The dilemma: Will the Chief Operation Officers manage to digitize supply chain in an exponential world?

By Mehmood Khan, Chief Operating Officer at SAP Africa

Chief Operating Officers (COOs) and supply chain management are feeling the brunt of accelerating business environment further complicated by increasing customer demands for efficiency, personalization, and convenience. Slow manual processes based on inconsistent information across functional areas spell death for modern supply chain management. Inability to adapt to real time and changing demands leads to wanting customer service and potential attrition.

To address these risks, companies are increasingly looking to digitize their supply chains by implementing a cloud-based digital platform that optimizes traditional ERP processes while integrating new exponential technologies.

Cloud-based platforms that enable real-time decision making based on accurate big data – generated through traditional processes as well as the growing prevalence of sensors – and predictive analytics powered by machine learning is changing the way companies approach supply chain management. Accenture predicts that SaaS, driven by a need to simplify and optimize today’s complex global supply chain networks for supply chain management market will reach USD 4.4-billion in 2018.

The value proposition is clear: according to studies by the Boston Consulting Group, leaders in digital supply chain management enjoy increase in product availability of up to 10 per cent, more than 25 per cent faster response times to changes in market demand, and 40 per cent -110 per cent higher operating margins.

The exponential technologies driving supply chain innovation

Big data matched with real-time predictive analytics permits large-scale scenario analysis giving COOs the power to conduct accurate demand forecasting, capacity planning, and advanced procurement with a focus on collaborative optimization.

With the adoption of sensor technology in every facet of the supply chain and the availability of reliable all-time localization through GPS, GSM and Galileo-based positioning, COOs have wide array of data on stock opening, temperature, humidity, and more offering greater optimization of existing processes.

Automation through advanced machine learning algorithms that leverage process and sensor data is propagating extreme accuracy in decision making as human judgment becomes augmented. By automating supply chain procurement processes through best practice machine learning, COOs and supply chain managers can eliminate opportunities for error and ensure effective event and risk management based on expert systems.

However, the job of the COO and his supply chain management support to lead the organization into this exponential future is complicated by the need to manage the implications of digital transformation while simultaneously innovating the underlying business model.

The digital transformation imperative

Digitizing the supply chain enables companies to integrate, embed intelligence, and visualize all supply chain processes from supplier to customer. This opens the door to real-time inventory management through a redesigned data model that finally provides transparency on inventory flows. Placing a digital core at the centre of all supply chain management processes encourages daring risks, and scenario planning to identify opportunities for meeting potential market demand with high levels of service at low cost.

Manufacturing costs are similarly reduced as detailed planning and scheduling aids agility within the supply chain and optimizes the efficient use of capacity.

A traditional ERP simply cannot keep pace with the rate of change and the need to innovate and optimize quickly, accurately, and cost-effectively. Delivery commitments based on outdated data leading to cancelled or delayed orders; inaccurate order prioritization resulting in unfulfilled strategic customer orders and difficulties in addressing last-minute rescheduling by priority customers are just but  a few risks companies face when relying on an outdated technology platform for supply chain decision-making.

The business outcomes of digitizing the supply chain

With exponential technologies such as IoT, big data, predictive analytics and machine learning integrated to the SAP S/4HANA digital platform, COOs and supply chain management can leverage rule-based allocation check in a single system to ensure the needs of strategic customers are always met. Up-to-date inventory management ensures realistic, fulfilled commitments and real-time order confirmations with advanced segmentation techniques which in effect drives business profitability in unprecedented ways.

The business outcomes can be transformative: reducing days of inventory by 10-12 per cent, reducing revenue loss by 10-15 per cent, cutting total logistics costs by 10-12 per cent, and reducing supply chain planning costs by up to 5 per cent. Critically, digitizing the supply chain enables companies to run easily and shift focus more towards innovation – both in terms of improving existing processes as well as developing entirely new business models and revenue streams.

But with a recent Forrester Business Techno-graphic Survey showing only 27 per cent of supply chain management professionals and 22 per cent of logistics and distribution personnel using or intending to use big data analytics, the real question is, will COOs rise to the challenge of digitizing their supply chain in time to adapt to an exponential world?