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Digital Supply Chain Transformation Guide PDF

52 Pages·2017·3.5 MB·English
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Digital Supply Chain Transformation Guide: ESSENTIAL METRICS The Fronts ide F l ip : Focusing on Customers and Revenue The Center for Global Enterprise “The biggest weapon a company has to outperform its competitors over the next 3 years is the Digital Supply Chain. The Digital Supply Chain will dramatically improve revenue and reduce costs while delighting customers. A true winning play.” S a m P a l m i s a n o , f o r m e r C h a i r m a n a n d C E O , I B M a n d F o u n d e r, C e n t e r f o r G l o b a l E n t e r p r i s e ( C G E ) G LO B A L D I G I TA L S U P P LY C H A I N CO M M U N I T Y * © Copyright 2017, The Center for Global Enterprise, All Rights Reserved. *DSCI Project Partner Digital Supply Chain Transformation Guide: Essential Metrics 4 You Get What You Measure: Making the DSC Real 6 Guide for Action 7 I . W H AT I S A D I G I TA L S U P P LY C H A I N ( D S C ) ? 8 Metrics Make It Happen 9 I I . T R A D I T I O N A L S U P P LY C H A I N ( T S C ) M E T R I C S 9 Introduction 10 TSC Metrics 12 APQC Benchmarks 13 TSC Metrics : How wi l l Digita l izat ion Drive Improvements? 16 I I I . E S S E N T I A L D I G I TA L S U P P LY C H A I N M E T R I C S 16 What are the Essentia l DSC Metrics? 17 Guidance for Using these Metr ics : Gett ing it Done 20 The Essentia l DSC Metrics : Crucia l Choice, Pol it ica l ly Tough, Incredibly Effect ive 22 People are Coin Operated 23 I V. D S C I T R A N S F O R M AT I O N M AT U R I T Y A S S E S S M E N T ( T M A ) 23 Why a Transformation Maturity Assessment? 24 How TMA f its into the overal l DSCI Performance Guide 26 Outside In 26 Considerat ions on the Scope of the Assessment 27 Transformation Maturity Assessment Scale 28 V. P R I O R I T Y AC T I O N S F O R S E N I O R M A N AG E M E N T 30 Governance 30 Leadership and Cal l to Action 31 APPENDIX A: Essentia l Digita l Supply Chain Metr ics : P ick L ist 38 APPENDIX B: Transformation Maturity Assessment 43 APPENDIX C: Digita l Supply Chain Strategy Development Workshop 47 REFERENCES 48 ACKNOWLEDGEMENTS D S C Tra n s fo r m at i o n G u i d e : 3 E s sent ia l Metr ic s Table Of Contents Photo credit: Li & Fung You Get What You Measure: Making the DSC Real The supply chain is the most significant business of the Digital Supply Chain (DSC) was their process for most companies today. This is a given highest research priority. for companies that manufacture and distribute products, but it rings true for companies that deliver software or financial services as well as We don’t want to measure how good we are; we want to other services. Such companies may not use the measure how good our customers think we are. term “supply chain,” but they have one and it ANDERS KARLBORG, ASSISTANT CEO, ZTE must be managed with greater precision than ever. In fact, Our research shows that companies who successfully implement a Digital Supply Subsequently, the Center for Global Enterprise Chain will reduce costs by 20% on average while recruited leading supply chain executives increasing revenue by 10%. from 26 companies around the world. This exceptional team of CEOs and supply chain In 2015, the Center for Global Enterprise (CGE) executives joined forces to define the game- assembled a group of chief executives in changing business strategies, technologies and Sanya, China to discuss managing global market patterns that make a DSC a must-have in businesses. These CEOs agreed that the topic today’s business world. DSC Tra n s fo r m at i o n G u i d e : 4 E s sent ia l Metr ic s Companies need to focus on four areas to The DSCI agreed to execute focused research make the transition to a DSC: Demand, People, projects in these three areas to expand Technology, and Risk. The management of these upon the findings outlined in A Frontside areas were defined and a comprehensive review Flip. Performance Metrics was selected as a of the findings can be found in the October 2016 top priority and is the focus of this paper: creating white paper Digital Supply Chains: A Frontside the right set of measurements to ensure that a Flip. The key take-away of this research is that DSC is built, that growth is accelerated, market Digital Supply Chains must focus on the customer share increased and costs dramatically slashed. to drive business growth. Supply chains are no longer a necessary evil where low cost and on The DSCI surveyed leading companies – around time delivery wins. They are a tool for market 125 supply chain leaders – on how performance success and business growth. metrics will change in the next three years. 81% of the respondents said that performance metrics The CGE established the Digital Supply Chain will change significantly while only 1% expect no Institute (DSCI) to continue its focus on supply change in their performance metrics between chain transformation and to cooperate with now and 2020i. the Global Experts Group of 26 leading supply chain companies representing a cross section of When asked how Digital Supply Chain industries from around the world. performance metrics will look in relation to existing supply chain metrics, 79% of the The Global Experts Group determined that three respondents said that performance metrics will be areas in particular require more attention to a combination of new DSC metrics and traditional hasten the implementation of the Frontside Flip. supply chain metrics. 