Managing Disruption requires Fostering Innovation and Scaling the Digital Supply Chain

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1 Managing Disruption requires Fostering Innovation and Scaling the Digital Supply Chain The growth of digital business, acceleration of digitalization and demand for sustainability present significant challenges and opportunities for many supply chain organizations. Supply Chain Leaders like yourself must take the lead in refining and communicating comprehensive talent and organization strategies. These strategic plans must be grounded in agility and aimed at addressing the strategic goals and operational challenges of the business Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. For more information, info@gartner.com or visit gartner.com.

2 Digital Supply Chains Require Proactive Talent and Organization Strategy As the speed of change, new threats and opportunities raises the stakes for enterprises, supply chain has never been more important to commercial success. Strategy, leadership and governance are fundamental to addressing new challenges and seizing new opportunities. Together, these competencies make it possible for supply chain to enable new business models, deliver products and services that can be disruptive, and provide access to new markets while producing a source of competitive advantage. Developing strategy is a critical aspect of supply chain leadership and a framework for governance because it provides clarity of direction and decisiveness in intent and action. Strategy, leadership and governance allow the supply chain to align to priorities, coordinate activities and make trade-off decisions around common goals. Digital business has made these competencies even more important than ever by driving increased rates of change that require supply chains to respond quickly to disruptions and align with evolving digital business models. It must do so while remaining consistent and predictable in executing the ongoing demands of the business. Disruption Forcing a Revisit of Planning Capabilities Supply chain planners have used algorithms for years for areas such as demand, inventory and transportation planning, and manufacturing scheduling, but the way they use them and the type of algorithms are changing dramatically. Traditional algorithms advise planners by creating plans, scenarios and schedules for them to review and collaborate on. These algorithms are mainly deployed in areas where best practices are appropriate because there is a known cause-and-effect relationship. In the digital era, the traditional, best-practice-focused, manually intensive, highly collaborative planning approach won t be sufficient to get value from the massive amount, granularity and speed of data generated throughout an ever-extending enterprise business network and associated connections. Competitive advantage will be determined by speed of understanding through the use of machine learning and artificial intelligence and adaptive response to environmental signals. Move to Mastery: Innovate, Disrupt and Scale the Digital Supply Chain

3 Leaders Extending Sourcing and Procurement s Value Proposition and Metrics Beyond Cost Savings Sourcing and procurement professionals often face criticism from internal stakeholders for being exclusively focused on cost savings. Although cost reduction remains a priority, there are multiple ways suppliers can drive profitability beyond reducing purchase price, such as growing revenue through innovation. To uncover these opportunities, supply chain leaders must move away from attitudes that focus on short-term gains to a holistic approach in supplier management that will enable suppliers to deliver greater value. By doing this, an appliance manufacturer was able to offer consumers an industryleading warranty on a critical component by partnering with a key supplier to launch a new product under co-branding. This strategy resulted in the brand owner s revenue growth, while increasing the supplier s sales and brand exposure. Leading companies have developed an interaction framework with key suppliers that enables joint development and collaboration to obtain higher value. Commonly referred to as supplier relationship management (SRM), this concept describes the process of managing strategic suppliers that is different in terms of levels of engagement and relationship focus versus the rest of the supplier base. Supplier relationship management is the organized approach to developing supplier partnerships according to their relevance and value potential. SRM provides stakeholders with clear guidelines on engagement priority and expectations, based on the relevance of different supplier segments.

4 Emerging Technologies Creating Digital Business and Initiating New Manufacturing Models Across all manufacturing value chains, the role of manufacturing operations is changing at a pace never experienced before. Concepts like digital business, or the German government s Industrie 4.0 initiative, have spurred a rapidly unfolding abundance of industrial productivity frameworks, policies and initiatives. These initiatives all promote digitization and smart factories through the Internet of Things (IoT), artificial intelligence (AI), 3D printing, robotics and cloud computing. Initiatives are rich with broad-sweeping ideals, and this helps gain momentum. Yet aligning these modernized and/or innovative production capabilities with the supply chain is no easy ask. Multiple initiatives might highlight the importance of the value chain while simultaneously promoting manufacturing excellence in isolation. Digital Trends Now Transforming Logistics Strategies Logistics has always been a critical component of a company s supply chain, but historically, in many organizations, it has been an overlooked and underinvested cost burden. This is now changing as companies such as Amazon and Alibaba disrupt the logistics industry by developing the function to a point where it is now a differentiator that drives growth and delivers customer value. However, the biggest impact is coming from the transportation industry facing increased rates and tighter capacity. This is good news for the industry because, over the past five years, venture capitalists have invested about $8 billion in the logistics sector. Also, the introduction of new technologies such as artificial intelligence, robotics and big data analytics has accelerated digitization of the sector. Logistics is not without its challenges. Some companies readily point to growing capacity constraints, labor and talent shortages, increasing costs, fuel price fluctuations, and so on. However, some iteration of those challenges has been prevalent in logistics for as long as the function has existed. As company attitudes evolve, logistics is no longer just about dealing with issues. Today, it s increasingly enabling positive outcomes. Move to Mastery: Innovate, Disrupt and Scale the Digital Supply Chain

5 Reading Digital Signals to Create a New Approach to Delivering Great Customer Experiences Today, customer focus is a major consideration for CEOs and their leadership teams. In our Gartner CEO annual survey, we ask participants to highlight their top areas of focus for the coming year. Customer has been in the top five for the past three years. CSCOs are taking up the charge, driving the rise in customer-centric supply chain initiatives that create and protect value through collaborative programs developed hand in hand with customers. The growth of digital is enabling much more demanding consumers and customers. Companies are waking up to the need to develop a strong ecosystem of partners across the customer value chain. Supply chains must now look to evolve collaborative partnerships beyond traditional alliances and channel relationships. Companies like Amazon, Johnson & Johnson, Apple and Nokia are successfully exploiting their supply chain expertise to deliver innovative outcomes that meet or exceed customer expectations. These companies recognize that their customers are often more influenced by their supply chain experience than other types of interactions how a late delivery can disrupt or disappoint and how an expedited delivery can delight or save a life. These companies are building the right supply chain infrastructure to capitalize on the interactions that supply chain has with customers for competitive differentiation. They have moved from a focus on customer service through delivery products to a focus on customer experience through the delivery of products, services and outcomes. Gartner defines the customer experience (CX) as the customer s perceptions and related feelings caused by the one-off and cumulative effect of interactions with a supplier s employees, channels, systems or products. Supply chain leaders must first understand customers needs to shape how the supply chain can positively impact their experience. Organizations with a heavy reliance on their supply chains are well-positioned to promote and implement collaborative processes that improve the customer experience, given the frequent interactions that the logistics and customer service functions typically have with customers. Join the world s most important gathering of supply chain leaders and embrace the transformative power of agility and responsiveness, and to anticipate and respond to unexpected events, and turn disruption to advantage. Move to Mastery: Innovate, Disrupt and Scale the Digital Supply Chain September 2018 London, U.K Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. For more information, info@gartner.com or visit gartner.com.