Here's how finance leaders can make the case for supply chain technology and solid infotech investment.
The supply chain is undergoing a revolution. As noted by Supply Management, chains that were "hollowed out" in the 1980s and 1990s to make way for cheaper, international manufacturing solutions are now being filled in as organizations look to maximize control over product movement and condition. But addressing timeline, quality and delivery concerns demands more than just backfill.
Businesses are opting for supply chain technology as a way to empower digital initiatives and help ensure they're on the cutting edge of production efforts. For finance leaders, however, what's the value proposition of this kind of investment? How do firms become leaders in supply rather than just marking time?
So what's behind the big push for digital supply chain technology? Consider key factors, such as the following:
- Visibility — Corporations can't control what they can't see. Digital solutions let supply experts quickly access current inventory levels, expected production timelines and potential shipping issues.
- Globalization — As noted by EP&T, products are now both produced using components from global suppliers and shipped worldwide on demand. As a result, "traditional" supply chain information technology simply can't keep up. Phone calls and emails are too slow when it comes to managing factory floors or ensuring timely delivery.
- Complexity — EP&T notes that products are rapidly becoming more complex as features such as wireless connectivity are built right in. This complexity demands oversight to ensure consistent product quality.
- Expectation — Driven by the mobile device and social media revolution, consumers now expect not only prompt responses from manufacturers and distributors, but the ability to customize products on demand. Meeting these needs puts organizations ahead of the game but demands supply chain infotech that can keep up.
- Recruiting — Tech-driven supply chains are also necessary to on-board the next generation of workers. Consider that according to Dell, techology at work influences more than 80 percent of millennials when it comes to taking a job. Further, 50 percent of all employee and 60 percent of millennials think technology will make in-person communication obsolete. If supply chains consist of legacy apps and poorly-optimized networks, recruiting new talent becomes an uphill battle.
More Products, More Problems?
Supply Management notes that not all supply chain restructuring goes as planned. In fact, 73 percent of manufacturing businesses that redesigned their chains did not achieve their intended end results. According to Electronics Purchasing Strategies, this also extends to digital supply chain initiatives. While 75 percent of executives agree that digital strategy is critical, just 5 percent are satisfied with current progress.
What could be part of the problem? Digital uptake must happen at every step of the chain, since even one provider missing the mark severely impacts overall efficacy. This puts finance leaders in a difficult position — investment in digital supply solutions such as big data, internet of things-based product tracking and increased automation offer the potential for big corporate gains, but longer chains quickly exhibit investment drop-off, and making the move to shorter solutions is time-consuming and may not produce ideal results.
Solving the Supply Chain Cost Conundrum
Despite C-suite reticence, however, there are big gains tied to supply chain spending — finance leaders simply need the right approach. First, it's critical to have a plan. Consider the case of Ikea, which plans to spend more than $1 billion on new supply chain enhancements to improve its renewable energy and recycling efforts, according to Environmental Leader. The move is predicted to positively impact the retail giant's bottom line — in part because they know exactly what they're aiming for.
The same goes for any digital supply transformation — identify areas of concern or target specific results before spending on technology. Next up? Invest in the big picture. While it can be relatively easy to isolate points of data on the supply chain, effective digital offerings help managers discover the whole story.
By uncovering the full narrative, organizations gain access to critical supply chain knowledge. And last but not least? According to Forbes, firms can't be afraid to embrace new technologies such as self-driving vehicles or robotic workers that can effectively "pick" from shelves and manage warehouse lines. While these initiatives are still maturing, huge cost savings and HCM potential exist here, since employees paid to innovate make a much bigger impact than those simply paid to work.
The digital supply chain is coming, and finance leaders would do well to talk up the investment. Seeing a solid return, however, means understanding key digital drivers and adopting supply chain infotech that increases visibility, addresses emerging problems and empowers employees.