JDA & KPMG Digital Supply Chain in Retail & Manufacturing: A State of the Industry Benchmark, conducted by Incisiv
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1 JDA & KPMG Digital Supply Chain in Retail & Manufacturing: A State of the Industry Benchmark, conducted by Incisiv
2 RETAILER Keeping up with customer expectations is driving retailer investment in the supply chain. Top Drivers Real-time product visibility (57%) End-to-end traceability (53%) New fulfillment nodes (50%) Retailers view cognitive/predictive analytics as the most disruptive new technology followed closely by Internet of Things (IoT)/connected devices. When it comes to technology deployment, cloud is the de-facto option. Retailers are held back by commitment to a clear integrated strategy. A piecemeal, follower approach may not work in the future. The time to build an overarching strategy is now. Top Inhibitors Management commitment (70%) Limited IT budget (60%) No integrated strategy (30%) MANUFACTURER Agility and innovation is driving manufacturer investment in the supply chain. Top Drivers Real-time product visibility (50%) Innovate faster (40%) Lower cost to serve, improve planning (33%) Manufacturers view Blockchain and autonomous vehicles as the most disruptive new technologies; 1 in 2 will conduct a pilot in the next 24 months. On-premise solutions are preferred over the cloud. Manufacturers are clearer about their strategic direction and focus. It is the execution structure and change management capabilities that hold them back. Top Inhibitors Resistance to change (57%) Complicated decision making (40%) Management commitment, data security (37%)
3 RETAILER Keeping up with customer expectations is driving retailer investment in the supply chain. Improving end-to-end order visibility and supporting new fulfillment methods are priorities. Top 3 drivers of investment in the supply chain (Retail) 53% End-to-end traceability 57% 50% Real-time product visibility Manage new distribution/ fulfillment nodes FAST FACTS 1 in 4 retailers rank attracting and retaining talent as a top priority while no manufacturers do so. What I Want, When I Want It. Retailers live at the frontline of customer expectations. Enabling the the supply chain to evolve in order to meet customers changing expectations is the core driver for investment in the supply chain. Retailers need real-time visibility to drive both efficient fulfillment and customer experience. Customers shrinking patience with long delivery cycles and increased expectation of getting shipping updates throughout the fulfillment journey is driving retailers to improve product visibility. Traceability follows visibility closely as customers demand greater information about where and how their products were sourced. As a result, retailers have to put in place processes and systems to track and trace constituents of each product they sell. This is also a risk-mitigation investment driven by compliance needs. Further, it improves preparedness for product recalls. Finally, the customer wants to be served at her pace and on her time. This has led to significant innovation and investment in supporting new fulfillment nodes from using stores as a fulfillment hub to partnerships with a growing list of last-mile delivery players.
4 MANUFACTURER Manufacturers are focused on agility and speed to market. While improving visibility is a shared goal with retailers, manufacturers place a much greater emphasis on innovation. Top 3 drivers of investment in the supply chain (Manufacturer) 40% Innovator faster 50% 33% Real-time product visibility Lower total cost to serve, improve integrated planning/s&op FAST FACTS 1 in 5 manufacturers rank incorporating new data streams as a top priority while no retailer does so. Lean Innovation Machine. Manufacturers and logistics providers supply chains are critical to meeting the customer promise of fast and accurate shipping. They need the ability to expose real-time product information to their retail partners. Especially as the volume of drop-ship orders increase, this helps improve fulfillment processes and ensures that customers have complete visibility into the order. Improving integrated planning and lowering the total cost are core execution tenets that will continue to be a top priority as manufacturers try to squeeze efficiencies out of the supply chain. Finally, we get to innovation. It was surprising that while no retailer rated supply chain innovation as a top driver, 4 in 10 manufacturers did. As the threat of Amazon extends from retail into manufacturing (Amazon Basics, Fashion) and logistics (FBA, Shipping with Amazon), we see an increased focus on innovation. Manufacturers realize that sitting still is no longer an option. They are looking for ways to leverage new technologies and partnerships to improve speed to market and deliver a superior customer experience profitably.
