Snarls in the supply chain are nothing new for businesses, especially given the pandemic-related disruptions over the last 2 years and the ongoing talent shortage, with supply chain managers quitting at the highest rate in 2021 since 2016. To help ease these issues, supply chain professionals must begin to embrace the concept of “technical debt” to not only quicken digital transformation but to build resilience to navigate future disruptions.
“Technical debt” is typically an IT industry term referring to the additional work or re-coding that must be done to digital systems after they have gone live. Technical debt is not inherently positive or negative, but rather, a condition of operating in an agile way. For industry professionals, agility is key to navigating cost pressures and heightened consumer expectations, and accruing technical debt can enable fast onboarding and integration of the necessary digital solutions to provide that agility.
Debt for good
Intentionally accruing debt may sound like a strange concept, but it can provide benefits for those operating in the supply chain. Think of it like credit card debt – a credit card can help make a necessary purchase quickly, provided the resulting debt can be managed properly. Accruing short-term debt can help businesses keep pace with innovations in their industry and increase the speed at which products and services are introduced to the market.
Technical debt is a natural part of doing business in today’s digital-first world, as organizations are constantly improving their tech stacks to keep pace with disruptive technology deployed by competitors. This is the same concept as deploying an 80% complete minimum value product (MVP) into the market. It allows the product to get into user’s hands for initial testing and feedback, giving businesses early insight into what’s working and what’s not. The 20% leftover is the ‘debt’ associated with the product – the additional re-tooling and work needed to address feedback, bugs, or other issues found in the early stages.
The rapid acceleration and subsequent re-tooling is what allows businesses to increase the speed of digital transformation which was already fast tracked by the pandemic. During this time, nearly 90% of organizations say the pandemic made them more aware of the technical debt that exists within their systems. As supply chains are still feeling the impact of disruptions, consumers and businesses are still feeling the impact of these snarls, and digital transformation can enable enterprises to become more resilient and better mitigate potential pitfalls.
Managing accrued technical debt
While it’s true technical debt is not inherently negative, it can build up over time and cause unintended consequences for organizations. A new McKinsey report found half of organizations that have undergone modernization efforts have failed to successfully pay down their debt. More alarming, perhaps, is that recent data from Software AG found 58% don’t feel they have a formal strategy in place to manage the debt.
Ultimately, the key to managing technical debt is transparency into systems and processes. The McKinsey report found that technical debt accounts for anywhere between 15-60% every dollar spent on IT within an organization. Supply chain professionals looking to control costs while still creating efficiencies in the chain must take this into consideration, as the focus needs to be on moving ahead, not paying for solutions onboarded in the past.
Managing and paying down technical debt first requires knowledge that the debt exists. This means that an analysis of each solution must be done to assess what bottlenecks, inefficient processes or knowledge gaps remain to determine what must be done to close those gaps. For example, IT architecture management tools can help determine where one system might be negatively impacting the whole organization. Applying process mining and creating digital twins can also assess the efficiency and effectiveness of systems and processes. This will help identify if certain processes are overloaded and whether the functionality exists for employees or customers to get the maximum value out of them.
This is why the post-deployment assessment and management of these systems is critical. Just because a new system has been onboarded, or an MVP has been released to users, doesn’t mean it was done perfectly. Perhaps certain functions of a new system are not meshing well with others in the stack, or it’s having difficulty handling specific datasets. These issues are hurdles preventing digital transformation and can perpetuate the same issues that were set out to be solved, not to mention could possibly accrue unintended technical debt later.
Debt of any kind can have a negative connotation attached to it, but it truly does come down to how it’s managed. Businesses operating within the supply chain must continue innovating and creating efficiencies to get ahead of potential shortages and consumer demand, and as a result, must rapidly onboard technology to help them do so. This is where having a proper plan in place to address the resulting debt will help business stand out against others and gain the trust of consumers.