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04/05/2016

Study: 70 Percent of Executives Have Started the Digital Transformation of Their Supply Chains

Executives see a large gap between the current state of digital transformation across their extended global supply chains and what they expect to see just five years from now. These are the results of a global research study, "The Current and Future State of Digital Supply Chain Transformation" conducted by Capgemini Consulting and GT Nexus, an Infor company. (See infographic here.)

Most research studies conducted on the topic so far have examined digital transformation within organizations, or between organizations and their customers. This new research project is the first of its kind that explores the current state and future of digital transformation especially between organizations and all of their partners across the extended value chain.

The study surveyed 337 executives from some of the largest global manufacturing and retail organizations across Europe and North America.

Key findings of the research study include:

Digital transformation of the supply chain is important
  • Seventy-five percent of respondents say digital transformation of the supply chain is "important"
  • Fifty percent say that digital transformation is "very important"
  • Seventy percent say they have started a formal digital supply chain transformation effort
Progress has been slow so far
  • Less than 30 percent of respondents said they are "dissatisfied" with progress so far
  • Only 5 percent are "very satisfied"
Key technology enablers have been identified, but are not widely used yet
  • Supply Chain Visibility Platforms/Tools (94 percent)
  • Big Data Analytics (90 percent)
  • Simulation Tools (81 percent) and
  • Cloud (80 percent) are seen as the biggest technology enablers of digital supply chain transformation
  • But 48 percent of respondents admit that right now "traditional" methods such as phone, fax, email are still the dominant ways to interact with supply chain partners
Dramatic changes are expected within just five years
  • Today only 15 percent of respondents say that the majority of data from the extended supply chain is accessible to their organization. In five years, that number jumps to 54 percent
  • Today only 23 percent of respondents say that the majority of data from the extended supply chain is analyzed and used for decision making. In five years, that number jumps to 68 percent
  • Five years from now, 95 percent of respondents expect more processes with suppliers to be automated
  • Five years from now, 94 percent expect to receive more real-time status updates from across the entire supply chain
The expected benefits of digital supply chain transformation include, but go well beyond cost reductions for logistics, inventory and maintenance, improvements in customer service and higher overall equipment effectiveness. Perhaps more importantly, digital supply chain transformation is expected to dramatically improve an organization's agility.

Agility is necessary to respond to changing market conditions, to new market entrants that can threaten existing business models or to unexpected supply chain disruptions. Such disruptions have already caused major harm to the financial performances and reputations of countless organization over the years.

Mitigating the impact of these unforeseen disruptions has become a main priority and a major driver behind the need to digitally transform. But according to the study, current levels of collaboration and visibility across the network are still low. That limits agility.

"Seventy-five percent of respondents say digital transformation of the supply chain is important, but a massive gap exists today between where companies are today and where they expect to be in just five years from now," said Mathieu Dougados, senior vice president, Capgemini Consulting.

"Transformation initiatives inside the four walls of the enterprise pose significant challenges within themselves. But in today's globalized and outsourced world, digital transformation can only be successful if companies approach it with a holistic view of their entire value chain," Dougados continued. "That value chain can include hundreds of partners. So connectivity between partners, cross-company access to data, and the use network-wide analytics become the key focus areas."

"Supply chain transformation is a massive undertaking that requires leadership and vision at the C-level, and a holistic transformation approach that fosters automation, connectivity, data sharing and collaboration across the entire value chain," said Kurt Cavano, vice chairman and chief strategy officer at GT Nexus.

"This survey showed that manufacturers and retailers clearly have an idea of where they need to be and what digital technologies will get them there in the next five years," he added. "But it's going to be a real sprint given the current reliance on outdated, analogue technologies such as phone, fax and email to collaborate and execute in the global supply chain. Meanwhile, risk of supply chain disruptions runs high, with an expensive cost to pay."