A clear sign of untransformed supply chains strapped to legacy systems of the past is the speed at which they get unsettled. Transformation of supply chains is not a singular moment but more of a gradual process of individual shifts and everyday revolutions of an organism forever in flux. Generally, a supply chain that is subtle and flexible is one built on perpetual improvement to whatever circumstances arise, good or bad. Occasionally though there are situations where a major disruptor completely uproots the global supply chains, flips it on its head and all practitioners have to reorientate, restructure and regroup.
How planners react to these moments is key to the survival of a business: resilience is key, and action is everything. Supply chain transformation is a never-ending churning wheel, and, in some cases, when a major disruptor appears, the wheel has to turn that much faster so companies can adapt, persevere and progress. It is key to remember that supply chain transformation and digital transformation are never complete – they are a journey without a destination, and businesses must be willing to endure and keep on driving forward.
Disruption can upend businesses, shocking the ecosystem until it reveals cracks in the supply chain structure; However, disruption can also be the spark that ignites necessary changes. Covid is a major, generation-defining disruptor, one that forces practitioners into the transformation of their supply chains, to enable them to adapt and prevail.
Few supply chains were prepared for 2020: few were responsive by design, even less were anticipative, focusing on accuracy rather than agility. If there is a plus that can be valued from the disruption of the pandemic, it is that those businesses who did react now have set solid foundations for 2021 and beyond: Covid is a wake-up call to many businesses to realize the need for digital supply chains transformation.
Likewise, Artificial Intelligence (AI) has been both a disruption and a catalyst to supply chains as it has become more and more common in business and society: on the farm, in the factory, in the car, or the home. Wherever it has touched, technology over the past decade has accelerated exponentially in convenience, quality, and usability. Twenty years ago, AI was something solely available to the military and now AI is an everyday tool, entirely normalized, allowing for the flow of information, data, and communication to be more fluid across supply chains.
Driving change through customers
In their transformation, businesses must be ambitious and willing to also reorient and restructure their supply chains. The greatest way to structure this is to begin at the customer: the transformations that are customer-centric are always the strongest. Supply chains are extensive and dense structures: it is sometimes easy to get lost in them and forget who they are designed to serve. Over the last years, supply chains have strengthened because of their transition towards being more customer-driven.
“I have had the chance and opportunity to be able to place customers at the crux of the supply chains I worked in: from Unilever to Carlsberg and FrieslandCampina, efforts were always made to drive critical decisions from the customer perspective – that always made all the difference.”
Transformation of FrieslandCampina
FrieslandCampina is a sizable and complex entity, and its transformation proved that no matter how large the organization, change is possible when starting from the customer perspective and leveraging insight, energy, enthusiasm, and a bottom-up approach. When disruption hits, the customer should not even notice it: The seamless communication across the digitally transformed supply chains ensures the tremors of the crisis are minimal and that service to the end consumer isn’t adversely impacted: as if there is a crisis backstage, yet the audience watching notices no trouble or strife and the show simply goes on as ever.
“I have had the chance to lead the supply chains transformation of the Consumer Dairy Business Group of FrieslandCampina – FrieslandCampina is the biggest dairy cooperative in the world with a turnover close to €12bn; the Consumer Dairy BG represents about half of this with products you can find on any retailer’s shelves around the world.
The customer-centric transformation process took the best part of three years and the results were phenomenal, forging an extremely resilient supply chain capable of tackling all the problems Covid presented whilst increasing all typical supply chains KPI metrics: Increased customer-service fuelled the top line, logistic cost reduction the bottom line and adequate stock management impacted WC positively.”
Let them be the judge
The customer is the all-important judge who scrutinizes the fruits of a transformation. While transforming, companies must revisit their approach to customer relationship, portfolio management, forecasting and responsiveness, stock and logistics. After a transformation, the service must be at least at par or better. In the case of the supply chain transformation of FrieslandCampina, the customers reacted favorably and enthusiastically and this is what made it a success. What was visible from the perspective of internal KPI metrics was mirrored by external feedback: The Advantage Group Survey (AGS) model gave strong positive feedback and in Modern Trade markets, customers ranked FrieslandCampina supply chains much better than in the previous year.
The second integral judge is those seated at the top level of the business and inquiring “How is the company’s P&L performing” and “How did this supply chain transformation help us in the market?”. There is a careful balance required between these two judges and companies must seesaw delicately between them, showing value to both, convincing them all of the value of the transformation.
Gaining trust in your digital transformation – where to focus
The digital transformation requires high investment and trust from leadership as the possible expense may deter businesses who, above all, view the customer as their important focus and the supply chains as a means to the end. Within the context of transformation and digitalization, supply chain leaders must highlight and track the areas that produce value early through quick returns.
Planning is the right place to look as it is the structural backbone of supply chains: the planning continuum drives the flow of goods from one end to another while also supporting the flow of information from customers, irrigating the entire supply chain. The key here is digging into the deep troves of data and turning it into information through insight and simple visibility tools.
Alignment: All for one, one for all
Alignment is imperative; a business is only successful when all its facets are coordinated. In a transformation, the whole business needs to move in sync or risk that isolated functions ring-fence their silos, slowing the pace of transformation, stifling, stagnating, and ultimately, grinding it to a halt and dragging the business back to starting point. But “alignment” is both vague and often mentioned.