10% of the respondents These research areas were: said that DSC metrics will feature completely new metrics and only 6% of the respondents believe 1. DSC Performance Metrics that the metrics will resemble existing metrics, 2. Blockchain Technology albeit better and faster i. 3. Driving Demand with the Digital Supply Chain: Using Real-Time Big Data and AI/ Machine Learning Change in Performance Metrics Over Three Years No Change Moderate Change Signifcant Change 0 10 20 30 40 50 60 70 80 DSC Tra n s fo r m at i o n G u i d e : 5 E s sent ia l Metr ic s Guide for Action This guide is the result of extensive research and numerous consultations with our DSCI members, We have a culture that respects and works towards Global Experts Group, industry leaders, practitioners, and academics. The report has four performance metrics . We take them seriously and so do major sections, the first of which covers a review our people . of currently used supply chain metrics which are MIKE CORBO, CHIEF SUPPLY CHAIN OFFICER, COLGATE-PALMOLIVEE referred to as “traditional” supply chain (TSC) metrics. These TSC metrics are important as they comprise 80% of the DSC scorecard. The second For this reason, we believe our work is equally section outlines a new set of essential metrics applicable to executives working in manufacturing for a Digital Supply Chain which will show how and commodities trading, as well as those these metrics account for change in the areas working in finance, banking, software, and other of Demand, People, Technology, and Risk. The service industries. third section includes an extensive maturity assessment which is designed to help supply chain Implementing a DSC requires supply chain executives determine how much progress has leaders to take conscious steps towards creating been made in their supply chain transformation a more demand-driven and customer-focused while providing guidance to companies as to supply chain. In keeping with this principle, where they should focus efforts to improve. The this handbook adheres to a customer-driven fourth and final section also provides guidance on approach. We hope you find our examination of how a company should implement the significant traditional metrics, our maturity assessment, and changes required for an effective Digital Supply our outline for new digital metrics a theoretical Chain to grow revenue and reduce costs. and practical way to understand “how” your company can make the transition and We believe the implementation of these new become a more profitable, cost efficient measures, combined with certain existing Digital Supply Chain. traditional metrics, will help companies accelerate their transition to a Digital Supply Chain. Such a transition requires education and training. The DSCI has developed Leading the Digital The work is intended for senior supply chain Supply Chain, a 5-week online course combined executives, but can also serve as an insightful with a one-day, in-person workshop to help guide for anyone working on or studying supply companies take advantage of new management chain management and best practices. Part of practices, the expanding universe of data, and the transition to a Digital Supply Chain involves emerging technologies to collaborate with their re-defining our understanding of supply chains customers and suppliers to drive innovative to include industries that have not traditionally products and services. considered themselves supply chain businesses. DS C Tra n s fo r m at i o n G u i d e : 6 E s sent i a l Metr i cs Photo credit: ZTE Chapter one What is a Digital Supply Chain? “In Digital Supply Chains: A Frontside Flip”, Production will be driven by customer demand a Digital Supply Chain (DSC) is defined as a and not by manufacturing efficiencies. This will customer-centric platform model that captures lead to improved inventory management while and maximizes the utilization of real-time data better meeting customer needs. coming from a variety of sources. It enables demand stimulation, matching, sensing and Instead of being a function that focuses on the management to optimize performance and less visible aspects of business (everything from minimize risk. procurement through delivery), the supply chain will evolve into an integrated role alongside There are several key considerations in sales, marketing and product development. transforming a supply chain to a Digital Supply Digital Supply Chain leadership will work across Chain. First and foremost is understanding your all elements of the demand stack including customer and the end consumer in a more demand stimulation, demand management, sophisticated way by utilizing data analytics and demand sensing, and demand matching. This advanced technologies. requires an increase in internal collaboration and with key supply chain partners – suppliers and customers. Data analytics and advanced As defined by the customer, our business is al l about technologies enable companies to have precision, accuracy, and quality, and our metrics also have greater visibility into supply chain risks and to be precise, accurate and of high quality. prevent or mitigate negative impacts in an JOHN WAITE, VP GLOBAL SUPPLY CHAIN, MICRON improved fashion. DSC Tra n s fo r m at i o n G u i d e : 7 E s sent ia l Metr ic s It is important that a company start by developing measurements you cannot adapt to a new a DSC strategy. We will suggest how to develop strategy. Conversely, when changes are made to this strategy later in this document. One point your metrics, great things will happen. must be made clear, if you do not change your Metrics Make It Happen When