When the Walls Crumble: How the supply chain can navigate the interconnected digital organization
In the digital age, the supply chain does not stand alone. Whether we like it or not, toda...
Dan Reeve, Director of Sales and Business Development, Esker
In the digital age, the supply chain does not stand alone. Whether we like it or not, today’s business models weave functions such as accounts payable, sales and customer service into the operation of the supply chain—and ultimately, in its success or failure. That means that today’s supply chain managers have to give consideration to every function that touches their operations.
In particular, sales and customer service departments have a big impact on the supply chain, and managers looking to secure their place within organizations would do well to concern themselves with the success of their order management operations. Inefficient processing of sales orders increases both hard costs and soft costs. The longer it takes for an order to advance from sales to customer service to fulfillment, the more expensive it is. The cost rises even more if the order has to be sent back because of an error, starting the process all over again.
In addition, the negative impact on customer service levels can have significant repercussions on an organization’s bottom line. According to Forrester, the financial impact of raising a customer experience from below-average to above-average can translate to over $80 million in additional annual revenue. Those numbers are more than just compelling. Businesses that dismiss the direct impact of order management on today’s complex supply chains are setting themselves up for a competitive disadvantage.
What blurred the departmental lines?
The strict siloes between customer service, inventory management and supply chain logistics have definitely broken down in the digital age. In an era when the ideal customer experience is defined by Amazon, customers—especially those in the millennial age group—have been conditioned to expect real-time transparency in price and inventory, reliable and accurate delivery time forecasts and a speedy, easy ordering process.
Savvy businesspeople know that the customer experience directly affects organizational success. In fact, the Chief Supply Chain Officer Report by Gartner’s SCM World showed 45 percent of supply chain managers believe improved customer service and higher levels of customer loyalty are the main ways supply chain can impact the overall business.
But it’s more than just the company’s bottom line that’s impacted by the customer experience. By a factor of nearly 2:1, supply chain managers included in the report who say their CEOs consider the supply chain equally critical as sales and product management also say they place high importance on customer service. These three lines of business weave inexorably through supply chain operations as a direct effect of the digital transformation. While digital technology has led to increased complexity, it is also the means by which supply chain managers can navigate this complicated new ecosystem.
The first step: EDI
Odds are that your organization already utilizes an Electronic Data Interchange (EDI) system to exchange data such as sales orders and invoices in a standard electronic format. Inbound information is fed through a mapping system, where it follows a set of digital instructions to output the data in the correct format. EDI is the first step to digitizing the supply chain. These systems reduce bottom-line costs, increase data accuracy, accelerate business cycles and enhance security. But they’re still only first steps, not comprehensive solutions in and of themselves. Up to one-third of EDI orders can have errors, leading to frustrating inefficiencies.
The problem is that EDI stops short of being able to handle exceptions like incorrect pricing or customer information, creating gaps that need manual correction. Orders with such errors have to be put through a complicated workflow before they can be fed into a company’s ERP system. The resulting system is thus not really an automated one, since the number of manual touchpoints is still high.
In addition, just because you have an EDI infrastructure in place doesn’t mean suddenly all of your orders are going to start coming in through that system. Your customers aren’t going to want undergo long training processes in an unfamiliar technology just so at the end of the day they can give you money. They want to be able to send their orders through whatever channel suits them best: fax, email, paper, online, by phone and so forth. A truly advanced digital solution is supposed to enhance the customer experience, not frustrate it.
A step further: Automation
Only a fully automated solution, one that takes digitized supply chain processes to the next level, can truly add to your customer service levels. Such solutions should incorporate advanced technology like optical character recognition (OCR) to take the information captured from an EDI order and create a human readable version. This lets your customers submit orders in the form of their choice while also making it easier for customer service representatives (CSRs) to verify information, make any necessary corrections and get the order to the fulfillment center as quickly as possible. And since every order is stored in one system regardless of channel or format, workflows are unified and streamlined.
Fully automating order process management reduces costs associated with order processing errors, allows operations to handle increasing volumes of order without adding new staff and frees up CSRs to focus on customer satisfaction and upselling. But the organizational benefits range far beyond the customer service pool. In particular, they satisfy the executive appetite for increased metrics and visibility through the collection and analysis of real-time data. According to the Aberdeen Group, “improving internal cross-departmental visibility” and “streamlining processes for easier monitoring and enhanced usability” are the top two strategic actions companies believe can make complex supply chains more manageable.
Automation is the enabler, providing the ability for managers to set and track detailed KPIs that relate to specific business concerns as well as allow for customizable dashboards. The increased transparency and reporting capabilities reveal the “actionable insights” that strategic leaders hunger for, as well as provide a complete audit trail in case today’s complex privacy concerns and regulatory standards necessitate increased compliance efforts. That increased transparency also works to the advantage of logistics, increasing customer satisfaction by providing predictable, reliable order and delivery.
Finally, it doesn’t matter how great a system is if it doesn’t show a clear ROI for the organization’s IT staff. In 2017, most IT professionals see the benefit of cloud-based solutions, especially for businesses with big ambitions to grow. Automated document processing software provides easy setup, automatic upgrades and backups and a pay-as-you-go pricing model that enables scalability. Automation also relieves the pressure that EDI exceptions place on IT infrastructure, since orders aren’t having to be processed multiple times. This may seem like a tertiary benefit, but any manager knows that when IT ain’t happy, ain’t nobody happy.
Supply chain in the digital age
The transparency that automation brings is critical to increased customer service levels, faster supply times and more efficient inventory management. And the insights that it offers lets supply chain managers forecast demand cycles, catch potential issues early and track resources in real-time. Digitization of orders, invoices and payments increases accuracy levels and streamlines document processing, as well.
The supply chain no longer takes a backseat to sales or customer service when it comes to impacting the customer experience. Supply chain managers today must be concerned with all touchpoints of the order lifecycle, from sales to procurement to accounting. The supply chain isn’t siloed inside a warehouse anymore, and managers must start to think more like members of the c-suite, taking the business’s overall organizational structure and strategic goals into account. Digital technologies have broken down the traditional walls that exist between job functions and created a whole new supply chain paradigm with new challenges. Only by embracing digital technology can managers turn those challenges into opportunities.
About the author
Dan Reeve is the Director of Sales and Business Development for Esker Americas, a worldwide leader in cloud-based document process software. Dan's specialties include: order-to-cash and procure-to-pay solutions; electronic invoice processing; improving cash collection in order to lower DSO; and accounts payable automation integration with ERP.
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NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”