In a way, automation is a little like an organization’s culture – you can’t touch it or point at it, but it can nonetheless have a profound bearing on developments.
For something so intangible, it’s interesting that automation technologies make their largest impact on what is probably the most physical part of any business – the supply chain. They generate greater quantifiable benefits here than in any other area.
In our global digital supply chain survey, we found that automation initiatives in procurement and supply chain functions deliver the highest returns as compared to any other function. Automation delivers an ROI in the supply chain of 18%, three percentage points more than for HR and four percentage points more than for IT. For other functions, including finance and accounting, research and development, and customer service, the difference was even greater.
The importance of focus…
Needless to say, these headline figures conceal a fair degree of variance – some organizations have seen greater success than others in digital transformation via supply chain automation. Our survey shows that more progress and better results are achieved by those who can identify their areas of greatest strategic importance, and who are then able to focus on those. The downsides to embarking on too many projects at once aren’t just wasted time and budget, but the consequent inability to implement a winning project at scale.
Indeed, our survey found that only 14% of organizations are currently able to scale at least one of their supply chain digital initiatives to multi-site deployment or full-scale deployment. The vast majority – 86% – are stuck at either proof of concept (POC) or pilot stage. The survey also noted that those organizations that were able to scale up their digital supply chain initiatives have, on average, six POCs running at any one time. By contrast, those organizations who have failed to scale are running an average of 11 POCs.
… and of vision
How do successful organizations identify winners on which to focus? Answer – they have a framework in place, enabling them to evaluate the outcomes of individual pilot projects and map them against a clearly defined roadmap for where the enterprise would like to see its supply chain three to five years hence. In addition, they have ensured that the budget is ringfenced year on year.
The advantage of conducting a survey at scale – in this case, more than 1,000 organizations – is that broad trends can be identified. For instance, we were able to see the points in the value chain where strategic wins were most prevalent, in terms of ease of implementation and the benefits realized.
We were also able to identify some general principles of supply chain digitization. For instance, our survey explores the importance of:
- Obtaining buy-in from senior management
- Aligning the supply chain vision to that of the business
- Engaging supply chain partners in the process
- Driving a customer-centric mindset
- Building the required talent base
Does it work?
If automation is intangible, so are business theories – even those expressed in blog posts such as this. What’s needed is something of substance. “Does it work?” is a fair question.
What’s needed, in fact, is proof.
Suppose I told you that next-generation supply chain management (SCM) practices are typically delivering order delivery cycle time reductions of 15–20% and improvements in forecast accuracy of 10–30%?
Suppose, too, I said that a blue-chip FMCG customer of ours, with around 400 brands, is seeing improvements in forecast accuracy of the order of 10–20% across its product lines?
And suppose I also told you of another client – a multinational medical device, pharmaceutical, and CPG company with an annual revenue of around $70 billion – that is achieving close to $7 million in external manufacturing operational savings over five years?
So yes, supply chain automation works. As I said in my introduction, it’s rather like organizational culture – you can’t see it, but you can see its effects.
To take full advantage of it, it needs to be approached with focus, with a commitment to achieve scale, and with a long-term and enterprise-wide strategy. Do this, and you too will be the envy of your peers in HR, IT and finance.
To find out how Capgemini’s Digital Supply Chain solution standardizes and integrates supply chain master data with planning, execution, and insights, based on a proven and comprehensive framework, contact: firstname.lastname@example.org
Learn more about Capgemini’s Digital Supply Chain can increase your competitive advantage by strengthening your business drivers and focusing on your end customers.
Read Capgemini Research Institute’s “The Digital Supply Chain’s Missing Link: Focus” report to learn more about how organizations across consumer products, manufacturing, and retail understand the digital initiatives they are adopting, the benefits they are deriving, and the way they are transforming their supply chain.
Dharmendra Patwardhan is responsible for developing offers and capabilities for transforming supply chain operations that drive tangible business outcomes for Capgemini’s clients.