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Supply Chain Digitalisation Management Challenge

January 22, 2018 • OPERATION, Business Process, Future of Business, Supply Chain

By Richard Markoff and Ralf seifert

As part of the broader Industry 4.0 trend, the digitalisation of supply chains is happening quickly. Much of the attention is centred on innovations like cloud computing, software-as-a-service (SaaS) and advanced analytics. But there is another aspect to this rapidly changing landscape: companies must rethink their IT management approaches, from their purchasing strategy to the interaction between IT and business processes.

 

Exciting New Solutions, Unexpected Obstacles

A few years ago one of the authors, a supply chain director at a large multinational company, found himself championing an innovative digital supply chain IT solution for vendor collaboration. The goal was to better share projected forward material production requirements using a SaaS cloud platform provided by a niche vendor. It seemed to be a perfect solution to the vexing challenge of coordinating the vast amounts of planning data for thousands of items with a large, diverse vendor base.

There were understandable questions about potential improvements in staff productivity, inventory and reactivity that fed into the business case. But one challenge was not anticipated, and it nearly scuttled the entire initiative – the company’s internal IT department.

The IT team was reluctant to move forward and raised some valid questions. The cloud was new to them, and they raised data security concerns; they also feared that the small, privately held vendor might not be financially viable and insisted on access to its financial position. In fact, their posture became less constructive as the project progressed. Despite raising questions about the viability of the potential vendor, the IT team declined to assist in prospecting other vendors. They also advocated strongly for using a similar but less performant functionality offered by the company’s large enterprise system provider that was less tested and more costly.

In the end these differences were overcome, the project was implemented successfully with the original vendor and all were proud to have contributed to an early instance of supply chain digitalisation. But the initiative revealed an important dynamic that warrants more reflection. The IT roadmap for sourcing and procuring solutions to cover business processes has to adapt to the advent of supply chain digitalisation. IT management strategies that seek to limit the number of vendors, or do not foster virtuous iterations between evolving business needs and potential digitalisation solutions, will become issues for companies actively looking for ways to evolve their capabilities.



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About the Authors

Richard Markoff has worked in supply chain for L’Oréal for 22 years, in Canada, the US and France, spanning the entire value chain from manufacturing to customer collaboration. He is currently a supply chain coach, consultant, researcher and lecturer.

Ralf Seifert is Professor of Technology & Operations Management at the College of Management of Technology at EPFL. He also serves as Professor of Operations Management at IMD business school in Lausanne, Switzerland, where he directs the Digital Supply Chain Management programme.

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