Building the Business Case for Digital Transformation of Supply Chain Planning

It seems like the phrase “digital transformation” is everywhere these days. There are as many definitions for digital transformation and articles on the subject. I like the definition provided in i-scoop’s online guide to digital transformation.

“Digital transformation is the profound transformation of business and organisational activities, processes, competencies and models to fully leverage the changes and opportunities of a mix of digital technologies and their accelerating impact across society in a strategic and prioritised way, with present and future shifts in mind.”

The digitisation of a supply chain involves creating a detailed data model that mirrors the intricacies of an actual end-to-end supply chain network. (Learn more in Technology Evaluation Center’s report, The Impact of Digital Transformation on the Supply Chain.) Done right, a digital twin will have enough detail to model the information, money, and product flow from acquisition of components, through production, distribution and fulfilment to the customer. Model element include forecasts, capacities, inventory positions, lead-times, resource availability, costs, revenues, and profits. Finally, the model needs constant updates of customer, production, purchase, and distribution order status to ensure analysis and resulting actions reflect what is currently happening in the physical supply chain.

The benefits of digital transformation are plentiful. Below are three tangible benefits of digitally transforming your supply chain:

Process Automation:

A very visible benefit of building a digital twin of your supply chain is the ability to use the information to automate routine process steps and free up resources to work on more value-added activities. Advanced supply chain systems have exception-based workflow and active alerts that when used in conjunction with user-defined limits can automatically process purchase, manufacturing, distribution and customer orders. Human intervention only takes place when plans, transactions, orders, etc. fall outside of defined limits.

Continuous Planning & Optimal Response:

Digitization of the supply chain unleashes the full capabilities of today’s powerful supply chain solutions leading to game changing competitive breakthroughs in customer service and value creation. One such capability is the application of algorithmic optimization in the areas of demand, inventory, supply, manufacturing, and transportation planning. The rich supply chain data available through a digital twin provides the foundation and inputs required for effective algorithmic optimization.

Another advanced supply chain capability is continuous planning. A supply chain digital twin contains up-to-date information on capacities and transactions. As new events take place (for example a new customer order, or a delayed replenishment) a planner can quickly determine an optimal response. Continuous planning and optimal response capabilities often lead to reduction in costs (manufacturing, inventory, transportation) and improvements in customer service (fill-rates, cycle-times).

Advanced Analytics:

Often the largest benefits from digitizing the supply chain come from new insights gained from the ability to conduct in-depth end-to-end analysis. The ability to analyze expected demand versus capacitated supply and determine financial impacts of multiple “what-if” scenarios provides the information needed to head off potential risks and fully embrace opportunities. A digital twin of the supply chain provides the information needed to make smart decisions on when to enter new markets, where to introduce new products, when and where to increase production capacity, and how to effectively compete. A digital twin provides a rich environment for running “what-if” scenarios of likely disruptions to determine the appropriate response before they happen. When the disruption does take place, a pre-established plan can be executed beating competitors to market.

How might a digital supply chain transformation change your daily life?

  • You have real-time, accurate information, eliminating the need for data manipulationPicture1blog
  • Collaboration on actual supply chain activities is online and in real-time
  • “What-If” scenarios and simulations are automatic, intelligent and include sufficient data to make informed decisions
  • Supply chain decisions move from calendar driven to continuous optimal response

A digital transformation of your supply chain can help you harness visibility, velocity and value and allow you to compete and win in today’s competitive marketplace.

To learn more about digital transformation, read Technology Evaluation Center’s report, The Impact of Digital Transformation on the Supply Chain.

 

About the author 

Hank Canitz PictureHenry Canitz is The Product Marketing & Business Development Director at Logility. To read more of Henry’s insights visit www.logility.com/blog.

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Distribution Disruption Causes KFC Chicken Shortage

Last week, even the Colonel couldn’t help KFC restaurants in the United Kingdom. Approximately 800 of the 900 KFCs in the U.K. temporarily closed because of a chicken shortage, according to CNN Money.

The supply problem was pinpointed to issues with the restaurant chain’s new distribution partner, DHL. A KFC spokesperson described the issue as “teething problems” related to the transition that happened just a week before. DHL leaders reported that many of its deliveries were incomplete or delayed because of operational issues.

Although the exact details of this disruption management plan were not outlined in the article, KFC’s explanation to its customers was quick. The restaurant chain first alerted consumers via social media with a post that read, “Some chickens have now crossed the road, the rest are waiting at the Pelican Crossing.” KFC also set up a landing page on its website to report store operations.

Then KFC purchased a full-page ad in British newspapers to apologize to its clientele. The ad featured an empty chicken bucket with the chain’s initials scrambled to read “FCK,” a nod to an expletive that, in this case, means oops or whoops, along with an apology note. The company continues to offer humor-filled updates via social media. Although 95 percent of the restaurants have reopened, some are still operating with limited menus because of the distribution disruptions.

Public relations expert Rupert Younger, director of the Oxford University Centre for Corporate Reputation, applauded KFC’s effort to apologize and explain the issue to the public. “It speaks to a business that understand[s] that mistakes were made and they’re prepared to have fun at their own expense,” he said. He also told CNN Money that he was impressed that KFC’s ad did not outright blame DHL for the issue. Younger expects that KFC will soon face an increased demand because of its open, authentic and humorous apology.

I think we can all learn a lesson from KFC here. Disruptions happen, and supply challenges can be a headache for everyone involved. But, while you’re fixing the problem and planning for the future, transparency and a bit of humor can go a long way with your customers. A positive attitude can foster positive relationships going forward.

Risk and recovery

As KFC recovers from this supply chain challenge, no doubt the restaurant chain will update its disruption management strategy. One potential preventive measure could be to add protective capacity, which the APICS Dictionary defines as, “The resource capacity needed to protect system throughput — ensuring that some capacity above the capacity required to exploit the constraint is available to catch up when disruptions inevitably occur.”

When managing disruptions, it helps to have a risk management plan in place. APICS can equip you with the tools to build a risk management plan to anticipate and recover from disruptions. By participating in APICS Risk Management seminars and elective topic presentations at APICS 2018, you will learn about risk and supply chain management, how to assess and control risk, and more. In addition, earning your APICS Risk Management Education Certificate shows your employer that you are ready to tackle risks for your company. Visit apics.org/risk to learn more.

About the author
Abe EshkenaziAPICS CEO

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