Janet Godsell: “Many manufacturers still need to break down silos”

The majority of European manufacturers are still only at the early stages of their digital supply chain journey, according to findings from a recent study commissioned by software vendor JDA and conducted by the University of Warwick. “Most companies still have a functional organizational structure,” states researcher Professor Janet Godsell from the University of Warwick’s research and education group, WMG.

By Martijn Lofvers

The research into 179 European manufacturers of a wide variety of products reveals that just 2% are approaching the fourth and highest level of digital supply chain readiness. That is the level at which companies utilize machine learning (to discover the relationship between cause and effect) and artificial intelligence (to make decisions autonomously) and are actively involved in business optimization based on their end-to-end visibility in supply chain networks. Only 13% of the companies studied currently have a ‘prescriptive’ supply chain, which is the third level of readiness. These companies use machine learning and artificial intelligence to some extent in a digital control tower, and have a mature decision-making process based on integrated business planning (IBP), which is the highest level of sales & operations planning (S&OP).

“Manufacturers need to break through the impasse with IBP and S&OP,” says Godsell. “Of the 11 key supply chain processes manufacturers were asked about, S&OP was rated as having the lowest level of maturity (34%) and also scored the lowest on ambition; just 21% expect to use S&OP to support end-to-end business optimization by 2023. People are clearly tiring of S&OP. Companies don’t see how they can make this process effective. New technology must give them more visibility of the entire supply chain so that they can make sound financial decisions and arrive at IBP.”

Breaking down silos

The research shows that 53% are at the second level (‘predictive’) which is aimed at functional optimization and efficiency. Godsell: “Many multinationals are at this level with functionally optimized silos.” A large number of these companies are expected to digitally transform to a higher level over the next five years. By 2023, 32% of the manufacturers will have a prescriptive supply chain based on automatically generated recommendations. According to the researchers, digital optimization means transitioning from a ‘node’ to a ‘network’ approach, periodic to real-time decision frequency, and supply chains evolving from ‘one-size-fits-all’ to a market segment of one.

A key enabler of supply chain segmentation – allocation planning and order promising – was identified by the manufacturers as the process with the highest ambition to adopt digital technology, doubling over the next five years from 30% to 61%. One fifth of the respondents believe that by 2023 their factory planning and scheduling will be able to respond in real time. The adoption of artificial intelligence (AI) is predicted to grow three times faster than other technologies such as sensor networks, Internet of Things (sensors on products and carriers) and robotics. So far, only 28% have started to use AI.

Safe places

“To maintain and enhance competitive advantage, organizations need to focus on three aspects of the supply chain digital transformation process,” recommends Godsell. “First, build a data platform to share information across the whole supply chain. Then focus on improving how data is gathered throughout the chain. Lastly, use AI and machine learning to optimize business processes in the end-to-end supply chain.” Godsell emphasizes that it takes strong leadership to accept the need for this step and to adapt the organizational structure accordingly. “Beiersdorf has added a digital layer in its organization and adjusted the KPIs. Pioneering manufacturers are creating ‘safe places’ to experiment with new digital technologies or are even setting up a spin-off as a kind of start-up.”

Supply Chain Professor Godsell will be presenting the findings from a recent study into the adoption of digitalization by European manufacturers at the inNOWvate Supply Chain Event in the Dutch city of Amersfoort on 22 May. For more information about the inNOWvate Supply Chain Event, which includes the culmination of the innovative European Supply Chain Start-up Contest, see here.