Companies are lagging behind in smart supply chain investment

smart supply chain

Over three quarters of all companies lack the skills and capabilities to further digitalize their supply chains. As a result, they risk missing out on major benefits, such as better alignment with customer demand, significant efficiency gains and better resilience against calamities and other supply chain disruptions. In contrast, early adopters achieve cost savings of 10 to 15%. A recent study of the value of smart supply chains by innovation and transformation consultant PA Consulting revealed these and other findings.

The report titled ‘Power your potential: the value of the smart supply chain’ – created in conjunction with the University of Nottingham – has been published at a time when supply chains around the world are suffering severe disruption due to coronavirus. Risk analysis firm Verisk Maplecroft predicts that the disruption to global supply chains caused by the virus could last until Q3 of this year. A growing number of suppliers are reporting increasing problems with supplies and are being forced to adjust their prices and sales forecasts.

Damage limitation

According to PA Consulting, by enabling better visibility and forecasting, smart supply chains actually help companies to predict such risks more successfully so that they can implement damage limitation measures sooner. Additionally, a smart supply chain is more agile, creates more transparency across all processes, and provides valuable insights into consumer behaviour. This improves the overall efficiency of the entire supply process and enables suppliers to respond more effectively to consumer demands and market developments.

More than a hundred supply chain experts worldwide were surveyed in the study. 30% of them admit that they do not know how much value a smart supply chain could add. Just under half (47%) are specifically interested in the opportunity for reducing operational costs by digitalizing their supply chains. As a result, they are missing out on key opportunities to considerably improve their financial performance, according to PA Consulting.

Enhanced customer focus and service

“Digital technologies don’t only improve performance and cost efficiency. Real-time insights also enable organisations to provide the immediacy that customers are beginning to expect, which strongly enhances the customer service. That adds a huge amount of value – considerably more than many of our clients initially expected,” comments Ricardo Tülkens, Partner Industrial Manufacturing at PA Consulting. He cautions that these results can only be achieved if companies increase their investment and develop a clear, long-term vision which embraces all the available technologies and opportunities.

The study demonstrates that there is a clear need for change in the supply chain. 61% of the respondents across the board, from the life sciences sector to the automotive industry and from aerospace to defence, are planning to make far-reaching changes to their supply chain technology within the next three years. According to PA Consulting, however, many organizations are put off by the challenges associated with such a process.

Tips to stimulate progress

PA Consulting offers four tips to stimulate progress: turn ideas about a smart supply chain into a vision that is aligned with the company’s purpose and ambitions; understand the total value opportunity by developing a long-term vision for the whole supply chain; accelerate the adoption of technology by continuously analysing and piloting available options and assessing their added value; and last but not least, catalyse the business to execute by ensuring that processes and employees are fully focused on efficiency, agility and service.