Article
The Power of Digital Transformation in the Supply Chain
Victor AyacheWhat is resilience?
Resilience refers to a system's capacity to respond to disturbances while maintaining or restoring equilibrium. Supply chain resilience measures how effectively a system can regain stability when confronted with random or self-imposed disruptions. Supply chains must be recalibrated to establish a new equilibrium where the rate of supply aligns with the rate of demand across the entire supply chain.
Driving Transformation with Pragmatism
Contrary to common misconceptions, achieving a digital supply chain transformation does not necessitate a complete organizational overhaul. Substantial benefits can be achieved through incremental financial investments. Instead of adopting an all-or-nothing approach, organizations can embark on a pragmatic journey toward digital transformation. By intelligently integrating readily available data with automation and smarter analytics, businesses can initiate their transformation from a feasible starting point.
The Critical Starting Point is Demand Forecasting
The traditional approach involved generating multiple demand forecasts from different functional areas and then reconciling conflicting forecasts or finding a middle ground for future planning. Establishing a robust foundation, the demand forecast, to develop specific supply chain strategies is of paramount importance.
By leveraging internal data, such as point of sale data, CPI and inflation rates, as well as external data like trends and social media metrics, along with data from various departments including historical sales, CRMs, and inventory positions, organizations can now compute and integrate information in unprecedented ways. Powered by AI, companies can effortlessly generate a single integrated, unified demand forecast with optimized accuracy, enabling executives to focus on strategic decision-making.
The End Point is Operational Excellence
Once the demand forecast is in place, the team can incorporate internal and future parameters such as trade, financial, and marketing plans. This forms the basis for generating three plans: sourcing, manufacturing, and logistics. By leveraging real-time data, analysts, and automation in the supply chain, businesses can create a resilient and agile ecosystem that effectively anticipates and responds to challenges. Information flows within a circular model, integrating feedback loops and real-time optimizations. Manual interventions to address errors, last-minute costly changes, the bullwhip effect, emergency deliveries, changeover losses, exception management, costly contingency stocks, inventory reshuffling, and other operational complexities can be streamlined and optimized, fostering a new and improved flow experience. Scaling this innovative solution across all operational sites, applying it to thousands of SKUs, will result in enhanced strategic inventory positions and improved customer experiences.
What about micro brands?
The traditional goal for supply chain managers was to reduce the cost per unit, often achieved through volume, cost-effective yet time-consuming sourcing, and other approaches. However, for micro brands, speed of material, speed of information, and automated interventions are the focal points. Through a digital transformation in the supply chain, coupled with aligning unique product characteristics with a consumer-centric strategy, managers can engineer distinct sourcing, manufacturing, and logistics solutions that leverage economies of scale. A digital infrastructure will support growth aspirations while upholding a modern and responsive supply chain.
Statistics of retail companies ACCENTURE
— Average 32% reduction in finished goods
— 45% reduction in raw materials
— 45–60% lead time reduction
— 10–12% increase in capacity availability