Retailers are under pressure to adapt and evolve, challenged by changing customer demands and increasingly dominant online multinationals. Indeed, as we approach 2020, retailers in our annual Beacon research tell us that customer experience (55%) and digital disruptions (53%) are the top factors driving change in the industry. In this landscape, the role of the supply chain becomes acutely important: Retail leaders have an opportunity to apply digital tools to transform a traditionally non-value add function into a central aspect of organisational strategy, enabling competitive advantage.
What is a digital supply chain?
The term ‘digital supply chain’ has multiple meanings. Essentially, it describes the revolutionary application of technologies like the internet of things, 3D printing, automation, big data, and predictive analytics to achieve greater efficiency and improved decision-making from sourcing through delivery. Successfully digitising supply chains helps organisations to remove silos between legacy systems and build the resilience required to thrive in disruptive market environments. Instead of reacting to challenges, advanced data systems and predictive analytics allow firms to develop organisational agility.
Companies like Amazon and Inditex have been early adopters, building faster, more flexible and responsive supply chains, driving operational excellence and, ultimately, differentiated customer service. For example, Amazon holds a patent for ‘predictive shipping’, matching dispatched items with customer orders. Despite no supply chain being ‘fully digitalised,’ many retailers have yet to embark on this journey, remaining vulnerable to disruptions and siloed data management, with limited integration and transparency.
So, what’s missing?
As with every transformation, focusing on processes and technology alone will not bring success. We believe people underpin successful transformation, and that many organisations fail to place adequate focus and investment here.
Many companies are failing to empower employees in a landscape characterised by more data, larger networks, and growing customer expectations. A lack of skills and talent has been identified as the joint-largest constraint on supply chain performance, ahead of insufficient investment in technology. Without the right culture and skills, digital transformations – however innovative – are destined to fail.
The components of a digital culture
Culture encompasses the underlying beliefs, values, and interactions within an organisation. Digital cultures help accelerate and sustain supply chain transformation. Successful digital cultures typically share three reinforcing values:
- Customer Orientation: Data and technology allow supply chains to be more customer-centric, and this means consumers now expect them to deliver on improved convenience, reliability, and transparency.
- Agility: Supply chain activity focusses upon planning and best-practice models; digitised activity is iterative and fast-paced. This conflict must be addressed. Amazon is investing $700 million in training a modern workforce, focusing on roles like data scientists and security engineers.
- Collaboration: Agility demands transparency and interaction. Breaking down silos and empowering non-hierarchical, cross-functional teams helps drive integrated supply chains. External collaboration is also increasingly possible. Walmart China integrated its inventory and order management system with JD.com, allowing online orders to be directed to a Walmart store or JD warehouse, depending on proximity and courier availability. This resulted in a 250 percent increase in sales and 30 percent reduction in fulfilment costs.
Next steps: Building a digital culture
1. Define and sponsor your strategy
Companies must define their supply chain strategies and identify critical capabilities. Approaches will vary and require flexibility, but a clear understanding of your strategy is key. To drive this, consider promoting supply chain executives to senior leadership positions.
The changes that are necessary to activate this strategy must be articulated to employees, with leadership at the forefront. Research shows that the ‘active and visible participation’ of senior leadership is the number one factor contributing to the success of macro change.
2. Promote required skills and behaviors
Upskilling should focus upon specific technologies and behaviours that critical employees need to employ. For example, creativity, relationship-building, and problem-solving are important for technical roles. Additionally, identify those who thrive in and further your culture, and share success stories by recognising those who learn new skills and commit to the vision.
New, digitally native talent will be needed. Individuals with digital skills are in high demand, but companies that embody a digital culture will be attractive to these candidates. Supply chain executives should also be equipped to lead more diverse teams in an agile and flexible manner.
3. Track progress
Measuring your strategy’s progress helps you identify improvements and demonstrate the value of employees’ efforts and your commitment. Measurements will vary by company and objectives – metrics include critical behaviours (cultural), knowledge development (training participation), business performance (productivity, customer satisfaction), and the achievement of key milestones. Leaders should collect direct feedback about employees’ opinions and their acceptance of change.
So, what to take away?
- The need for organisations to digitally transform the supply chain has become imperative as we approach 2020 and beyond.
- The success of digital supply chain transformation depends on how organisations empower and supports their people and customers.
- To capitalise on the newfound agility and advantage that a truly digital supply chain can bring, act now.
This blog draws on the results of a North Highland-sponsored survey conducted in September 2019. To analyze organisational attitudes and determine the most critical strategic priorities for 2019, we surveyed 103 retail leaders from organisations that had 2018 revenues greater than $1 billion and that are headquartered in the U.S. or U.K.