Supply Chains Embrace Digital Transformation Into the Future

The need for improved collaboration and decision-making is driving much of this innovation as leaders seek to get actionable insights faster, from ever-increasing quantities of data.

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In late 2022, a APQC survey asked 301 manufacturing organizations about their current and future digital transformation initiatives. Fully 98% said their supply chains were in some phase of transformation, whether planning, piloting, implementing or evaluating.

APQC’s definition of digital transformation refers to the strategic integration of multiple technologies, including digitizing data and information, automating processes, applying analytics and enabling digital interactions and communications. Each transformation is influenced by its scope (functional, multi-functional or enterprise); governance (centralized or decentralized); and strategic intent (customer intimacy, operational excellence or organizational growth).

For supply chains, the most common elements of digital transformation identified by respondents included implementing or upgrading enterprise resource planning (ERP) systems, advanced analytics and AI and cognitive computing projects. Rounding out the top five responses: machine learning and Internet of Things (IoT) initiatives.

Current State of Adoption

Almost all respondents indicated that undergoing digital transformation is a reality for their supply chains in 2022 to 2023. One-quarter (24%) have full-scale adoption in progress, and 16% have completed their transformations and have moved into the continuous improvement phase. Only two percent of respondents report that their organizations are NOT undergoing or planning a digital transformation.

Drivers of Digital Innovation

The reasons why organizations are seeking to digitally transform their supply chains are complex. Several of the top drivers are related to enhanced collaboration and integration. Top responses include improving:

  • sales and operations planning/integrated business planning
  • decision-making ability through inter-connected systems
  • information sharing and collaboration across business silos and systems
  • cybersecurity/reducing IT risk
  • quality
  • supplier/customer service and communications
  • supply chain cycle times

Supply Chain Leadership Joins With Others

Within the organizations in the research, supply chain leadership is most often responsible for the digital transformation (47%), but in many organizations multiple functions or departments are jointly leading the effort. Dedicated digital transformation teams were mentioned by 42% and data management teams were identified by 41%. Only 29% of respondents named IT departments as leading their organization’s digital initiatives.

Barriers to Success

Despite the vast majority of supply chain organizations being engaged in transformation, barriers remain to the success of digital transformation efforts. Not surprisingly, cost concerns top the list for respondents, followed by limited technology capabilities and security and governance concerns. However, ensuring employees have the needed skills and buy into the change is also in the top five. Organizations cannot overlook the critical role of engaging employees in the success of ongoing digital transformation.

Moving Forward

Supply chains around the world are increasingly going digital. The need for improved collaboration and decision-making is driving much of this innovation as leaders seek to get actionable insights faster, from ever-increasing quantities of data. Given all the complexities, effective change management is crucial to ensure long-term success in supply chain digital transformation.