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What Manufacturers Should Know About Digital Supply Networks

Stephen Laaper, principal and Digital Supply Networks leader at Deloitte Consulting, talks with Manufacturing Business Technology about digital supply networks and what manufacturers should know about them.

Stephen Laaper, principal and Digital Supply Networks leader at Deloitte Consulting, talks with Manufacturing Business Technology about digital supply networks and what manufacturers should know about them.

Manufacturing Business Technology: What are Digital Supply Networks?

Stephen Laaper: Digital Supply Networks (DSNs) are best defined by the use of rapidly advancing technologies to disrupt the traditional supply chain, which has previously been linear, and often siloed in organizations. To eliminate this inefficient approach, DSNs seek to create a dynamic model by increasing the frequency of interaction and decreasing the latency in sharing data and information across functions. These new technology tools help transform supply chains into more efficient networks with greater agility and velocity than the traditional linear model.

Manufacturing Business Technology: What are some of the key issues you are seeing in supply chain today, and how will digital supply networks aid in resolving these issues?

Stephen Laaper: Cost, complexity, and demands for increased flexibility continue to be primary challenges in many organizations. As supply chains have sought to drive improvements on these dimensions they are increasingly overwhelmed by the amount of data at their fingertips. Manufacturers are working hard to harness the power of this data — and it is proving to be both a challenge and an opportunity.

As companies look to harness the power of DSNs, new technology is becoming available that enables companies to transform their operations to better manage holistic decision making through improved end-to-end connectivity and transparency, always-on agility and a focus on systemic “Intelligence Augmentation” to drive better decisions.

Manufacturing Business Technology: How have changes in customer demand influenced digital supply networks and how will this shape business strategy?

Stephen Laaper: When attempting to forecast customer demand, it can be difficult for companies to get high-quality consumption data to inform forward looking forecasts.  

The Internet of Things (IoT) — smart devices, appliances and the increasingly connected world — has helped streamline this communication between the end customer and supplier. It has provided deep insight into customer consumption patterns. This type of technology has helped manufacturers analyze, understand and segment customer patterns, develop consumption based models to identify customer needs and more accurately align the supply chain around the consumption based demand forecasts.

Manufacturing Business Technology: Digital supply networks will change how a business operates, perhaps in ways that were previously unforeseen. What are some of the steps organizations should take ahead of implementing this type of technological shift?

Stephen Laaper: There are really three main areas to focus on. These include:

No. 1 - New workforce skills and capabilities: Changes in the supply chain workforce are hands down the largest challenge companies will face moving forward. The skills needed to operate the supply chain of tomorrow are vastly different from those in use today.

Organizations will need people who can employ “systems thinking across the full supply network,” as opposed to how organizations have typically developed talent in functional silos. This type of thinking will lead to agile teams who can monitor the impact of their job function across the full value network. In all industries, leaders must consider how they will recruit top talent for these positions, where they will increasingly be competing with non-traditional competitors.

No. 2 - Data analytics opportunities: Data is everywhere — leaders have to go beyond the level of “staying afloat” and begin defining and executing business improvement based on utilization of supply chain and operations data.

No. 3 - Cybersecurity risk: Beyond just IT security, operational technology security is a major factor that leaders must address head on to prepare and protect their supply networks. This type of security, such as that of factory production systems or even HVAC systems, has not risen to the level of computer protection. It is an important asset that companies cannot afford to overlook.

Manufacturing Business Technology: Transforming business processes to digital can ultimately lead to changing the nature of certain tasks or jobs. What do you see as one of the key changes for the workforce of the future as a result of digital supply networks?

Stephen Laaper: The biggest “skills gap” will likely be in “applied technology” jobs — the ones that require a surprising amount of technical capability and do not necessarily result from a four-year college degree. For example, advanced robotics and factory floor automation will likely be highly prized, particularly as jobs that incorporate more advanced technologies come to the forefront of the labor force. Some manual operations that have been previously outsourced overseas in many areas are returning to the U.S., as outlined in a Deloitte paper “The Reshoring option: Maybe it’s time.” A portion of these jobs are returning as highly automated with technologies that require a smaller, but highly educated workforce.

There will also be a much higher demand in the near future for more refined technology skillsets. Deloitte’s 2016 Business Confidence Report showed that although more than half (53 percent) of CXOs (those in the C-suite) say innovation is a major priority, 44 percent of CXOWs (CXOs in waiting) are not prioritizing investments in employee recruitment and retention for new and different skills that foster innovation. Additionally, 88 percent of CXOs and 93 percent of CXOWs believe the rapid pace at which technology and markets are changing is creating a skills gap at their companies, with nearly half feeling the gap is not being adequately addressed.

The message is clear: it is time for investments in employee recruitment and retention to be a priority. A failure to address the need for new and different skills may leave organizations behind.

Manufacturing Business Technology: Data is everywhere. How can leaders leverage the data they collect and amplify it effectively within digital supply networks?

Stephen Laaper: Through digitizing supply chains, manufacturers and other organizations will help implement the transition from a linear to a network method of addressing the supply chain process. This will include the following “information value loops” to better serve the digital and physical outcomes companies desire:

  • Physical-to-Digital: Capturing data from the physical world to create a digital record.  This is also referred to as “digitization” of the supply chain or the creation of the “Digital Twin.”
  • Digital-to-Digital: The use of algorithms, advanced analytics, artificial intelligence and machine learning to drive meaningful insights, simulations, and optimizations across the supply network.
  • Digital-to-Physical: Taking the outcomes of the digital-to-digital loop to enact physical change in the supply chain. This can be done either with “man-in-the-loop” decision making or autonomously without manual intervention. This is the area where most companies fail to realize their current technology investments today.

Some technology vendors approach organizations and promise a lot of features to help reign in the data. But the reality is that for most vendors, they only represent a small piece of the picture. It is important to utilize these information value loops — they serve as the framework by which organizations can better understand where the technologies fit. By employing a “value first” mentality, organizations will be better able to leverage these technologies to build and operate their Digital Supply Networks.

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