The enterprise may understand the importance and value of digitizing their supply chains, but understanding it and executing it are two very different things.
A new report from consultancy firm Capgemini finds that most of the initiatives that large corporations have deployed in an effort to digitize their supply chains have failed to actually emerge from preparation and testing phases — despite half of the corporations surveyed noting that supply chain digitization is a top-three priority.
“While most large organizations clearly grasp the importance of supply chain digitization, few appear to have implemented the necessary mechanisms and procedures to turn it into a reality,” said Capgemini Head of Digital Supply Chain Practice for Business Services Dharmendra Patwardhan in a statement announcing the research last week. “Companies are typically running too many projects, without enough infrastructure in place, and lack the kind of focused, long-term approach that has delivered success for market leaders in his area.”
In Capgemini’s report, “The digital supply chain’s missing link: focus,” survey respondents revealed just how much they are struggling to make progress in their digitization efforts.
On average, organizations have 29 different pre-deployment efforts happening in their plan to digitize supply chains. Those initiatives include proof-of-concepts and pilots, or mere ideas of how to integrate innovation and technology into their supply chain management processes.
Yet according to researchers, having so many initiatives deployed at once has businesses “spread … too thinly,” with only 14 percent having successfully scaled any of their initiatives beyond pilot phase and into full-scale deployment. It’s this finding that led Capgemini to title its report with an emphasis on “focus,” as organizations are struggling to narrow their efforts onto a few, manageable projects.
According to the survey, less seems to be more: Companies that were successful with their efforts had an average of only six supply chain digitization projects. Businesses that failed, meanwhile, averaged juggling 11 projected.
GE Transportation CEO of Global Supply Chain & Engineering Rob Burnett, who was quoted in Capgemini’s announcement, agrees.
“Rather than a cost center, the supply chain can be a source of innovation and efficiency for the whole organization, but it’s important to maintain a sharp focus on priority projects to get the ball rolling,” he stated. “There should be a wider appreciation that less is more.”
It’s not only the number of initiatives at play, however, Researchers also found a direct correlation between the success of an initiative to be brought to fruition, and the way that a company organizes its efforts. For instance, most of the firms with successfully-scaled supply chain automation projects said they had “a clear procedure in place to evaluate the success of pilot projects” (versus only 24 percent for organizations with failed initiatives). Successful projects were also linked to the establishment of “clear guidelines for prioritizing those projects that needed investment.”
According to Patwardhan, these steps are critical to making any investment in supply chain digitization worth the cost.
“Digitization of the supply chain will only be achieved by rationalizing current investments, progressing on those that can be shown to drive returns, and involving suppliers and distributors in the process of change,” he noted.
For the companies that are able to successfully scale their supply chain digitization efforts, 94 percent said the project has directly led to an increase in revenue. Indeed, the return on investment (ROI) of supply chain digitization initiatives is a top motivator for corporates, with 77 percent citing cost savings as their top driver for a project.
Other motivating factors include increased revenues (56 percent) and the emergence of new business models (53 percent).
Analysis supports organizations’ efforts to drive value through supply chain digitization, with separate Capgemini analysis finding that the average ROI on automated supply chain and procurement processes hit 18 percent. On average, it takes only 12 months for organizations to see their supply chain automation projects pay for themselves.