Digital Supply Chain & Operations: What Level is Your Organization Now?
Nathanael Powrie and Simon Knowles continue their series of articles on the five-level digital supply chain and operations maturity journey from a reactive, legacy supply chain to a forward looking, synchronized digital network optimized for efficiency, agility, growth, quality and speed. This article focuses on the typical attributes of an organization at levels one and two maturity and provides real-world examples of the measurable benefits companies can achieve moving up from these initial phases.
A step by step digital transformation journey
In our recent article, we discussed the importance of data-led insights in breaking down silos and delivering visibility and control across the supply chain and operations. Getting full control of your organization's existing data is the critical foundation of any transformational journey and should come before you even begin to discuss further technological investment.
With many horror stories of digital initiatives not delivering measurable value, the key is to start off in the right way. With a clear field of vision and help developing and implementing your ROI business case, you can drive a step-by-step digital improvement program to take you from a legacy supply chain to a synchronized digital supply chain and operations at a pace that works for your organization and your people.
Know where you are now, and start the journey with an end in sight
Your instinct may be to dive headlong into new technologies, resist that instinct! The best place to start is with a comprehensive review of the current maturity of your organization's supply chain and operations. This doesn't have to take long. For example, we work with clients and carry out a rapid insights and analysis that takes, on average, between four and six weeks. The outcome is a clear ROI-driven business case and articulation of a measurable, actionable implementation roadmap tailored for your organization.
The TVO digital functional attributes model
Implementing a program based on the Total Value Optimization (TVO) levels of maturity (figure one) enables companies to rapidly improve the performance of their supply chain and operations and track measurable improvement from an EBITDA, cash and growth perspective. Aligned to the TVO Pyramid, the TVO Functional Attributes Model is a pragmatic tool for mapping out where your organization is and where you need to be to achieve a high-performing digitally enabled supply chain and operations.
Moving up from levels one and twoAt level one the organization operates in functional silos with limited interaction between sales, procurement, manufacturing and logistics. Data frequently resides in silos too, with basic reports frequently being produced manually, often on spreadsheets. The result is poor data integrity and visibility, leaving the organization without a reliable single source of truth.
In this environment, data analysts can collect, aggregate and cleanse data from multiple disparate systems without an investment in IT. For example, we worked with a manufacturer comprised of eleven affiliated businesses. Leveraging TVO Control Tower, our analysts gathered data to provide visibility to category management across the entire company. This gave leadership the capability to mitigate future price increases, make better decisions and support continued, sustainable growth, leading to a 20% EBITDA improvement.
At level two, organizations may have already begun to introduce some digital tools in certain functions e.g. e-procurement, while other functions such as logistics and operations continue to use tools and systems that are not synchronized. This lack of synchronization prevents improvements from a cost, service, quality and throughput perspective.
A global flexible packaging company at this level faced significant challenges with siloed operations poor metrics and immature management operations. The company had invested $6M in ERP, which had so far provided little reporting capability or value. We leveraged this investment and improved processes, data accuracy and people alignment across the business. A centralized data warehouse was also produced to provide daily trend analysis, predict future performance based on upcoming production plans and provide accurate information for better decision making. The result was a 14% improvement in throughput and a 56% EBITDA improvement.
Rapid insights build confidence for the journey ahead
As mentioned earlier, rapid insights and visualization tools help qualify and quantify the ROI business case and assess the disciplines, tools and behaviors required to turn data into information and information into action.
In our experience, this solid ROI-driven business case and measurable implementation plan, gives leadership and staff the confidence to move forward. As the business starts to see measurable results, this confidence builds further and a cross-organizational, high performance digital mindset is developed. This is critical as you continue towards the ultimate goal of a synchronized digital network.
In our next article, we will focus on organizations that have reached the third level of digital supply chain and operations maturity: The cross-functional digital supply chain, we'll look at how companies at this level make use of diagnostic analytics for more collaborative decision making, and outline the steps required to move to a multi-level digital supply chain.
Maine Pointe, a member of the SGS Group, is a global supply chain and operations consulting firm trusted by many chief executives and private equity firms to drive compelling economic returns for their companies. We achieve this by delivering accelerated, sustainable improvements in EBITDA, cash and growth across their procurement, logistics, operations and data analytics. Our hands-on implementation experts work with executives and their teams to rapidly break through functional silos and transform the plan-buy-make-move-fulfill digital supply chain to deliver the greatest value to customers and stakeholders at the lowest cost and risk to business. We call this Total Value Optimization (TVO)™.
Maine Pointe's engagements are results-driven and deliver between 4:1-8:1 ROI. We are so confident in our work and our processes that we provide a unique 100% guarantee of engagement fees based on annualized savings. www.mainepointe.com