Digital Manufacturing Requires Digital Supply Chain
Part of the promise of digital manufacturing, also known as Industry 4.0 or Industrial Internet of Things, concerns breaking the digital barriers, freeing information to flow to where it is needed.
This relates to the promise of implementing an Enterprise Resource Planning (ERP) system in a manufacturing enterprise, which always fell a little short due in large part to the lack of integrated information. Timely, accurate data from production did not find its way into the enterprise system.
Effective digital manufacturing extends beyond just the facility into the ecosystem of company facilities, logistics, suppliers, and customers. In other words, the next great leap of progress will be an integrated, digital supply chain.
“The Current and Future State of Digital Supply Chain Transformation,” by Capgemini Consulting, GT Nexus and Infor, reports on a study that surveyed over 300 executives from some of the largest global manufacturing and retail organizations across North America and Europe, and found that:
- Currently, only 15% have access to data from their extended supply chains, and just 23% of those that have access, actually analyze that data for decision making purposes
- Almost 50% of respondents admit that right now “traditional” methods such as phone, fax, email are still the dominant ways to interact with supply chain partners
- Only 23% say that the majority of data from the extended supply chain is analyzed and used for decision making, but in five years, that number is expected to jump to 68%
Most research studies conducted on the topic so far have examined Digital Transformation within organizations, or between organizations and their customers. This new research project is the first of its kind that explores the current state and future of Digital Transformation especially between organizations and all of their partners across the extended value chain.
The study surveyed 337 executives from some of the largest global manufacturing and retail organizations across Europe and North America.
Key findings of the research study include:
Digital Transformation of the Supply Chain is important
- 75% of respondents say Digital Transformation of the supply chain is “important”
- 50% say that Digital Transformation is “very important”
- 70% say they have started a formal Digital Supply Chain Transformation effort
Progress has been slow so far
- >30% of respondents said they are “dissatisfied” with progress so far
- Only 5% are “very satisfied”
Key technology enablers have been identified, but are not widely used yet
- Supply Chain Visibility Platforms/Tools (94%), Big Data Analytics (90%), Simulation Tools (81%) and Cloud (80%) are seen as the biggest technology enablers of Digital Supply Chain Transformation
- But 48% of respondents admit that right now “traditional” methods such as phone, fax, email are still the dominant ways to interact with supply chain partners
Dramatic changes are expected within just five years
- Today only 15% of respondents say that the majority of data from the extended supply chain is accessible to their organization. In five years, that number jumps to 54%
- Today only 23% of respondents say that the majority of data from the extended supply chain is analyzed and used for decision making. In five years, that number jumps to 68%
- Five years from now, 95% of respondents expect more processes with suppliers to be automated
- Five years from now, 94% expect to receive more real-time status updates from across the entire supply chain
The expected benefits of Digital Supply Chain Transformation include, but go well beyond cost reductions for logistics, inventory and maintenance, improvements in customer service and higher overall equipment effectiveness. Perhaps more importantly, Digital Supply Chain Transformation is expected to dramatically improve an organization’s agility. Agility is necessary to respond to changing market conditions, to new market entrants that can threaten existing business models or to unexpected supply chain disruptions. Such disruptions have already caused major harm to the financial performances and reputations of countless organization over the years.
Mitigating the impact of these unforeseen disruptions has become a main priority and a major driver behind the need to digitally transform. But according to the study, current levels of collaboration and visibility across the network are still low. That limits agility.
“75% of respondents say Digital Transformation of the supply chain is important, but a massive gap exists today between where companies are today and where they expect to be in just five years from now,” said Mathieu Dougados, Senior Vice President, Capgemini Consulting. “Transformation initiatives inside the four walls of the enterprise pose significant challenges within themselves. But in today’s globalized and outsourced world, Digital Transformation can only be successful if companies approach it with a holistic view of their entire value chain. That value chain can include hundreds of partners. So connectivity between partners, cross-company access to data, and the use network-wide analytics become the key focus areas.”
“Supply chain transformation is a massive undertaking that requires leadership and vision at the C-level, and a holistic transformation approach that fosters automation, connectivity, data sharing and collaboration across the entire value chain,” said Kurt Cavano, Vice Chairman and Chief Strategy Officer at GT Nexus. “This survey showed that manufacturers and retailers clearly have an idea of where they need to be and what digital technologies will get them there in the next five years. But it’s going to be a real sprint given the current reliance on outdated, analogue technologies such as phone, fax and email to collaborate and execute in the global supply chain. Meanwhile, risk of supply chain disruptions runs high, with an expensive cost to pay.”
