European manufacturers need to better embrace "digital supply chain journey", report finds

The vast majority of European manufacturers are stuck at the earliest stages of the digital supply chain journey with data integration proving to be the biggest roadblock, a report finds.

A study released by JDA and WMG at the University of Warwick, which explored the digital supply chain readiness of 179 European manufacturers, has revealed that only 13% have a ‘prescriptive’ supply chain. That being said, 31% predict that they will have one in place by 2023.

A ‘prescriptive’ supply chain is categorised as Level 3, out of a scale of 1-4, with 4 being a self-learning autonomous supply chain.

Manufacturers are moving towards greater supply chain segmentation and differentiation, the biggest primary strategic focus is on operational excellence (39%), rather than product leadership (31%) and customer intimacy (30%). Data remains a key ingredient towards delivering both operational excellence and greater customer intimacy, but manufacturers are struggling to integrate and synthesise it effectively.

As data becomes increasingly important, technology to capture and to better utilise that data grows with it. AI adoption is predicted to grow three times faster than other areas of investment, such as sensor networks, Internet of Things (IoT) and robotics. Until now, however, only just over a quarter (28%) have started to use AI.

There are also challenges afoot Sales & Operations Planning (S&OP), with S&OP rated as having the lowest level of maturity (34%) of the 11 key supply chain processes manufacturers were asked about. Only 21% of manufacturers have the ambition to use S&OP to support end-to-end business optimisation by 2023, and 22% said the same for supply chain optimisation. This indicates that manufacturers should continue to focus on evolving from S&OP to Integrated Business Planning (IBP), as strong processes will underpin digital agility.
 

Related stories:

Sustainability in the supply chain is key for cost saving and efficiency, HSBC report finds

Procurement digital transformation continues to realise major cost savings, report finds

Walmart's 2018 CSR report: 20mn tonne reduction in emissions, sustainable sourcing and more

“To maintain and enhance competitive advantage, organisations need to focus on three aspects of the supply chain digital transformation process,” said Professor Jan Godsell, Professor of Operations and Supply Chain Strategy, WMG, University of Warwick. First they must use digital technologies such as AI and Machine Learning to support core supply chain processes. Next, they should pave the way for end-to-end supply chain optimisation by adding a business process layer to their organisational structure. This will put them in a position to leverage functional excellence while also breaking down siloed areas. Finally, they should lay the groundwork for end-to-end business optimisation, using digital technology to break through the IBP impasse.

“In practice, manufacturers can enable this to happen by creating ‘safe places’ to experiment with new digital technologies. They may even wish to consider the creation of a separate business entity for more radical experimentation with new digitally enabled business models.”

“This report lays bare a fundamental truth: many manufacturers are not as far along the journey to a digital supply chain as they should be.  As a result, they are yet to fully harness the potential of digital to deliver greater customer intimacy,” said Hans-Georg Kaltenbrunner, vice president manufacturing industry strategy, EMEA at JDA. “However, if manufacturers put themselves in a position to better exploit their data, they will be able to evolve supply chains from ‘one-size-fits-all’ to a market segment size of one. Now is the time to begin experimenting with technologies such as AI and Machine Learning. The key is to make sure they can successfully ride the digital wave, finding the right balance between process excellence and digital readiness.”