There are two clear ways to talk about alignment. The first is to define how the transformation will be successful and do this through a set of KPIs metrics. As a supply chain digitizes, employees might have their jobs reshaped, replaced, or disappeared and in order to maintain a good flow, there has to be clear communication across the board, top-down and bottom-up. Gartner’s Hierarchy of Metrics provides a clear view of the KPIs metrics.
The ‘Why’ story
The second clear way to talk about alignment is the Why story. To convince the stakeholders to get out of their comfort zone and transform their supply chains organization, shuffling people roles, processes and adapting their systems to this, it is imperative that all understand why. The top-down and the bottom-up alignment revolves around this Why story and it is vital also to those observing the company externally – it is the magnetic pull that attracts them to the transformation agenda.
The ‘Why’ story is the essence of alignment of internal and external stakeholders, top-down and bottom-up, along the extended supply chains and with external parties, customers, suppliers, logistic providers and partners.
- Why are we changing an entire organization?
- Why are we organizing our frontline to customers differently?
- Why should stakeholders and decision-makers support this?
- Why should customers and partners support this?
Answering these questions is crucial to how alignment drives commitment through clear governance and clear KPIs metrics. Furthermore, and as mentioned earlier with the use of AGS, final alignment through feedback of the customers is crucial to analyze the transformations impact as it happens.
The challenge for supply chains leaders over the next five years is to make sure that their businesses understand that supply chains digitalization is not merely a series of buzzwords to be uttered at conferences or mentioned in articles…: it is an actual concept that has to be hard-wired into the supply chains. If we want supply chains to be effective tomorrow, this is vital.
“Digitally transforming a supply chain is a vast endeavor. Therefore, my best approach is to break it down into smaller, digestible nuggets. Plenty of effort has already been made in the exciting world of Industry 4.0 – the Fourth Industrial Revolution. This is only the beginning of the change we are to see in the wider supply chains.”
The integration of Manufacturing Execution Systems (MES) into the data flow within the upstream in factories has started to happen already. In these modern factories, every facet of manufacturing and production is connected and the whole system becomes a hive of data. Often, the impact of data on the supply chains can be discreet, however, the influence on the modern factory is visible to the naked eye, showing the benefits of instantaneous transparency in operations.
We are now in the next phase of the revolution: using data platforms with smart algorithms in order to turn data into actionable insights for the extended supply chains.
Planners of the new generation are highly educated with MBAs and strong analytical abilities that allow them to understand the supply chains in a great level of detail. The old world of planning consisted of a group of people in a business meeting with conflicting views and opinions, discussing the way forward by looking at data from the past. Next-gen digital-savvy planners are still being used to key in outdated data and base forecasts prepared with spreadsheets copied on slides. Resulting in the business stagnating, backward-looking and bickering.
Many businesses have gained a lot of visibility in 2020 and data kept them afloat. Instead of wasting time crunching numbers and keying in data, businesses realize now that they have access to next-gen platforms from companies like o9 Solutions. The platform twins the supply chains data model and provides scenarios populated by machine learning algorithms: planners now can make decisions based on data-driven insights and real-time information.
It is the responsibility of businesses to maintain attractive jobs in supply chain management so as to draw the next-gen digital-savvy members of the bulging workforce. In other words: Make supply chains sexy. Instead of keeping a planner in the loop inputting menial data and crunching numbers, let bring them on the loop to add value through insight – humans do make the difference, they are not being replaced by the system but working with the system. And every so often, let’s take them off the loop to let the system do what the system is designed for with its artificial intelligence and machine learning algorithms.
Supply chains: the fifth wheeler
Businesses really see their supply chains as core to their raison d’être. More than often supply chains is a necessary evil for brand-focused businesses who see investment in the supply chains as money squandered when it should be used to build up the customer-facing aspects of the company. As a CEO with limited cash to spend, supply chain investment can be seen as diverting valuable investment from innovation, brand building, media buying and sale promotion. Supply chains is the fifth wheel on the wagon.
The biggest risk is thus not being able to sustain the transformation: there can be a loss of appetite after some quarters, after investing some money and when the results aren’t yet tangible. That is why we need leaders and champions to drive digital supply chain transformations on, being the roar into the megaphone, propelling it all forward.
Leaders and Champions
Digital supply chain transformation requires a business to have a vision and it is infinitely better when championed by someone that has been there, done that, got the I ❤️ Digital SC Transformation t-shirt. If someone can tell you what is on the other side of the mountain, you would be more likely to climb it.
“The truth is without investment, the ideas will be just as worth the PowerPoints you’ve been writing them on. It takes convincing. What is important to remember is that even a failed transformation can be rewarding, nothing is wasted as remnants of the transformation will remain. It is a series of stepping stones, not a great boundless leap.”
A base for transformation can be built and it needs to adapt as the business transforms and all of the entity needs to move forward in sequence, leaving no one lagging behind that could potentially become the breeding ground for skepticism. In order to avoid a failed transformation, a lot of explanation needs to be done, it requires leadership and championing, management of your stakeholders and decision-makers and keeping the ‘Why’ story alive.
Customers are all very similar: they want great experience yet it is always different, they want great service, but their expression of service is always different. Customers notice when you listen to them: great business execution comes from having this intimacy with the customers and isolating individual nuances. The customer is king: try to understand why and then, it is full steam ahead with the digital supply chain transformation.
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About Pierre Mille
Pierre is a supply chain and customer-centric business leader inspired by developing people and organizations. He is also very keen on reinforcing operations with technology where and when it makes sense.