Companies Still Behind on Digital Transformation of Supply Chain

Only 7% of companies are reaping the benefits of digital transformation of supply chain planning, according to a new study by ToolsGroup and Spinnaker.

Additionally, 54% are seeking improved service levels in the coming year, and only 14% have a machine learning project underway, meaning for many AI-augmented planning is still more hype than adoption.

A North American-based survey of nearly 200 supply chain professionals from top CPG, distribution/wholesale, food and beverage, manufacturing, and retail companies found that 58% of respondents are still in the exploring or evaluating phases of digital transformation.

Because digital transformation can involve selecting and implementing several different solutions, the early stages are often protracted. Having 27% in some stage of executing shows many organizations are making good progress in selecting and deploying enabling technology.

Drivers of supply chain planning digitization vary significantly by company:

 -- Increased operational efficiencies (e.g. productivity, working capital, cash flow) as a key driver  (42%)

 -- Evolving customer behaviors and expectations (41%)

 -- Improving customer service levels/order fill rate (39%)

 -- Driving business performance (e.g. revenue and profit) (37%)

Fear of change is the leading obstacle to implementing of digital planning (30%), with data quality/lack of data (25%), aversion to risk (24%), and people/skills deficits (23%) close behind. Planners and other supply chain practitioners in the new digital world need skills in communication, decision making, and change management on top of the standard technical skills.

“Eighty-nine percent of responding companies identify volatile demand and unpredictable customers as a supply chain planning challenge,” says Caroline Proctor, chief marketing officer of ToolsGroup. “We’re seeing more and more companies combating that uncertainty by leveraging machine learning, digital twins, and IoT. This enables them to automate supply chain processes, increase service, and free up working capital.”

Indeed, companies are looking to improve in the areas of cost and service in the coming year. Sixty-three percent of respondents said they would look for reduced cost as an outcome of planning digitization, 54% said improved service levels, and 42% are seeking faster delivery.

“Digital transformation is not seen as a singular activity but a set of interrelated activities that span across people, process, technology, policy, and metrics,” says George Fowler, group vice president in Spinnaker’s Supply Chain business unit. “The study shows that companies are aspiring to reinvent themselves as an entirely new entity, working to balance all these dimensions to achieve their digital transformation goals. And there’s no time to lose--the time is now to execute on a strategy before opportunity and competitive advantage is lost.”