Proving the Business Case for the Internet of Things

Digitalising supply chains helps prepare for coronavirus, says PA

Steve Rogerson
February 25, 2020



Digitalising supply chains can helps businesses prepare for disruptions such as the coronavirus outbreak or Japanese tsunami, which threaten severe disruption to supply chain infrastructure, according to research from PA Consulting.
 
The study found that businesses that resist digitalising their supply chain were at risk of failing to meet customer demands and missing out on significant cost reductions.
 
The study of over 100 cross-sector global supply chain leaders shows that, despite recognising the business advantages of smart supply chains, converting ambition into action is a challenge; 69% admit their supply chain strategy is not innovative enough and 79% of organisations don't have the right mix of skills and capabilities.
 
The report, produced in partnership with the University of Nottingham, explores the business benefits of digitalisation. Unlike traditional supply chains, a smart supply chain is intelligent, connected, agile and provides businesses with greater insights into how customers use products. This enables them to forecast demand, and supply products more accurately and efficiently, unlocking growth opportunities.
 
PA evidence reveals early adopters of smart supply chains have seen a 10 to 15% cost reduction since migrating from a traditional supply chain. Yet less than half of senior leaders surveyed (47%) said they were specifically interested in the potential of smart supply chains to reduce operating costs, suggesting they're overlooking an opportunity to improve their business' bottom line.
 
Another key incentive is that the data from smart supply chains provide leaders with better oversight of customer demand, inventory levels and potential risks. In the midst of the coronavirus outbreak, it is critical that supply chains are robust enough to mitigate disruption. Although the exact consequences are unknown, the virus threatens to impact all areas of the supply chain, from sourcing materials, to logistics to consumer demand. The enhanced visibility provided by smart supply chains leads to earlier risk detection and, ultimately, damage limitation.
 
"Applying digital technologies in the supply chain enables businesses to break new ground in terms of performance and customer focus, sparking a passion for innovation in a fast-changing world,” said George Marinos, smart supply chain expert at PA Consulting. “They create direct, real-time connections with customers so that organisations can give them precisely what they need at the right time. This generates real value. As a result, our clients commonly see benefits that far surpass their original requirements.”
 
He said, as the research outlined, these would only be achieved with higher investment and a clear long-term ambition to embrace the full range of technologies and opportunities.
 
“Every leader should look to the smart supply chain to power the possible in their organisation,” he said. “The opportunities are too considerable to ignore."
 
PA's research shows that the appetite for overhauling supply chains exists, with 61% of organisations – across life sciences, industrial, manufacturing and automotive, consumer goods, and aerospace and defence – planning to implement significant technology-led improvements into their supply chain within the next three years. However, concern over the difficulty of implementing such technologies risks stalling progress.
 
PA has identified four critical actions senior leaders can take to overcome the perceived complexity of the technologies associated with smart supply chains, to ensure their systems are as intelligent and forward-thinking as their ambitions:

  • Build smart supply chain vision to suit purpose and ambition, with the ultimate aim of creating a responsive smart supply chain;
  • Understand total value opportunity by taking a long-term view of the wider supply chain;
  • Accelerate technology adoption by scanning, assessing, piloting and scaling available options and linking their use to value outcomes; and
  • Catalyse business to execute, developing processes and people with a focus on efficiency, agility and service.