It’s time to digitally integrate the value chain

Doubling down on digital transformation is a requirement as businesses adapt to the pandemic with new business models and rapid innovation. In many cases, survival is at stake; in others, it is an opportunity to discover new routes to market and indeed new markets.

But something more fundamental is happening underneath the surface. The pandemic has brought the New Customer into sharp focus and businesses learned they need to react quickly to satisfy their needs. The traditional customer that our supply chains were designed to serve has changed. The “New Customer,” whether B2B or B2C, has a fundamentally different way to make purchasing decisions based on criteria that include near-instant delivery, bespoke products and services, dynamic pricing, and among other factors, a delightful user experience.

At the Digital Supply Chain Institute (DSCI) we asked our members what has changed during the pandemic. We found many themes in common. Our members, global organizations with operations stretching across continents, were overwhelmed at first by the disruption. They were too slow to adapt, lost sight of their customer which changed overnight, lacked the real-time data to understand the impact, and found that KPI’s turned out not to be indicators at all, but obsolete internal metrics. Internal silos proved to be an obstacle and came tumbling down.

Companies have long talked about tearing down silos. Organizations are now doing just that, only not stopping at corporate borders. They are building a Digitally Integrated Value Chain, one that connects the front-end of the business to the customer, links all departments and processes across the enterprise, and integrates the back-end ecosystem of suppliers and partners that constitute the supply chain. The Digitally Integrated Value Chain crosses enterprise boundaries, is integrated and transparent, and managed from beginning-to-end of the value chain. It’s been happening in the platform economy but is now rapidly making its way into the traditional enterprise.

Businesses are finding that future performance no longer follows from past performance. Time is of the essence and traditional approaches are no longer fit-for-purpose. New models that enable decisions across the entire value chain and are inclusive of consumers, customers, and supply chain partners are imperative.

An alcoholic beverage producer, with bars and pubs closed, quickly built an e-commerce presence to deliver direct to the home. What the company discovered, however, is the home consumer’s consumption patterns were different, and demand increased for ready-made drinks. Near real-time data on demographics and purchasing information across the consumer base existed, but that information was in the hands of distributors and retail outlets and your corner pub—not easily accessible to the beverage producer. To adapt, the company needed to extend their business to serve new consumers which required a new organizational approach, new skills, a different culture, retail regulatory compliance, and KPI’s that reflected how well they were serving the new customer in addition to their traditional segments.

Similar challenges were experienced by an athletic apparel manufacturer, who detected a major shift in demand for certain products, but the reasons were not immediately clear. Data to redirect the supply chain to align with the shift, once again, existed but was not readily accessible to provide needed insight. As a result, it took valuable time to identify that shoe sales had dropped, but athletic wear, particularly sweatpants and leggings were selling at disproportionately higher rates than forecasted. And most frustrating was that the supply chain, like most in the apparel business, was oceans away and take months to redirect.

As businesses rethink their models, they are realizing that the linkage between the customer and their supplier network must be seamlessly integrated. Today, buying decisions are ever more rapidly changing. In near real-time, consumer and market intelligence must directly feed supply chain networks, dramatically decreasing reaction time. This requires employees to be customer-facing, fulfillment data must be available in real-time, inventory systems updated to support omnichannel distribution, IT systems have to be updated and provide interconnectivity to track individual orders, and supply chains must be able to respond faster and get closer to the customer. A new approach is required and the Digitally Integrated Value Chain has emerged.

In a Digitally Integrated Value Chain, the supply chain is transparent and responsive to shifts in market behavior. Supplier and distribution networks operate openly, exchanging data and information. You have visibility across the entire market from customer and consumer back through supply and materials. New leadership skills emerge that emphasize collaboration across silos and enterprises, and most importantly the value chain is managed end-to-end with shared performance metrics that are indicative of customer success, not just business unit performance.

Businesses will succeed or fail with their adeptness in serving the New Customer. Tear down those silos and build a digitally integrated value chain - your New Customer demands it.

Shawn Muma is director of Supply Chain Innovation and Emerging Technologies for CGE’s Digital Supply Chain Institute (DSCI). To learn more visit The Center For Global Enterprise.

You can read more from Shawn Muma by clicking on the links below:
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