.The majority of European manufacturers are only at the early stages of their digital supply chain journey, according to a new report from JDA Software, Inc., and WMG, at the University of Warwick. The ‘Delivering the Digital Dividend’ report benchmarked the digital supply chain readiness of 179 European manufacturers, revealing that only 13 per cent currently have a ‘prescriptive’ supply chain (categorised as Level 3, out of a scale of 1-4, with 4 being a self-learning autonomous supply chain). However, the report does reveal that manufacturers are keen to digitally transform their supply chains. Almost one third (31 per cent) predicting they will have a prescriptive supply chain in place by 2023.
Manufacturers missing the mark
The report reveals that most manufacturers are yet to harness the potential of digital to compete through greater customer intimacy. Manufacturers are moving towards greater supply chain segmentation and differentiation. The primary strategic focus is on operational excellence (39 per cent). Followed by product leadership (31 per cent) and customer intimacy (30 per cent). Data remains a key ingredient towards delivering both operational excellence and greater customer intimacy. However, manufacturers are struggling to integrate and synthesise it effectively. The evidence suggests that manufacturers are only just beginning to embark on data collection from new sources.
AI is predicted to be the fastest-growing technology
Manufacturers are looking at new ways to come to terms with, and capitalise on, the exponential growth in data. AI adoption is predicted to grow three times faster than other areas of investment. This includes sensor networks, Internet of Things (IoT) and robotics. Until now, however, only just over a quarter (28 per cent) have started to use AI.
The report suggests that when it comes to Sales & Operations Planning (S&OP), manufacturers have underlying problems to address. S&OP was rated as having the lowest level of maturity (34 per cent) of the 11 key supply chain processes manufacturers were asked about. Only 21 per cent of manufacturers have the ambition to use S&OP to support end-to-end business optimisation by 2023, and 22 per cent said the same for supply chain optimisation. This indicates that manufacturers should continue to focus on evolving from S&OP to Integrated Business Planning (IBP), as strong processes will underpin digital agility.
Digital optimisation means transitioning from a ‘node’ to a ‘network’ approach’, periodic to real-time decision frequency. Supply chains are evolving from ‘one-size-fits-all’ to a market segment of one.
What manufacturers are saying
The research reveals how manufacturers are responding:
- A key enabler of supply chain segmentation. Allocation Planning and Order Promising, was identified by manufacturers as the process with the highest ambition to adopt digital technology. The report expects it to double over the next five years from 30 percent to 61 percent. Doing this will help manufacturers progress on their journey to a segment of one.
- One fifth (20 per cent) of manufacturers believe that by 2023 their factory planning and scheduling will respond in real-time.
- Almost two thirds (61 per cent) of manufacturers will have end-to-end network design by 2023. This reflects the fact that fulfillment complexity has risen rapidly in the digital era. However, in a digital world network design cannot be resolved in isolation: an end-to-end approach is required.
“To maintain and enhance competitive advantage, organisations need to focus on three aspects of the supply chain digital transformation process,” said Professor Jan Godsell, Professor of Operations and Supply Chain Strategy, WMG, University of Warwick.
Report suggests businesses must use digital technologies such as AI and Machine Learning to support core supply chain processes. Next, they should pave the way for end-to-end supply chain optimisation by adding a business process layer to their organisational structure. This will put them in a position to leverage functional excellence while also breaking down siloed areas. Finally, they should lay the groundwork for end-to-end business optimisation, using digital technology to break through the IBP impasse.
According to Jan Godsell, “In practice, manufacturers can enable this to happen by creating ‘safe places’ to experiment with new digital technologies. They may even wish to consider the creation of a separate business entity for more radical experimentation with new digitally enabled business models.”
Enterprise Times: What this means for businesses?
The report confirms that achieving digital maturity is the primary supply chain goal across many sub-verticals. Many organisations consider AI challenging when they have struggled to attain quality analytics for a much simpler linear supply chain. As a result, organisations are not matching digital supply chain strategy to capitalise on digital opportunities. The key for businesses will be relationships with key technology partners. The adoption of new technology such as AI and Machine Learning by ‘supplier’ companies. The use of Einstein Discovery in Salesforce, SAP Leonardo Machine Learning, JDA and IBM.
It will be in the interests of those key technology partners and platform providers to embrace emerging technologies. Those companies have the resources, expertise, finance and supply network to begin piloting new applications of AI and Machine Learning across all aspects of the digital supply chain.