Hannu Luoto

By Hannu Luoto

Digital Transformation Strategist

LinkedIn

The Third Industrial Revolution, also known as the Digital Revolution, began changing the world at an increasingly rapid rate around 50 years ago. In the early ‘90s, Finland became a key player in this revolution, as it developed the digital 2G networks which enabled the increased use of mobile devices on a global scale. The popularity of mobile devices was followed by the dawn of the Internet. From the late ‘90s onwards, the Internet has connected people and companies at an exponential rate. Today, there are approximately 4.5 billion Internet users, and the number keeps growing with around one million new users joining the web every day. The amount of data has exploded. Today, each Internet user has access to around 60 zettabits (21 zeros) of data, which is 30 times the amount available ten years ago. The big question is: how can this data be turned into information and used to benefit the environment and society as well as companies and their supply chains?

In the early 1980s, perceptions of Supply Chain (SC) management changed: smooth material flows and the optimal use of resources gained critical importance when it came to meeting customer demands in ever-changing market conditions. Talk of Digital Supply Chains (DSC) began to reach the general consciousness some ten years ago, when this new concept was defined as “a strategic and operative exchange of information between suppliers to enhance communication between actors in the chain”. To put it differently, people were beginning to realize that electronic data needed to flow smoothly, not only inside companies but also into and out of organizations.

Today, SCs are on the brink of a significant digital transformation, and the pressure to act soon is increasing. Modern chains are required to be transparent and resilient (during a pandemic, for instance), and they need to be efficient and agile to meet changing customer needs.

The ongoing change affects everyone whose competitiveness is dependent on a well-functioning supplier interface and distribution network – regardless of the industry.

A generally accepted view is that SCs shouldn’t be seen as mere operations governed by efficiency thinking, but as true enablers that create new business opportunities. The demand for bringing customer demands and operations closer together is increasing. After the transformation is over, the winners will be those who understand the opportunities presented by new technologies but also acknowledge that sustainable change cannot be based on technologies alone.

Getting started can present a problem. One of the challenges presented by SC digitalization is the vast number of opportunities and options related to technology and competence development. Companies’ resources and information are limited but they are still forced to make difficult decisions, which leads them to fear financial risks and the impacts of their choices. What can you do if you’re faced with the necessity of going digital and you want to continue running your business?

From work orders to ensuring customer value

Surprisingly many companies still manage their operations analogically, by using different types of documents, such as work orders, consignment notes and storage reports. This type of manual work is not only slow but it also involves many stages which are prone to errors. Distributing information to everyone who needs it is laborious, which means that the supplier won’t receive information on changed customer needs in time. As the reaction is delayed, the supplier loses materials or precious time.

At this stage of development, single operations will usually be optimized using digital but separate systems. These include, for example, production control systems, inventory management systems and logistics management systems. Although these may allow your operations to develop within company silos, focusing on them alone can easily make you miss the end-to-end perspective. The customer’s voice still isn’t heard clearly enough at the beginning of the chain.

The digitalization of SCs aims at tackling this problem through the digitalization of the entire chain in a customer-centered way. The objective is to make the flow through the chain so smooth that the different actors will be able to react to changing customer needs in real time, without any material losses or delays. Any changes required by the customer will be reflected in product development, and product structures will be updated automatically in accordance with new needs. As the market expects companies to be ready for constant change, technologies, processes and people need to be prepared.

Are new technologies the key?

Digitalization has a significant impact on work environments. It provides new insights into processes and allows for the collection of increasing amounts of data. This has a significant effect not only on how organizations work, but also on the competences of individuals.

As company operations become increasingly digitalized, organizations are required to decentralize their decision-making. They also need to encourage teams to work across organizational boundaries and to share best practices and information. Organizations that encourage people to try new things, despite the risk of failure, will rise to the top. As decision-making gets faster and new tools emerge, individuals are required to constantly learn new things – and discard old habits.

Change calls for the right kind of attitude towards development and growth. It is connected to the desire to recognize one’s own weaknesses and the ability to update one’s skill set as needed. This applies not only to digitalization in general, but particularly to SCs undergoing digitalization.

Sustainable structures of the future

At first thought, technology and sustainable development couldn’t be further apart as concepts: technology enables economic growth and sustainable development seeks to hinder it, right? Wrong. Supply Chains are rapidly forming new networks and becoming more dynamic, making digitalization the one factor that enables the building of a sustainable future; it is the key to reducing our carbon footprint (e.g. optimized routes, minimized inefficiencies and waste), learning new skills (e.g. personal productivity and well-being), and social responsibility (e.g. transparency using block chains).

For some reason, the local manufacturing industry and logistics sector have been slow to pay attention to questions of responsibility. New EU regulations and legislation, alliances (e.g. Responsible Business Alliance, RBA, including companies such as HP, Intel, IBM and Apple) and companies’ own responsibility programs (e.g. Google’s Carbon Free by 2030) are quickly making sustainability thinking the new norm. By now, the demand for responsibility should come as a surprise to no one. The time for us all to act is now, regardless of the size of our enterprise.

A new (digital) way of doing things

Nothing ventured, nothing gained. The only way to stay ahead of the competition is to have courage and an open mind. Those who want to move forward fast, even though they know errors will be made in the process, will write the future DSC success stories.

The entire chain needs to be authorized to take responsibility for the customer experience, which also needs to be personalized throughout the chain. There needs to be a shared business objective and a shared understanding of the meaning of customer value, as this is the only way to achieve any common goal. If the aim is to take responsibility, concentrating on maximum efficiency and domination over the SC won’t result in the desired result, nor will it produce any necessary innovations. Isolating yourself from the rest of the SC and only looking out for number one won’t be enough once the competitors move on to truly digital, customer value-based chains.

Did this text give you a new perspective on customer experience? If you want to talk about it some more, our Vincit Now team is ready to help.

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