5 Cognitive analytics is seen as the most transformational business capability that will be embedded across the supply chain. Connected devices will continue to see an uptick. Insights for the Win. Using data effectively will become a key source of differentiation across industries. Utilizing the vast amount of data that the supply chain collects is both a huge challenge and an opportunity. Cognitive/predictive analytics is overwhelmingly viewed as the most disruptive technology by executives for its ability to impact all parts of the supply chain be it forecasting, fleet routing or inventory optimization. IoT/connected devices are also seen as disruptive. The reduction in cost of these devices coupled with their data dividend is the driving factor of adoption. FAST FACTS Retailers: Rank cognitive/predictive analytics higher than manufacturers. Manufacturers: Rank Blockchain and autonomous vehicles higher than retailers; 1 in 2 will test these in the next 24 months.
6 Cloud solutions emerge as strong alternatives to on-premise. For retailers cloud is becoming the de-facto option. Manufacturers are more guarded. Technology deployment preference (cloud) Percentage of respondents who preferred cloud/hosted technology deployment to on-premise 60% 60% 57% 63% 57% 50% 43% 57% 50% 60% 63% 70% 70% 27% 30% 33% 23% 17% Forecasting & Replenishment Network Planning & Design Warehouse Management Transportation Management Inventory Optimization Inventory Visibility & Traceability Workforce/Labor Management Cross-Enterprise Collaboration Integrated Business Planning/S&OP RETAIL MANU Linear (RETAIL) Linear (MANU) Great Agility. The perception and adoption of cloud solutions has changed significantly over the last five years. Adoption of cloud solutions among retailers has been growing at 15 percent y-o-y, and cloud solutions are no longer seen as being functionally inferior or less secure than on-premise solutions. Moving to the cloud offers greater agility and speed to market. Retailers who have been under the gun from the likes of Amazon have embraced this shift, and the cloud is a de-facto standard for new software. Manufacturers, on the other hand, have yet to fully embrace the cloud, except for solutions such as collaboration and S&OP. Their reservations stem from their lack of adoption of core cloud applications and perceived data security risks.
7 RETAILER Retailers are held back by commitment to a clear integrated strategy. A piecemeal, follower approach may not work in the future. The time to build an overarching strategy is now. Top 3 impediments to investment in the supply chain (Retail) #1 challenge #2 challenge #3 challenge 60% Lack of sufficient IT budget 70% 30% Lack of management commitment Lack of an integrated supply chain strategy Strategy First. Rethinking the Supply Chain. It is shocking that 70 percent of retailers believe that the lack of management commitment is their greatest impediment to investments. Perhaps examining why may offer some answers. Retailers have been behind the eight ball on developing their digital supply chain strategy. They have been playing catch up with the expectations set by Amazon and other digital leaders. A follow-the-leader approach to transformation will no longer work. It is neither strategic nor capital efficient as it focuses on adoption of capabilities to get to competitive parity, rather than on re-establishing the supply chain as a key driver of competitive differentiation. This is the time for the hard conversation, for retailers to take a step back and reimagine the role the supply chain should play in the new retail business model (store, digital, marketplace).
8 MANUFACTURER Manufacturers are clearer about their strategic direction and focus. It is the execution and change management that hold them back. Top 3 impediments to investment in the supply chain (Manufacturer) #1 challenge #2 challenge #3 challenge 40% Complicated decision making 57% 37% Resistance to change Lack of management commitment, security risk Execution First. Preparing for change. In sharp contrast to retailers, manufacturers don t rank the lack of budget as a top challenge. This is surprising. It s the rarest of rare occurrence when executives don t point to the lack of resources as a top impediment to investment or growth. What s happening with manufacturers is a bit more interesting. They seem to have the strategy and resource requirements squared off but are struggling to implement their strategy because decision making in the rank and file isn t streamlined and more importantly it s a challenge to manage change. As manufacturers get into the weeds with execution, they have come to realize that transforming the supply chain isn t just about plugging in new systems or turning on new capabilities. Talk to us... JDA Software is the leading supply chain software provider powering today s digital transformations. We help companies optimize delivery to customers by enabling them to predict and shape demand, fulfill faster and more intelligently, and improve customer experiences and loyalty. KPMG LLP, the audit, tax and advisory firm, is the U.S. member firm of KPMG International Cooperative ( KPMG International ). KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 154 countries and territories and have 200,000 people working in member firms around the world. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Incisiv offers digital transformation insights to consumer industry executives navigating digital disruption.
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