Manufacturers' Digital Supply Chain Expectations Outpace Reality
While companies are increasingly aware of the benefits of digital supply networks (DSNs), many remain in the early phases of adoption, according to a new study conducted by Deloitte and the Manufacturers Alliance for Productivity.
The research has revealed a disconnect between executives' opinions of their DSN efforts and actual implementation. The survey of more than 200 manufacturing organisations found that 51% of respondents believe their DSN maturity is at least "above average" compared to competitors, yet only 28% have started implementing DSN solutions.
Further, survey results suggest that end-to-end supply chain transparency is the number one operational goal for many manufacturers, as it represents the key to significant efficiency gains, yet only 6% of survey respondents are part of a manufacturing ecosystem in which every member of the ecosystem can see each other's data.
"While enthusiasm is high and manufacturers realise the benefits of Digital Supply Networks, many companies struggle to identify the right technology landscape which will provide the most value when they are approaching a digital shift," said Stephen Laaper, principal, Deloitte Consulting LLP and co-author of the study. "As a result, many hold off with key aspects of their transformation, which in turn puts their transformation at too slow a place.”
Most executives surveyed believe DSNs can provide significant advantages in comparison to traditional linear supply chains, but few expect implementation will lead to game-changing positive impact. Over half of the respondents surveyed (56%) said they believe a DSN will provide a significant benefit to their company.
Speed is a primary consideration among manufacturing organizations surveyed. Most respondents (52%) cited the ability to dramatically reduce the time to make strategic decisions as a top reason, followed by the ability to operate more efficiently and effectively (43%).
Many manufacturing companies also recognise the potential financial benefits of DSNs. When asked about the most important financial goals of a DSN, many cited increasing sales efficiency/effectiveness (22%), reducing operating costs (17%) and improving pricing and margins (17%).
The changing nature of work in advanced manufacturing technology may also impact DSN rollouts. Two of the biggest barriers associated with implementing DSNs were finding and training employees, each cited by 30% of respondents as a top challenge.
Additionally, organizations are potentially hesitant to change. Nearly 4 in 10 (37%) respondents say overcoming resistance to change is the greatest risk to the success of their DSN initiatives, following operating in silos/lack of integration (33%).
"There is no one way to deploy a DSN," said John Miller, council director, MAPI. "All companies operate differently, thus their DSN implementations carry unique challenges based on the existing infrastructure, talent base, culture and technological requirements."
Nearly one-fifth (17%) of respondents say cyber risk is the main reason they are reluctant to provide production data to outside suppliers, a key component of many DSNs. However, few have taken action to protect themselves, as just 38% have conducted an internal cyber risk assessment in the past year.
Blockchain could alleviate cyber risk concerns by allowing authenticated data communication across the network. However, in the study, blockchain was among those drawing the least investment attention at 17% of respondents.
"Blockchain can increase trust and transparency among ecosystem partners while helping reduce both the cost and risk of moving information across a supply network," continued Laaper. "As organizations develop a greater understanding of this relatively nascent technology and the value it represents, adoption rates should increase."