Pearson on Excellence: Building the digital supply network

In the future, companies’ physical end-to-end supply chains will work in concert with equally comprehensive and far reaching “digital supply networks”—from systems that support initial design and development work, all the way to those that help manage delivery and post-sale service.

The technology foundations of these networks exist now, but complete integration still has a way to go. When it happens, however, most every supply chain function will benefit from more frequent and open communication with every other function. Processes will become more efficient. Costs will drop; operational flexibility will increase; and more timely, reliable, and complete information will raise the accuracy of demand forecasts, as supplier and customer inventories become largely transparent.

Hubs of connectivity
Think of the digital supply network as having five “hubs of connectivity”—metaphorical crossroads where information flows automatically to and from other areas of the organization.

Digital Node 1: Customer Interface. With co-creation and crowd-sourcing, companies are finding new ways to understand and leverage the desires, preferences and ideas of consumers. Take FashionStake.com, creator of a “crowd-curated fashion marketplace.” On its highly interactive website, consumers vote on apparel designs before they have been produced. A vote becomes a purchase if enough votes are cast to justify a production run. In effect, manufacturing decisions are determined by consumer demand.

The supply chain planning implications of this approach are dramatic. Companies can gauge what will be popular in a virtual way before they commit to a physical product, thereby reducing inventory risk. Plus, insights from consumers’ choices can be applied to demand forecasts associated with other selling channels, like brick-and-mortar retail.

Digital Node 2: Product Lifecycle Management. Today’s product-development processes are often separated from the rest of the organization. In a digital network environment, however, sophisticated systems capture product updates and continually share product information with anyone whose current or future tasks might be affected. Data from purchasing, suppliers, operations, sales, and marketing supports planning in ways that control costs and accelerate the delivery of finished goods.

Innovative collaboration tools are helping Carrefour and its suppliers simplify product lifecycle management for private label products. According to Carrefour, this process—which ranges from design to in-store management—is key to ensuring the quality of Carrefour brand products.

Digital Node 3: Integrated Demand and Supply Planning. In the digital supply network, more people participate in the demand planning process. Digitized information is pushed throughout the organization to departments such as product development, marketing, production, logistics, and transportation. With this information on a server in a private cloud, authorized people around the world can readily access it. Forecast quality improves, which in turn reduces stock-outs, lowers inventories, and increases inventory turns.

Procter & Gamble gets dates and locations for all events with its retail partners—such as a cluster of Walmart stores in south Florida—and prepares for predictable increases in demand. For instance, if a set of stores plans a buy-two-get-one-free promotion on diapers, P&G systems are fully prepared to “custom coordinate” production and distribution in that region.

Digital Node 4: Suppliers. By leveraging digital capabilities available in supplier relationship management (SRM) technology, companies can improve collaboration, sourcing, transaction execution, and performance monitoring between themselves and their trading partners. This helps an organization increase enterprisewide visibility into spending and trading partner activity, while enhancing control across the sourcing and procurement cycle.

Jaguar Land Rover (JLR) has teamed up with Covisint, a provider of communication and collaboration systems, to enhance information-sharing with suppliers and streamline joint business processes. JLR now shares an unprecedented number of company-specific applications with its global supplier base and gives suppliers access to a massive library of up-to-date information.

Digital Node 5: Logistics. Digital network leaders use mobile devices to track inventory from warehouse to dock to store, thus improving their ability to fill orders reliably and efficiently; support routing decisions; and make rapid adjustments to changing conditions. Another logistical advance is sharing data from manufacturing planning systems with third-party logistics services providers. With better visibility into new-product developments and production volumes, the 3PL can more-effectively plan operations and reduce costs for both parties.

The United States Postal Services integrates multiple mail-tracking systems into a single system, called Surface Visibility. Barcodes on mail containers are scanned at the dock, thus providing advance notification of mail entering and departing a facility. USPS containers have dimensions embedded into the container barcodes, which helps optimize trailer cube.

Connecting the dots
Connecting all five digital nodes in the digital supply network is virgin territory for most companies. But it may not remain so, given the very real opportunity to obtain more accurate, more timely and more complete information, and thereby reduce stockouts, improve forecasts, and increase resilience.