The interdependency of the electronics supply chain may be hampering companies’ efforts toward digital transformation, research finds. While 75 percent of executives in the manufacturing and retail supply chains say a digital strategy is very important for their business, only five percent are satisfied with progress so far.
There are two levels of digital transformation occurring among businesses, according to GT Nexus and Capgemini Consulting, the companies that conducted the survey. The first is a company’s internal effort toward digital adoption. A third of respondents were actually dissatisfied with their organizations’ progress toward digital transformation so far. Only five percent reported being very satisfied.
The second level, external, includes a company’s supply chain partners, many of which have varying degrees of digital acumen. Half of respondents to the survey said that their supply chain partners lacked the necessary awareness of the importance of digital transformation, while 42 percent said their supply chain partners lacked the required skills. In electronics, even global businesses manage their data in regional "silos" and many companies use Excel spreadsheets for orders and BOMs, making sharing data difficult.
Organizations are now largely dependent on the digital transformation of every partner along its value chain, according to the report. If digital transformation is only applied to one single organization within a network, it will fall short.
Companies are understandably hesitant to criticize their partners, but transparency across the electronics supply chain remains a challenge. Almost half of the respondents (48 percent) to the GT Nexus survey said the main way in which they communicate with their supply chain partners was through “traditional” technologies like phone, fax and e-mails.
Modern supply chains can easily encompass hundreds or thousands of different trading partners across the world. Consultants warn a reliance on outdated, manual, analog tools of communication such as phone, fax and e-mail is fundamentally at odds with the needs of the fast-moving nature of global supply chains. Manual processes make communication across the supply chain incredibly difficult and provide room for vast amounts of manual error.
Executives, though, seem very optimistic about the future of their digital supply chain transformation. Five years from now, 54 percent of organizations expect to have access to most of the data from their extended supply chain.
According to Capgemini Consulting, there are several major considerations before embarking on a digital transformation:
Focus on business value: It is vitally important to optimize investment, including human resources. All decisions made must be based on return on investment, have a direct link to business benefits and how that ultimately impacts company performance and growth.
Fail fast, succeed faster: When innovating, an organization needs to accept that not everything is possible and not everything will be a success. It is therefore critical an organization stays true to itself and is able to stop at the right moment rather than wanting every single initiative to be successful. When certain projects don’t go to plan, the key learn from them fast without dwelling too much on what happened. This will enable businesses to move on to achieve their goals faster.
Adapt the governance model: To foster the momentum within the organization it is imperative that decisions are taken swiftly with a clear understanding of the business impact. To manage this, some organizations recruit or nominate a Chief Data Officer or Chief Digital Officer, others adapt their entire organization governance model. In some cases, reshaping the governance model is also needed to break silos between departments and ensure business focus.
Talent management: Lack of awareness and the required skills is a major barrier to digital transformation of the supply chain. Performing a realistic gap analysis between existing skills and those that are required for the organization to make progress throughout the transformation effort and reach ‘Digital Leader’ status is a must-have.
Develop a partnership ecosystem: Continuously nurturing a diverse ecosystem of partners is another key success factor. Organizations should actively identify and engage with partners of varying sizes and backgrounds. Small startup partners can add an extra measure of agility to an ecosystem, but may not be able to scale up to a global level as fast as some larger partners in the network could.
Don’t forget risk management: Organizations today are operating in an increasingly networked world especially in the world of supply chain where trading customers, partners, suppliers and logistics providers are all connected. Cyber security needs to be considered to ensure internal, client and partner data protection.
The study surveyed 337 executives from some of the largest global manufacturing and retail organizations from over 20 different countries around the world – largely from Europe and North America.
The full report can be viewed at: www.capgemini-consulting.fr/digital-supply-chain-transformation-survey or www.gtnexus.com/digitaltransformation.