April 12th, 2021
As a result of the COVID-19 pandemic, 44% of businesses have already accelerated or plan to accelerate digital transformation. Despite this research, Gartner claims that more than 50% of organizations have not yet actively started to build a roadmap for supply chain digital transformation. So what’s the holdup?
Here are four obstacles that organizations often encounter on their way to achieving digital supply chain transformation (and how to overcome them).
1. Still Developing Foundational Physical Capabilities
The truth is, many supply chains have been too slow to react to changing circumstances and are still developing the foundational physical capabilities required to compete in today’s market. For these organizations, it’s likely that they’re still attempting to digitalize paper-based and other inefficient processes internally. In that case, their supply chain digitalization efforts are immature; they’re trying to play catch-up by scrambling to implement digital technologies that should have been deployed years ago.
When an organization isn’t prepared at the very core of their operations, it becomes much more challenging to develop and/or adopt the technology they need to scale digital innovation effectively. This often leads to another common situation in which an organization begins to implement new supply chain technologies but doesn’t fully realize the communicated benefits.
Noticeable results will only come when the organization’s supply chain strategy is carefully planned. This starts with taking the initial steps and making necessary changes before heading straight for the pot of gold at the end of the rainbow. As much as this may seem like common sense, many organizations implement new technologies prematurely in attempt to achieve digital supply chain transformation as quickly as possible. More often than not, this sets them back even further.
2. Don’t Know Where to Start
This leads us to another all-too-common situation: lack of a plan. This affects organizations at all levels of maturity, but especially those that have yet to develop foundational physical capabilities. In either case, not knowing where to start when developing a supply chain strategy can cause short- and long-term complications.
When determining a starting point, the best thing for any organization to do is to assess pain points first and then map back to the appropriate technology. The specific pain points will vary, as these are highly dependent on the organization’s level of maturity. However, when there’s a clear understanding of what the issues are, it becomes much easier to figure out what can be done to resolve them.
This knowledge ultimately leads organizations to explore the right technologies from the get-go and therefore creates a natural path to digital supply chain transformation. From there, most organizations will see that next steps in their supply chain strategy begin to come together without much guesswork involved.
3. Lack of Expertise and/or Organizational Support
True digitalization in the supply chain is often hindered by humans rather than—or in addition to—lack of the right digital technologies. When attempting to achieve digital supply chain transformation, many organizations hit two internal roadblocks that halt necessary efforts: lack of technical expertise and lack of organizational support.
Of these two blockers, it is always easiest to conquer technical inability. Almost any working supply chain strategy recognizes that once digitalization in the supply chain reaches a certain point, new and experienced talent will need to be recruited to manage foreign solutions. At the very least, the supply chain strategy should include proper IT training for existing team members and external support from solutions providers.
On the other hand, lack of organizational support is a bit more complicated to overcome. While complex technologies and implementation challenges can hinder progress when internal resources aren’t up-to-speed, technical skills can be taught and/or acquired. Quite the opposite, willingness to change is a mentality. This requires something much harder to teach—strong leadership capabilities.
Supply chain technologies typically have a payback of less than two years and are critical building blocks to for a successful long-term supply chain strategy. On top of that, supply chain digital transformation is proven to drive growth, mitigate risk, and optimize costs. That being said, the most important thing to remember is that this requires a strong alignment between organization and supply chain strategy to succeed. True digitalization in the supply chain can only be achieved when technical skills and open minds come together.
4. Trading Partners Aren’t On Board
Another obstacle worth mentioning is onboarding complications. Just because one organization is ready to execute their well-thought-out supply chain strategy doesn’t mean all of their trading partners are jumping up and down with excitement. More often than not, organizations that are attempting to achieve digitalization in their supply chain aren’t able to reach their goals due to suppliers’ unwillingness to adopt new ways of doing things.
In an interview with Logistics Management, Dwight Klappich, VP of Supply Chain Execution Research at Gartner, says it best: “In supply chain management, regardless of the technology, ecosystem enablement is very difficult. A new unproven technology alone, blockchain or any other, is not going to get suppliers to do what they are supposed to do, when they are supposed to do it, how they are supposed to do it, in the way you want it done. The issue isn’t technology, it’s ecosystem enablement.”
The problem with ecosystem enablement holds especially true when it comes to EDI and e-invoicing initiatives. Today, organizations tend to operate from an inside-out perspective, whereas an outside-in mindset has the potential to enable seamless connectivity with trading partners. With an outside-in perspective, organizations understand their partners’ needs and can proactively approach them without compromising relationships.
Onboarding can be a huge task from an organizational perspective. That’s why TIE Kinetix offers fully managed onboarding services to lessen the load for businesses that aim to achieve digitalization in their supply chain.
Up Next: How Much Does All of This Cost?
Achieving digital supply chain transformation begins with overcoming the above obstacles. But achieving true digitalization in your supply chain, of course, comes with a price.
What costs can you expect to encounter on your journey to supply chain digitalization? You can find a straightforward answer in Part 3 of our Digital Supply Chain Series, How Much Does EDI Cost?