Digital maturity of supply chains still lagging

02 December 2021 4 min. read
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Digital maturity of supply chains still is still in its infancy, posing problems for firms still struggling to recover from the initial shocks of the pandemic. According to a new study, fewer than one-third of firms believe they are “leaders” in digital supply chain deployment – something which is a cause for concern as Europe moots a fresh round of lockdowns.

Global professional services firm GEP is an international provider of procurement and supply chain strategy, software, and managed services. It counts Fortune 500 and Global 2000 enterprises as part of its worldwide client base – and using this expertise, it has teamed up with Harvard Business Review Analytic Services to survey almost 300 global business leaders to measure the resilience of their supply chains.

According to the findings, many executives are clear on the importance of supply chains: 90% of executives said supply chains were a strategic resource that helped ensure their company’s profitability and survival. This is a point which has been driven home throughout the coronavirus crisis, which has regularly seen supply chains tested to breaking point. Modernising supply chains with digital technology that could help adapt to life where face-to-face contact is increasingly difficult has therefore become one of the top priorities for many business eco-systems, in the last two years.

Digital Maturity Leaders

In spite of this, though, executives also admitted they were still struggling to walk the talk on the matter. An average of just 8% believed they had achieved full digital maturity across the key components of supply chain operations: warehousing and logistics, procurement, inventory management, supply planning, demand planning and management, and supplier risk management. While a larger number felt they were far along the road enough to describe their operations as ‘somewhat mature’, almost one-quarter of businesses are consider themselves ‘laggards’ in terms of their maturity. In some cases, this might be because firms are no longer used to doing this kind of work for themselves.

"Many global companies spent the last thirty-plus years outsourcing everything from back-office functions like IT to the last mile delivery to customers, and as a result, they don't have sufficient control and are at a material competitive disadvantage," said David Doran, a Vice President in Consulting with GEP. "I am not saying to disregard outsourcing – in fact, the disruption to the world's supply chains is going to get worse, so companies need to accelerate their investment to build resilience, flexibility, visibility and control over their complex, multitier, interdependent global supply chains. But they need to do it right."

Path ahead

Pramod Gupta, another Vice President in Consulting at GEP, added, “While most enterprises acknowledge that a high-functioning supply chain is critical to survival, far too many remain digitally immature. The reality is that the supply chain is a strategic resource and needs to be treated as such. Supply chains have evolved into global ecosystems. Enterprises need solutions that take a holistic end-to-end approach to visibility and collaboration.”

Shifting Business Goals Rewrite Transformation Efforts

How might firms sharpen their digital supply chain maturity, though? According to GEP’s study, most firms lagging on digital supply chain maturity are treating it as an exercise in cost reduction. This mindset was already holding transformations back before the pandemic – but now it is even more detrimental, as it neglects the business-critical benefits of digitalised supply chains. One essential benefit – where many firms currently lag behind – is being able to track the end-to-end performance of a supply chain.

Half of respondents said they still lacked the capabilities “to track end-to-end performance across the supply chain." Further, as of 2021, the researchers found only 27% of respondents believed gathering and analysing data to improve visibility of performance across the supply-chain was a top priority, down from 29% the previous year. Some firms are setting notable examples as to how to change this, however.

Pointing to best practices GEP has come across among its clients, Gupta noted that in one example, a global consumer health care company recently began deploying technology to sense and respond to supply chain disruptions. Meanwhile, another client—a heavy-equipment manufacturer—is working to proactively detect near- and long-term risk. Both enterprises are leveraging artificial intelligence and machine learning to send push notifications across the value chain – early warning systems which Gupta asserted could “empower all stakeholders in the extended supply chain to swiftly reconfigure supply chain manufacturing, inventory, logistics, and distribution activities to absorb disruptions better.”