communicating what really matters Change Digital Supply Chain metrics and you will most to employees, investors, suppliers and change behavior. customers, there is no better quantifiable tool than a business metric. Remember, you Transforming your supply chain to a Digital can’t improve what you don’t measure. When Supply Chain means adding new metrics to implementing a change, it is important to determine the success of your efforts to drive evaluate the effectiveness and efficiency of the change. The three sections on traditional changes being made. Metrics assess business supply chain metrics, Essential Digital Supply undertakings, no matter if these measures involve Chain metrics, and the Transformation Maturity production goals, sales, customer satisfaction, Assessment provide a step-by-step guide on how or risk avoidance, as they play a role in assigning to use current and new performance measures accountability to different departments in areas to assist your company in building a successful where the company operates and performs. Digital Supply Chain. Photo credit: photo(s) by Richard Alcorn: Colgate-Palmolive D S C Tra n s fo r m at i o n G u i d e : 8 E s sent ia l Metr ic s Photo credit: Li & Fung Chapter two: Trad i t iona l Supp ly Cha in Metr ic s Introduction To move forward, it is important to look at our team carried out extensive academic the metrics currently in use in a supply chain. empirical research, conducted interviews with Transformation does not happen overnight, and many of our Global Expert Group companies, businesses cannot come to a grinding halt when and benchmarked our findings with data from changing policies and long-standing practices. the American Productivity & Quality Center Existing measures used to assess supply chain (APQC)ii. performance are, therefore, of paramount importance. For the sake of clarity, we have The guiding research questions used to shape chosen to describe metrics currently in use this investigation were: “What are the supply today as “traditional” supply chain (TSC) metrics. chain metrics that supply chain leaders care These measures represent the role of supply about the most?”; and “What are the supply chains centered on facilitating the movement chain performance metrics that are ‘universal’ of goods and services, but not necessarily the in practice across industries and organizations?” customer-focused or demand-driven ones that In The Hierarchy of Supply Chain Metrics, Debra are characteristic of Digital Supply Chains. Hofman wrote that “the key is to focus on the few While we recognize the valuable role, these critical metrics that really matter – the ones that traditional measures continue to play in today’s provide the most balanced view of end-to-end supply chain, we firmly believe changes must be supply chain performance, allowing companies made for a company to undertake a successful to see clearly how they’re doing and why, and transition to a Digital Supply Chain. where they’re making tradeoffs” (Hofman D., 2004)iii. The Global Experts Group predicts that To gain a better understanding of the type of the scorecard of the future Digital Supply Chain metrics currently being used across industries, will still include roughly 80% of these Traditional DSC Tra n s fo r m at i o n G u i d e : 9 E s sent ia l Metr ic s Supply Chain metrics and these metrics will be actions and initiatives will ultimately improve deeply impacted by the Digital Supply Chain. its performance as measured by these key It is important to consider how a firm’s digital traditional metrics. Traditional Supply Chain Metrics Our research concludes that key traditional isolating and determining the potential and metrics for supply chain leaders will continue actual impacts of the Digital Supply Chain. to be used as strategic tools for managing supply chain performance. Metrics such as The metrics shown in the chart should look Perfect Order and Demand Forecast Accuracy familiar to supply chain leaders. Our research will not become irrelevant, or less important, team has organized the metrics into Output as we transition to the Digital Supply Chain. Metrics and Process Metrics. We have further Instead, these metrics will become the best divided them so they are aligned with the and most reliable indicators of the efficacy Digital Supply Chain focus areas of Demand, and magnitude of the benefits of emerging digital strategies, actions, and outcomes. Of course, there are many arguments why supply chain metrics are not “one size fits all.” Some supply chain strategies are highly focused on customer service as a firm differentiator and, as a result, a leader may be comfortable with higher levels of inventory. Alternatively, a perfectly legitimate strategy may trade off some degree of customer satisfaction associated with higher inventory levels for the sake of efficiency, cost reduction, and risk management. Our proposal for a key set of traditional metrics recognizes this strategic segmentation, and attempts to highlight a standard set of measurements that will help you assess your current performance, and importantly, the impacts of any new Photo credit: Li & Fung digital act ivit ies. People, Technology, and Risk. We believe that The following chart illustrates the key these categories provide needed structure Traditional Supply Chain metrics our research to assess and manage Digital Supply Chain team has found to be most useful in terms of initiatives and performance. DSC Tra n s fo r m at i o n G u i d e : 1 0 E s sent ia l Metr ic s

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