In early April, a global research study conducted by Capgemini Consulting and GT Nexus that surveyed more than 330 executives in large manufacturing and retail organizations in North America and Europe revealed that 70 percent of those executives said their companies have started a formal digital supply chain transformation effort.
“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,” Kurt Cavano, Vice Chairman and Chief Strategy Officer at GT Nexus, said in the news release announcing the study results. “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. But it’s going to be a real sprint given the current reliance on outdated, analog technologies such as phone, fax and email to collaborate and execute in the global supply chain.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.”
With those survey results still fresh in our mind, Food Manufacturing recently had the opportunity to correspond with Cavano on the topic of digital supply chain transformation.
FM: For food manufacturers, what kind of challenges are you seeing in the supply chain, and where do you see an opportunity for data to be used for strategic decision making?
KC: Food manufacturers are facing a wave of pressures that directly tie in to the supply chain. For example, regulations and mandates on food disclosures and GMO labeling require specific production information on product packaging. Manufacturers are being held accountable for ingredients and goods that they don’t yet own, that are being produced in facilities beyond their scope of view. The challenge is much more than printing accurate information on labels. The real challenge is around traceability — the ability to track the goods and facilities along the supply chain. This requires deeper visibility. Historically, visibility and traceability have been difficult to obtain due to silos throughout the chain. Outsourced suppliers and tier 3 or 4 vendors have typically been beyond the brand’s scope of reach. But data, harnessed in a multi-enterprise environment, has proven to be a sledgehammer capable of breaking down barriers and enabling new forms of visibility and traceability. Production is no longer a single chain, it’s a global network. If data from all of the network nodes can be pulled into a central hub, questions around visibility can be answered and transparency is no longer as elusive.
FM: What value does a digital supply chain bring to food manufacturers on a local and global scale?
KC: Traditional processes such as paper, Excel spreadsheets and email feed into the silos that prohibit visibility. Typically, wherever there is a manual process, there is loss of control and visibility. By automating processes and documents, such as purchase orders, invoices, work in process tracking or packing/shipping, manufacturers eliminate paper and friction, but more importantly, they digitize these processes and workflows. This allows data and signals to be captured and sent back to the entire network, where all participants can benefit. Status of orders or origin of goods are no longer a secret. There’s a single instance of information or data that sits in the middle. Consider the fact that any update you make to your LinkedIn profile is visible to all 500 of your contacts in your network environment. If a food manufacturer or one of its suppliers updates an order and takes an action, the rest of the network sees that change.
FM: How are inefficiencies addressed with digital supply chain solutions?
KC: Eliminating inefficient manual processes is low hanging fruit. Something as simple as automating supplier invoices and three-way matching can eliminate days of paper shuffling, errors and delayed payments. At the factory, automating packing, scanning and shipment building not only speeds processes and improves efficiency, it ensures accurate labeling and compliance. It also enables strategic shipping programs, such as direct store deliveries, that allow for later decisions on fulfillment based on the latest set of data. The problem is, few companies have been able to digitize the supply chain to harness data. We recently conducted a study with Capgemini where only 23% of respondents said that the majority of data from the extended supply chain is analyzed and used for decision making. This is an issue.
FM: From a more strategic standpoint, how will a digital transformation improve operations, regulatory compliance and quality?
KC: Digital transformation is still in its early days. Not everyone is clear on what it means or how to begin down this road. The general benefits are in the areas of harnessing data and making it executable. Better data helps drive actionable analytics for better performance and decision-making. The supply chain is an areas of business that is ripe with inefficiencies given the complex, outsourced nature of production. Having a handle on data for greater visibility and decision-making will improve operations, compliance and quality. There’s no easy path or bolt-on solution. It requires process automation, collaborative technology and a network mindset that connects all parties and enables them to operate in unison.
FM: What kind of changes do you foresee taking place in the food manufacturing / process manufacturing space? What advice would you give to food manufacturers who are thinking about a digital transformation?
KC: The food manufacturing industry faces many similar challenges impacting other industries. Demanding customers want specialized options and foods. They want to know where and how it was made. They want to be sure it was produced under safe and responsible conditions that don’t harm them or the earth. They want transparency around GMOs and artificial ingredients. And, by the way, they don’t want to pay a lot for it.
Food companies also face a wave of regulations that can vary by country. Addressing these regulations will prove to be challenging due to the complexity of production. The supply chain is responsible for handing all of these changing demands. It is essential that food manufacturers deploy a strategy for supply chain visibility and traceability. A foundational element to this is digitizing the documents, workflows and collaborative processes between the brand and its trading partners.