The latest Gartner digital transformation guide for supply chain companies is available for free download. We highly recommend you grab a copy now. As Gartner writes on the landing page for the guide: “Tech develops fast; there is no time to wait and see. Take action to advance the supply chain digitalization journey.”
This year’s guide is full of compelling insights. Here is our reaction to the Gartner digital transformation guide.
Emergent Thinking and Agile Decision Making are Key
At the very beginning of the Gartner digital transformation guide, Gartner discussed the importance of having a digital supply chain roadmap that extends for many years. We agree wholeheartedly with the notion that companies should be thinking years ahead about their digital supply chain solutions. What we found encouraging was Gartner’s use of the word “roadmap” rather than the words “project plan.”
The Cynefin framework is a great tool to help organizations choose the right approach for decision making. Cynefin puts challenges into five categories: clear, complicated, complex, chaotic, and confusion. Digitizing the supply chain falls into the “complex” category, where there are known approaches for problems, but new issues tend to emerge as you address the known challenges. Complex challenges require emergent strategies that continually evaluate progress against goals. Organizations must be willing to adapt over time, acknowledging that inspecting and adapting to the evolving situation after the launch of the project. Rather than clinging to a project plan that has been proven inadequate or nearsighted, organizations must be willing to adapt to the emerging needs of their complex environment.
Old-school waterfall development plans were built to last through a project—but everything has changed since then. Today’s emergent thinking and agile mindset requires a “roadmap” approach to development. Keep the goals in mind but be willing to change the particulars along the way.
Supply Chain Decisions Are Business Decisions
The Gartner digital transformation guide also discussed the critical business outcomes organizations can expect to achieve from the digital supply chain roadmap. We agree that technology can help companies achieve a host of benefits. Gartner rightly notes these benefits range from, “accelerat[ing] performance, agility and resilience, and help[ing] to mitigate risk.”
Even more importantly, Gartner reminds us that we can “leverage strategic and emerging supply chain technologies and manage impacts to the broader business ecosystem.” We cannot repeat it often enough: supply chain solutions are no longer the exclusive domain of the supply chain organization. Your supply chain digitization strategy must acknowledge the fact that supply chain decisions are business decisions. They impact a broad audience that includes sales, marketing, finance, and HR.
Supply chain organizations need to understand that they are operating in a broader universe than they were 15 years ago. We used to wrestle with highly focused challenges such as creating statistical forecasts. Today, we make broader decisions based on more subtle input signals from across the business. As a result, people outside the supply chain organization must understand and interact with our information.
Do not Spend Blindly on Supply Chain Digitization
One of our favorite statistics from the Gartner digital transformation guide was this: according to a Gartner survey, 82 percent of CEOs in supply-chain-intensive industries plan to increase their overall investments in digital capabilities. That fact has much more relevance when you read it alongside this one: more than 50 percent of organizations have not yet actively started to build a roadmap for supply chain digital transformation.
In other words, there is a widespread certainty about spending more on digitization but little idea on how to make this digitization happen. Many supply chains have been slow to react to change and are still developing the foundational physical capabilities they need to compete in today’s business climate—let alone tomorrow’s. Any digital supply chain solution will reflect what its owner has sorted out within the supply chain. A company that has blind spots in its physical supply chain will have those same blind spots—only magnified—in its digital supply chain. Stakeholders will trust the faulty information in the digital solution and get faulty results.
Let Business Value Dictate Your Project Roadmap
Gartner advises companies to “start leveraging supply chain digital technologies to increase business performance by first building a multiyear, integrated digital transformation roadmap that addresses both short-term improvements and a strategic long-term vision.”
We agree, but with a caveat: order matters.
Fifteen years ago, companies would have addressed this challenge first by looking at handling their raw materials more effectively and then rolling forward through the other aspects of their supply chain. Or, they might have started with demand forecasting and moved into supply problems. Either way, it was a linear approach.
When you are spending millions of dollars on a supply chain solution, you should be focusing first on your areas of greatest value. This approach aligns well with today’s agile development strategies. Agility is all about finding the problem that has the biggest impact—whether it’s reducing uncertainty, minimizing risk, or increasing value—and dividing it by the amount of work it would take to address that problem. That ratio will tell you where to put your efforts first.
When the Gartner digital transformation guide mentions short-term improvements and long-term vision, we agree but caution readers to expect uncertainty along the way (and here, we will reiterate our support for using a roadmap rather than a project plan). You and your vendor must both be on the same page as far as the order in which you implement solutions. Keep the focus on addressing your areas of greatest value first. Otherwise, you may find yourself convinced to implement software that meets your vendor’s needs more than it meets yours.
Risk and Cost: A Balancing Act
One other passage in the Gartner digital transformation guide grabbed our attention: “Supply chain digital transformation is proven to mitigate supply chain risk and optimize supply chain cost, but it requires strong alignment between business and supply chain strategy to succeed.”
There is nothing untrue in this statement—however, optimizing costs and mitigating risk are two priorities that are often in tension with each other. An easy way to mitigate risk is to stock up on inventory—which drives up costs. An easy way to reduce costs is to slash inventory—which puts your business at risk of stockouts.
That’s why we at Logility advise companies to find a supply chain solution vendor that understands this tension and will help your company implement and configure a solution that is flexible enough to strike the right balance for your business between these two endpoints.
Point Solution or Platform?
Before we sign off, we’ll revisit a compelling statistic we mentioned above: 82 percent of CEOs in supply-chain-intensive industries plan to increase their overall investments in digital capabilities.
Again, this is a positive sign, but it also raises red flags. If the vast majority of these CEOs are planning to increase their investments in point supply chain solutions, they could end up introducing more complexity into their supply chains—the exact opposite of the outcome they wanted to achieve.
Point solutions are often excellent at addressing specific business problems, but they can hinder the ability of non-supply chain stakeholders to access and analyze information in their business decisions. Meanwhile, generalized ERP platforms that contain supply chain modules often lack the depth of functionality that supply chain teams need to solve their toughest business challenges.
The smartest play is a supply chain platform—one that’s built based on true supply chain expertise but is accessible and intuitive enough for stakeholders across the business.
Logility’s integrated business planning (IBP) helps you align financial, sales, production, procurement, and marketing information into a single plan rooted in supply chain reality. Intrigued? Contact us to learn more.
Chief Technology Officer
Kevin McInturff leads Logility’s Research and Development team as Chief Technology Officer. He has over 20 years of experience in enterprise software leadership, including time spent in startups and large enterprises. He's passionate about people, solving valuable market problems, and technology.