Thou shalt dream big and start small
Essentially all retailers desire a digital supply chain but end up facing typical stumbling blocks. Jasper van Rijn, Managing Director Retail at IG&H, explains why this is not necessarily a bad thing and why starting is half the battle.
At every retailer, manufacturing company and FMCG company, it's all about digitalizing the supply chain nowadays. Grand plans are forged, and strategic programs are rigged up to make it happen. These are accompanied by a promise to combine optimal customer service with dramatic cost reduction, while also ensuring sustainability.
But where are the results? Today, our supply chains are still mainly staffed by people. They are mostly engaged in manual tasks, working with paper processes, stuck in calls or meetings half of the time and making decisions based on gut feeling. In some countries, finding the right staff in the first place is an obstacle. Advanced digitalization is still difficult to find. Don't get us wrong: People should not be replaced through digitalization. Instead, it helps people to focus on the more interesting tasks that add the most value, leading to more scalable growth.
So, what happened to all those grand plans and strategic programs? Why hasn't digitalization really succeeded yet? We live in a time in which the possibilities seem endless. Where is that digital supply chain, anyway?
What is a digital supply chain?
To start at the beginning, it is important to dissect what two criteria a digital supply chain must meet.
First, hyperconnectivity, meaning that all links throughout the supply chain are fully connected. That way, for example, suppliers get real-time insight into customer demand for each store, and sales partners know exactly where there’s still inventory availability in the chain to meet customer demand.
Second, a digital supply chain is highly intelligent. This means that processes and systems signal when an exceptional situation occurs. Only in such a situation is human assistance then called for. Even more intelligent is when the definition of this "exceptional situation" is self-learning. For example, think of demand forecasts that are automatically adjusted based on various data sources, but automatically signal the demand planner when an (automatically defined) limit is exceeded.
Such a hyperconnected and intelligent supply chain is music to the ears of many supply chain professionals; that's not the problem. The issue lies in the operationalization and execution of digitalization. These efforts are often held back by fundamental challenges that stand in the way of innovation: an outdated IT landscape, the inaccessibility of multiple data sources, the lack of data and technology knowledge and expertise in the organization, or even political reasons in the organization. So where to begin?
Dream big, start small
Overcoming these fundamental challenges requires a guiding star. That may sound rather big, but it's about making your goal as concrete as possible. It doesn't have to be huge and complex. Instead, try to summarize it on an A4 sheet of paper. Start small and pragmatic, see what practical use cases within your company would benefit most from a digitalization move. Where is there an opportunity to create immediate value?
Your use case should be as specific as possible. What repetitive, manual tasks do you want to digitalize to save time or resources? Next, map out what clear, framed goals you can set. By doing this, you can keep a close eye on whether objectives are met during the process and you can also demonstrate the added value of the implementation.
Once you have formulated a concrete use case, you can start experimenting with initial applications. Work on a method that is exactly on the border (or just outside of) your comfort zone. For example, consider building a simple low-code application to digitalize a business process. With the advent of low-code, building applications is no longer reserved for coding developers; anyone can configure applications via drag-and-drop. Start small, like with one vendor or one product group. Measure the results, learn from the insights, share the successes and roll out further from there.
A use case in action
A Dutch fashion retailer recently made a successful breakthrough in maximizing sales revenue from seasonal products. For years, the company had noticed that a small portion of its items had sold out long before the selling season was over, while a much larger portion remained until the end. In other words, the company was struggling with out-of-stocks at the expense of sales as well as overstocks which meant cash was unnecessarily tied up in non-current inventory.
As many of these items have a very short life cycle of about 12 to 16 weeks, the retailer wanted to be able to manage inventory levels and pricing soon after introduction. The development of a forecasting model that identifies likely over- and out-of-stock within three weeks provided a breakthrough.
Combining this new insight with insights into price sensitivity, the retailer gained a powerful steering tool that creates immediate value. Among other things, the success of this use case is now helping to address some fundamental issues in the organization, including the transformation of its aging IT landscape.
Embrace challenges
Look at the concrete opportunities that are unfolding. Fundamental organizational challenges are often much better understood and addressed when they get in the way of concrete opportunities. An opportunity often solves the problem better than the problem itself. It doesn't matter so much where digitalization begins, as long as it starts small and agile. Only then will that digital supply chain come within reach.
Ready to become highly intelligent and hyperconnected? You can reach out to:
Jasper van Rijn
Managing Director Retail
T: +31 653376760