The article highlighted that valuing the human factor in technology-enabled supply chains can lead to greater impact, easier implementation, and long-term sustainability. Digital approaches that enhance information access, decision-making, and cross-functional collaboration prove more effective than those that work against people.
From linear to iterative transformation
A holistic supply-chain technology approach faces a major hurdle: that is executing the transformation. This challenging process involves juggling people, processes, and management infrastructure while overcoming technical, organisational and cultural obstacles.
Digitally-enabled transformations add two extra challenges into the mix.
- The extra technology component: which must be handled alongside changes to processes, management infrastructure, and mind-sets and behaviors.
- The lack of a single, clear destination: Digital technologies are evolving so rapidly that there hasn’t been time for many of them to prove themselves at scale. There is no Toyota of the digital supply chain, providing a template for other organizations to copy.
All that extra complexity and uncertainty means that companies can no longer follow the traditional linear transformation path: they need an iterative approach.
New digital technologies must integrate with people, processes, and management infrastructure—but those technologies will also influence how each of the other elements should be redesigned.
Introducing new technologies without changing operating systems, mindsets, and management infrastructure risks ‘digitizing the current firefighting’ instead of transforming supply-chain performance.
Why today’s approaches fail
Let’s look at the three common traps leading to common failure
- Focus only on process
Companies often develop detailed plans or copy ‘best practice’ templates for their supply chain processes. However, this can lead to ‘organ rejection’ during implementation. While process is necessary, it’s not sufficient for transformation. Supply chains should be cross-functional and process details must be co-created with key stakeholders and supported by hands-on capability building and change management.
- The second trap is the adoption of a technology first perspective: the digital hammer looking for an analog nail.
Companies often adopt impressive digital approaches and then seek places to apply them, leading to digitizing suboptimal processes. This limits the value of digital solutions and hinders capturing larger improvements long-term.
- The problem of pilot purgatory.
Companies tackle transformation by starting with a small pilot project, often achieving rapid and impressive results.
The problem arises during scaling up. Processes, systems, and technologies that work well in a small, motivated group may not handle the entire business’s demands and complexities. Different segments may have fundamentally different supply-chain needs, making a simple copy-and-paste approach ineffective.
Learning from the leaders
Avoiding pitfalls in digital supply-chain transformation is challenging. There’s no magic formula or one-size-fits-all approach. High-performing digital supply chains exhibit various archetypes with common threads. While advanced digital technologies are extensively used, they are part of a holistic effort centered around the human element. Let’s look at three examples.
- Aligning on a single, clear objective in high tech
In a fast-moving IT industry, a component manufacturer with a high-performing supply chain faced demands for faster delivery and last-minute order changes.
With lead times of more than 30 days to fulfill orders placed by customers in the West for products manufactured in China, the company found itself in an uncompetitive position.
Over several years, they transformed their supply chain to minimize lead times and control costs. This involved adopting digital technologies like lights-out factories and real-time planning, and process changes like segmenting product lines and introducing postponement in manufacturing. These efforts reduced lead times by over 80%, fulfilling most orders in under five days.
- Hands-on capability building in complex manufacturing
A multinational industrial-goods manufacturer struggled with supply-chain complexity in a make-to-order environment, relying on thousands of components from hundreds of suppliers. To avoid halts in production, planners flooded the system with inventory, leading to high costs and poor productivity. Despite having advanced supply-chain-management software for over ten years, its capabilities were underutilized. To solve this, supply-chain specialists worked with planners to create decision-support tools and problem-solving workbenches. They rolled out these tools with intensive on-the-job training, focusing on problem-solving, root-cause analysis, and communication skills. This approach unlocked nearly $100 million in stranded inventory in less than two months.
- Getting results fast with agile in consumer goods
When a major consumer-goods manufacturer aimed to enhance its supply chain, early tech-focused efforts failed. The problem was the traditional, slow waterfall approach with little collaboration between business functions and IT, merely digitizing existing processes. Shifting to an agile methodology, they formed a cross-functional team to design a new supply-chain planning system from scratch. This new system, created in 16 weeks, integrated 80 data sources for data-driven decision-making. The result was a reduction in re-planning time from seven days to three hours, a two-point service-level improvement, and a 10% inventory reduction.
Digital supply-chain transformation goes beyond technology. For it to be effective, companies must adapt their processes, capabilities, and management systems. Flexibility, a willingness to learn and change, and ensuring that their people are on board are essential.
Click to read more: https://www.mckinsey.com/capabilities/operations/our-insights/digital-supply-chain-transformation-with-a-human-face
