Digital maturity of supply chains still in its infancy

Despite a pandemic-rooted digitalization drive, supply chains remain in the nascent stage of their digital journey, according to a Harvard Business Review study commissioned by GEP. The study polled 276 global business leaders on the critical issue of supply chain information technology.

Though 90% of executives believe supply chains are a strategic resource that enables their companies to survive, only 8% have achieved digital maturity across the areas of warehousing and logistics, procurement, inventory management, supply and demand planning, and supplier risk management.

Only 28% of respondents rated themselves as “leaders” and as having achieved a high level of digital maturity across the key supply chain operational areas.

With the pandemic driving volatility and inflation, supply shortages, rising logistical costs, and cyberattacks, it’s unsurprising that 68% of surveyed companies said they are accelerating their supply chain modernization efforts. Companies are placing a particular emphasis on real-time demand forecasting analytics to mitigate disruptions in the supply chain. Relatedly, respondents identified a lack of real-time data about the performance of supply chains as the biggest barrier to their companies.

Though cost reduction remains a top goal of supply chain transformation, its importance has decreased somewhat in the last year, falling from 50% of respondents in 2020 to 44% in 2021. Meanwhile, more leaders view improved business resiliency as a primary business goal of supply chain transformation, up from 33% in 2020 to 42% in 2021.

“Boosting supply chain resilience has become a top priority for almost all our clients,” said Pramod Gupta, VP of consulting at GEP. “In one example, a global consumer healthcare company recently began deploying technology to sense and respond to supply chain disruptions. Another client—a heavy-equipment manufacturer—is working to proactively detect near- and long-term risk. Both enterprises are leveraging artificial intelligence (AI) and machine learning to send push notifications across the value chain.”

Gupta adds that such “early warning systems” can help companies quickly reconfigure their supply chain activities to better mitigate disruptions.

Automation technology – which enables companies to automate routine processes so staff can work on more strategic activities – is another popular area of supply chain digitalization. Approximately two-thirds of respondents said automating operations is a top procurement priority.

Organizations that were leaders in digital maturity were much more likely to prioritize automating procurement operations, with 53% strongly agreeing that it is a high priority, compared to 34% of digital “followers” and 28% of “laggards.”

“We’re trying to make our processes as autonomous as possible” with the help of emerging technology, said Matteo Perondi, global head of supply chain management process excellence at Vodafone Group. “AI [artificial intelligence] and robotics can help simplify most of the supply chain management operation. Employees can interact with the technology to get the information they need to manage the supply chain. In addition, the machine can autonomously interact with suppliers by sending out a request for a proposal and negotiating contracts based on preset criteria.”

More than half of leaders expect funding for supply chain transformation to increase this year. Only one-fifth of respondents, however, can quantify the ROI for their company's supply chain transformation spending.