There’s been a long-held concept that a supply chain could be agile or lean, but not both. In last month’s article, we explored how with the right digital transformation, there is no reason why a company can’t be both. Here, we’ll discuss the ways to get there.
When supplies are abundant and external variables are “predictable” the notion is to act on cutting down on expenses. However, organizations that have undergone a digital transformation know that a combined agile and lean supply chain is possible.
Digital transformation is necessary to regain a hold on inventory management, yet it requires C-level buy-in. At the height of the pandemic, there was a rush to stop the bleeding by testing and implementing new technologies, but as companies have now settled in for the long haul, they have quickly reverted to slow and lengthy decisions and implementations. As more time passes, there is less incentive for leadership to approve new technologies. That stall to move forward will leave companies more vulnerable when another “black swan event” arrives and upends the way businesses operate.
It’s time to take the necessary steps to be as best prepared as possible for whatever may come next. When done right, digital transformation in the supply chain makes your organization even more efficient today while meeting the challenges of the unknown. Yes, making the digital transformation can be intimidating, but five steps are essential for making a smooth transition that will enable having both a lean and an agile environment to have a more resilient supply chain.
Data foundation is critical, but data cleansing is not
Traditional processes are broken. To be agile, the network should be able to understand data accurately and send signals with supply chain updates. But legacy systems and processes cannot keep up with the amount of manual data cleansing required to be efficient.
To create a consistently agile supply chain, organizations have to understand their data across systems, both in-house and with your supplier network. As long as you understand your data, you can use existing data, incomplete and dirty, to drive outcomes more effectively and still carve a path to be agile and lean.
Digitizing the supply chain
Shipping physical goods from supplier to supplier to user needs an efficient system. If you aren’t getting the most from your data and if new systems are dependent on human data entry, the supply chain weakens. A digital supply chain means digitized goods, processes, and logistics. Yes, it requires taking manual processes and transitioning to a digital one, but once you lay the data foundation, you are enabling that data can be understood, intelligence presented to a human expert, and the “why” of decisions can be accounted for across the supply network.
Strategic supplier alignment
The important part of resiliency is the ability to interact and understand the operational risk. When shipments are predictable, they can be planned for, but if the shipment is now 40 weeks out instead of the regular four weeks, supply chain management is thrown off the rails. With digital transformation, it is easier to align with your suppliers. In a digitized supply chain, when you realize you need certain items, your supplier also can know it by sharing your data easily across platforms. The system will keep all parties in the loop with the changes. By building this network that allows you to be both agile and lean, you can pivot on demand.
Change management and understanding intentions across organizations
Change management is really about incentive alignment. As you’re undergoing a digital transformation, procurement will have different incentives than operations or financial. When the incentives don’t align with the goals you’re trying to achieve, you end up creating silos. And silos can’t scale to your real-time needs.
Understanding how to bridge and align incentives takes you back to being both agile and lean. You can drive out costs and trust your risk is as low as possible.
In this step, you see how the other three steps build upon each other. Procurement can save money with strategic supplier alignment, for example, which is built through a digitized supply chain and a solid data foundation.
Speed and changing the dynamic of the supply chain
Executing the digital transformation of the supply chain can’t wait. It is a time-consuming project. But putting it off for years or turning to the technology solutions of the past just means that you won’t be able to react and readjust your supply chain when the next “black swan event” comes along, and this will ultimately be a major detriment when it comes.