy customer demand. Digital supply chain projects promise to reduce the inevitable trade-offs between controlling costs and delighting customers.
To make sure that your next supply chain transformation project makes the most of what digital initiatives offer, make a shortlist of expected performance outcomes. Here are a few of the questions you should ask before green lighting a project proposal:
Does the project promise a performance shift to reduce trade-offs between cost and customer satisfaction?
Finding a digital solution to reduce costs should not be a one-dimensional exercise. Projects should at a minimum deliver the same level of customer satisfaction they did before any changes are implemented. If your actions cut costs but might lower customer satisfaction, rethink your approach. Digital transformation promises to unlock the ability to reduce inevitable tradeoffs by delivering new enhanced processes and business models. Make this a consistent goal of your initiatives and you will have a good chance of realizing better performance outcomes. A more accurate demand forecast, enabled using unstructured social media data, for example, may allow for ripple effects of cost savings, while at the same time minimizing out-of-stock situations, even improving customer satisfaction.
Will your project enable new business models that create growth through new revenues that were not accessible under the traditional model?
A digital supply chain project that aims to simply digitize an existing process or business model will likely miss the mark in performance improvements. Instead, take some time to review the business model itself before you implement technology solutions. By investing in digital data that uncovers more insights into customer preferences and needs, you might be able to adapt your business model to new segments. This way, the supply chain function may be able to access and drive growth into customer segments that might not have been available under the more traditional business models.
Will your digital transformation sustain competitive advantage through ‘hard to replicate’ integrated capabilities?
Before taking on a digital supply chain transformation project ask yourself if it takes advantage of opportunities to integrate processes and information across your enterprise. To sustain an advantage over competitors, your transformation initiatives should be hard to replicate by others. Integration across functions in organizations is often difficult, but this is precisely why you should aim to do it. It means you can build a capability your competitor lacks, giving you a chance to outperform them. Convincing your sales and marketing departments to share consumer insights with managers in the supply chain might give you a unique ability to design a strategy that can meet customer needs in entirely new ways.
By addressing these questions before you hit the go button on your next digital supply chain project, you might be able to get beyond simple incremental performance. Instead, you may realize the true performance promise of what digital supply chain transformation offers.
Dave Kurz, Ed.D., is a Research Fellow for the Digital Supply Chain Institute. He is an expert on organizational learning and leadership development. Kurz advises global organizations such as Coca-Cola, J&J, Colgate Palmolive, General Mills and Mastercard on innovative learning and leadership development strategies. He currently holds a faculty appointment as a clinical professor in the management department of Drexel University’s LeBow College of Business.