November 15, 2023
LinkedIn Live - Navigating Supply Chain Digitization: Takeaways
In a recent LinkedIn LIVE event in collaboration with Let’s Talk Supply Chain, Logward’s CEO, Jonas Krumland discussed together with Helge Remmers, Global Head of Air & Freight Procurement at Covestro, a German chemical manufacturer, what businesses must consider when digitizing their supply chains.
Imperatives in Supply Chain Management Post-Pandemic
In the wake of the pandemic, it's clear that supply chains require greater flexibility and visibility to adapt to market changes without business repercussions. This shift has become a crucial focus for companies in all industries, offering cost reductions, efficiency enhancements, and a competitive edge. Gartner's recent survey underscores the urgent need for supply chain organizations to embrace digitization in today's unpredictable climate. Surprisingly, despite the buzz around digitalization, a staggering 67.4% of supply chain managers rely on Excel spreadsheets as their primary tool, highlighting a significant gap between rhetoric and reality.
While some companies have devised specific solutions for procurement issues, this singular approach doesn't fully address the complexity of interconnected functions and external stakeholders within supply chains.
Also, integrating these solutions with existing transport management or ERP systems presents challenges, contributing to hesitance in fully and effectively digitizing supply chains.
Barriers to Digitization
COST: Cost shouldn't stand as a significant obstacle when implementing software. If you have a business case and you believe that the project can deliver true value to your business, then no matter what the budget looks like, this opportunity needs to be pursued. Also, people are way too comfortable using Excel and the solutions or analyses they build through it since they have been using the tool for far too long, potentially losing sight of the true effectiveness and benefits it could bring to them.
INTEGRATION: Another hurdle is the seamless integration of a technological tool with existing systems. No matter how excellent the tool is, if it can't integrate smoothly, it does not add any value to your business.
DATA STANDARDS: Diverse data standards within an organization or its units further complicate the integration of external technology with systems.
IT RESOURCES: Lack of available IT resources and alignment presents another barrier. No CTO has ever said that their IT resources do not have enough work, so “digitizing a supply chain” ranks low on their priority list.
MISALIGNMENT: Misalignment between regional IT initiatives and the global IT strategy, and a lack of expertise in business processes and domain knowledge, can result in missed opportunities when seeking suitable technology partners.
There is a “multi-dimensional conflict of interest”. Typically, companies operate under a corporate initiative led by a Chief Data Officer (CDO), Chief Information Officer (CIO), or a tech department. This constitutes one dimension. The other dimensions come from supply chains being intricate and diverse: they often have regional or local business units with distinct requirements that may not align with centralized corporate standards. The supply chains in Brazil may be completely different from the ones in Japan or US, even within the same organization. Also, within the same business units there may be differences. So, for a technology partner, aligning with both local and global requisites becomes imperative to provide tailored digitization solutions.
Switching to a new system without understanding the business requirements and having internal alignment between the supply chain and the IT departments can make a company lose millions of dollars.
Tech Hype vs. Reality: Finding the right Tech Partner
Emerging technology companies often rush to establish their brand, overpromising and portraying their solutions as the ultimate fix for all supply chain issues—a kind of 'magic button' that resolves everything instantly. However, this promise doesn’t hold true in most of the cases. Sometimes, there's a conflict of interest as companies prioritize securing funding over genuinely delivering value-added solutions to their customers.
To determine whether a company is merely overselling, it's crucial to assess whether you actively sought a solution or if it was “pushed onto you”. Verify that the solution is actually built to address your specific problem. Furthermore, seeking feedback from industry peers who might have used the solution can provide valuable insights. When you think that you have found a legit company, with a clear trajectory and strong financial standing, ensure mutual understanding of your business goals and challenges from the outset. Clarifying these aspects early on mitigates future misunderstandings. Lastly, also ask about the company's existing partnerships and try to talk with these companies for additional perspective.
Scope of Work and Implementation
Involve Business Process Owners: their buy-in is key. The scope of work becomes accurate when those engaged in daily or weekly business operations contribute. User involvement is pivotal; without it, failure looms. This is really challenging, there are no shortcuts.
Start with Problem Statement: As a guiding principle, businesses should define their problems clearly before seeking technology partners. Define your current setup and quantify the problem in terms of cost. Later assess implementation costs, project trajectory, ongoing solution maintenance costs, additional resource needs, and potential indirect impacts. Transparency is vital in presenting your business cases; avoid manipulating numbers to favor an idea, as accountability lies with you in the end.
Collaborate during Implementation: If things are not going the right way at this stage, intensive collaboration between the parties becomes vital, prioritizing user-centric approaches throughout. Effective communication with all stakeholders is fundamental, fostering a safe environment for individuals to voice concerns or dissent regarding ideas or processes and where a simple phone call suffices for discussions and clarifications.
How Logward operates: from Scope to comprehensive Orchestration
Logward has a dedicated Professional Service team entrusted with comprehensively understanding partners’ business needs and the scope of work. Employing small iterative processes, the focus on no-code solutions ensures the quick creation of software components for business users. This iterative approach facilitates learning from user feedback, refining solutions, without the need for a huge number of software engineers—digital natives are fully capable of customizing everything.
Many customers initially start with small scopes of work, but as they delve into these, they often evolve into comprehensive orchestration layers, for instance, integrating hundreds of suppliers, freight partners, and customer warehouses, spanning from sales order intake to purchase order submission, consolidation, transport execution, monitoring, and collaboration with partners.
Strategic Insights: Top Lessons by Helge and Jonas
- Define your needs first and how to apply software to enhance existing processes.
- Avoid merely replicating existing processes with software; instead, focus on understanding how software can genuinely improve these processes.
- Steer clear of creating software 'islands' disconnected from your existing operational platform (EOP), to prevent a complex and challenging IT landscape.
- Begin with small steps, run iterations, and maintain a vision for scalable solutions over time. Once the initial step succeeds, build upon it.
- Get buy-in from users and involve business process owners right from the start.
- Properly scope your project and embrace an agile approach.
Finally, defining success requires measuring hard facts within your business case. This includes looking at quantifiable metrics such as user satisfaction, time-saving metrics, and improvements in generating savings or sales. Additionally, soft factors like the willingness of users or business owners to expand upon the initial solution and further enhancements are great indicators of success.
A Glimpse into 2024
There won’t be any significant changes as technology is not the primary differentiator; it has been the same over the past decade. However, amidst the pandemic, supply chains have undergone increased complexity, intensifying challenges and heightening the demand for resilience.
While budgets may face tightening, supply chain concerns have gotten amplified attention in boardrooms. There's observed growth in investments directed towards supply chains and the predominant focus continues to revolve around constructing resilient solutions within the supply chain.
The need for resilient supply chains drives the urgency for digitization, despite persistent integration and alignment challenges. Choosing the right tech partner demands careful consideration of potential partners and a clear problem understanding at the very beginning. Ultimately, success lies in collaborative problem-solving and strategic implementation.
Logward is a Hamburg & Bangalore based logistics technology company.
We build software, move containers, and change mindsets.