COOs and supply chain management are feeling the brunt of an accelerating business environment further complicated by increasing customer demands for efficiency, personalisation, and convenience. Slow manual processes based on inconsistent information across functional areas spell death for modern supply chain management, with an inability to adapt in real time to changing demands leading to subpar customer service and potential attrition.
To address these risks, companies are increasingly looking to digitise their supply chains by implementing a cloud-based digital platform that optimises traditional ERP processes while integrating new exponential technologies.
Cloud-based platforms that enable real-time decision making based on accurate big data – generated through traditional processes as well as the growing prevalence of sensors – and predictive analytics powered by machine learning is changing the way companies approach supply chain management. Accenture predicts that the SaaS for supply chain management market will reach US$4.4-billion in 2018, driven by a need to simplify and optimise today’s complex global supply chain networks.
The value proposition is clear: studies by the Boston Consulting Group find that leaders in digital supply chain management enjoy increases in product availability of up to 10%, more than 25% faster response times to changes in market demand, and 40%-110% higher operating margins.
The exponential technologies driving supply chain innovation
Big data matched with real-time predictive analytics is enabling large-scale scenario analysis to give COOs the power to conduct accurate demand forecasting, capacity planning, and advanced procurement with a focus on collaborative optimisation.
With the adoption of sensor technology in every facet of the supply chain and the availability of reliable all-time localisation through GPS, GSM and Galileo-based positioning gives COOs greater data regarding stock opening, temperature, humidity, and more, allowing greater optimisation of existing processes.
Automation through advanced machine learning algorithms that leverage process and sensor data is gradually leading to near-perfect accuracy in process decision making as human judgement is augmented and, in some cases, replaced. By automating supply chain procurement processes through best practice machine learning, COOs and supply chain managers can eliminate opportunities for error and ensure effective event and risk management based on expert systems.
However, the job of the COO and his supply chain management support to lead the organisation into this exponential future is complicated by the need to manage the implications of digital transformation while simultaneously innovating the underlying business model.
The digital transformation imperative
Digitising the supply chain enables companies to integrate, embed intelligence, and visualise all supply chain processes from supplier to customer. This opens the door to live inventory management through a redesigned data model that finally provides true transparency on inventory flows. Placing a digital core at the centre of all supply chain management processes further enables expansive “what-if” and scenario planning to identify opportunities for meeting potential market demand with high levels of service at low cost.
Manufacturing costs are also reduced as detailed constrained planning and scheduling enables agility within the supply chain and optimises the efficient use of capacity.
A traditional ERP simply cannot keep pace with the rate of change and the need to innovate and optimise quickly, accurately, and cost-effectively. Delivery commitments based on outdated data leading to cancelled or delayed orders; inaccurate order prioritisation resulting in unfulfilled strategic customer orders; and difficulties with addressing last-minute rescheduling by priority customers are only a few of the risks companies face when relying on an outdated technology platform for supply chain decision-making.
The business outcomes of digitising the supply chain
With exponential technologies such as IoT, big data, predictive analytics and machine learning integrated to the SAP S/4HANA digital platform, COOs and supply chain management can leverage rule-based allocation check in a single system to ensure the needs of strategic customers are always met. Up-to-date inventory management ensures realistic fulfilment commitments and real-time order confirmations, with advanced segmentation techniques driving business profitability in unprecedented ways.
The business outcomes can be transformative: reducing days of inventory by 10-12%, reducing revenue loss by 10-15%, cutting total logistics costs by 10-12%, and reducing supply chain planning costs by up to 5%. Critically, digitising the supply chain enables companies to run simpler and shift focus more toward innovation – both in terms of improving existing processes as well as developing entirely new business models and revenue streams.
But with a recent Forrester Business Technographic Survey showing only 27% of supply chain management professionals and 22% of logistics and distribution personnel using or planning to use big data analytics, the real question is: will COOs rise to the challenge of digitising their supply chain in time to adapt to an exponential world?
By Mehmood Khan, Chief Operating Officer at SAP Africa