There has been much discussion in the press and research community about how digital technologies are transforming companies’ business models and customer-facing activities. But what’s discussed less widely is how those technologies are driving the emergence of digital supply chains.
Digital supply chain is the application of emerging technologies to radically transform how organizations source, make and deliver products for breakthrough value. Instead of contending with optimizing trade-offs between cost vs. features vs. quality, digital supply chain enable companies to push the performance frontier to unlock improvement across all performance dimensions.
Based on our client work and research, we see distinct capability areas that organizations need to develop in order to get ahead of the curve in building and sustaining winning digital supply chains:
- Develop new ways for collaboration: Effective collaboration across a supply chain network or eco-system is difficult – conflicting interests, lack of data transparency, and decisions based on opinions over facts can all steer a well intention initiative off course. Future leaders will need to develop new scalable strategies and solutions for data transparency, coordination and co-creation. (read “Sharing Supply Chain Data in the Digital Era“, MIT Sloan Management Review, Aug 2015).
- Become effective orchestrators: digital supply chains will rely on more strategic partnerships and external capabilities and assets. For example, in the consumer products and retail space we see companies designing and building non-traditional high-tech based supply chain capabilities as they pursue new offerings; Coca-Cola is developing a micro-dosing, digital fountain machine (Freestyle) and Tesco is exploring VR based retailing just to name a few. As this trend continues, companies must become successful orchestrators of complex capabilities and activities across an ecosystem. (read “Orchestrating Effective Platform Innovation in CPG and Retail“, Supply & Demand Chain Executive, 2012).
- Adopt platform thinking: as supply chains become more digitized, the corresponding coordination and transaction cost is reduced, resulting in more interconnections across function and firm boundaries. In effect supply chains increasingly become complex supply networks and as such will start to exhibit platform behaviors. Similar to consumer facing network platforms such as iTunes (music), Uber (personal transport), or Android (tablet OS), supply network platforms will have different economic and competitive dynamics than more traditional standalone models. Supply chain leaders must adopt platform thinking. (read “The Rise of Supply Chain Platforms”, CIO Review, Oct 2015)