Digital Supply Chain Networks: The Growing Urgency for Adoption
In an October 2020 video, the Center for International Trade and Transportation (CITT) provided an overview of supply chain trends and challenges as the pandemic unfolded.
As Phil Levy, Chief Economist at Flexport notes in the video, supply chain “failures” occurred on multiple fronts.
“If you want to talk about a supply chain failure, was it that you intended to get something from overseas and you were unable to do so? Was it that you intended to get something domestically and you were unable to do so? Or was it that you wanted to get substantially more of something either from overseas or domestically and you were unable to do so? Those are three separate questions. We saw those things all mixed together as the pandemic [impacted] the supply chain, and I think often in people's minds those mixed together,” he said.
While it would be nice to be able to say, nearly a year later, that the difficult dynamics described in the video are behind us now—that’s not the case. Instead, a resurgence of the virus in global hotspots and the emergence of COVID-19 variants are leading to a growing repeat of consumer worries and fueling ongoing supply chain woes.
Dynamics like these demonstrate that those who continue to rely on the linear supply chain of old may have a lot of difficulty surviving in the new normal ahead.
As the narrator of the video said, “The question remains whether the recent past is a prologue for the future.” In light of ongoing trends, the answer would seem to be yes—which makes the need for a digital supply chain (DSN) more urgent than ever.
The Imperative for the Digital Supply Chain
Although some may feel that the pandemic broke the traditional supply chain, others view it as a catalyst for much-needed change. In one analysis, Deloitte experts Jim Kilpatrick and Adam Mussomeli ask, “Could COVID-19 be the black swan event that finally forces many companies, and entire industries, to rethink and transform their global supply chain model?”
Describing how the pandemic “has already exposed the vulnerabilities of many organizations,” Kilpatrick and Mussomeli underscore the imperative for a new supply chain model: “A decades-long focus on supply chain optimization to minimize costs, reduce inventories, and drive up asset utilization has removed buffers and flexibility to absorb disruptions–and COVID-19 illustrates that many companies are not fully aware of the vulnerability of their supply chain relationships to global shocks.”
In this context, they underscore the importance of emerging technologies such as the Internet of Things (IoT), artificial intelligence (AI), robotics, and 5G to support the critical need for better end-to-end visibility. Such technologies are critical components of the DSNs that are needed to anticipate and adapt to supply chain challenges.
“Whether it is a ‘black swan’ event like COVID-19, trade war, the act of war or terrorism, regulatory change, labor dispute, sudden spikes in demand, or supplier bankruptcy, organizations that deploy DSNs will be ready to deal with the unexpected,” they write.
DSNs, SCOR, and the Digital Capabilities Model
An important framework for building an effective DSN is the Digital Capabilities Model (DCM), which we briefly touched on in last week’s post.
The DCM is the result of a collaboration between the Association of Supply Chain Management (ASCM) and Deloitte. Initially released in 2019, it offers a strategic framework for building an effective DSN.
But wait, what about SCOR?
Since 1996, businesses have been using some iteration of the supply chain operations reference (SCOR) as the model for improving supply chain management processes and outcomes. In a CIO article, Senior Writer Sarah White describes SCOR like this:
“The supply chain operations reference (SCOR) model is designed to evaluate your supply chain for effectiveness and efficiency of sales and operational planning (S&OP). …the SCOR model is intended to help standardize the process and create a measurable way to track results. …Using the SCOR model, businesses can judge how advanced or mature a supply chain process is and how well it aligns with business goals,” she writes.
An updated version, SCOR 12.0, was released by ASCM in 2017 to include emerging digital capabilities that support supply chain effectiveness. “The framework was modernized so that best practices better align with digital strategies, including new training information and integrated sustainability standards using the Global Reporting Initiative (GRI),” writes White.
But there’s an additional version of SCOR: the SCOR digital standard (SCOR DS) that was released along with the DCM in 2019 “to address the growing need for digitization in the SCOR model.” In this context, the DCM is a reference model compatible with SCOR that enables the shift from linear supply chains to more effective DSNs.
As White notes, “each digital DCM capability is mapped to elements in the SCOR Digital Standard (SCOR DS), a platform-agnostic framework that links business processes, metrics, best practices, and technology into one streamlined format.”
A Guide for Major Transformation
In “Digital capabilities model for supply chain: The guide for a major transformation,” Deloitte highlights the promise of DSNs to overcome the types of supply chain challenges that have been experienced during the pandemic: “Combined with the global reach of commerce, supply chains have moved from being linear linkages and handoffs to complex mature networks driven by sophisticated digital technology. It’s at this nexus of technology and global business that organizations have the opportunity to transform their supply chain into a powerful network that can react, adapt, withstand and have a positive impact on their customers’ lives.”
Three supply chain experts cited in the article underscored the benefits of the DCM, noting that:
Although SCOR has long guided improvement efforts, it doesn’t help “guide a major transformation.”
The DCM has been created in an effort to bridge this gap, since it provides the flexibility for companies to prioritize capabilities that will make the most difference.
The DCM also supports competitive advantage by helping companies connect digital investments with business strategy.
The DCM is an evolving model, as noted in a joint publication by Deloitte and ASCM in late August of 2020, Digital Capabilities Model for Supply Networks, which provides a comprehensive overview and detailed explanation of the DCM.
Under “Changing Paradigms,” Deloitte and ASCM describe why they decided to create the DCM: “The SCOR model served the industry well, but was not built to withstand todays disruptions calling for a new paradigm.”
Describing the DCM as “A model based on Capability Building Blocks,” the six level-1 Capabilities are listed as:
The principles for the model include starting with these level-1 Capabilities, each of which has “close ties with every other Capability. …Every level-1 Capability has a series of level-2 Capabilities, which provide the exact content an organization needs to operate as a digital supply network.”
For a more detailed look at how the DCM enables a robust and effective DSN, please access the full resource.
Additionally, this ASCM presentation provides an introduction to the DCM. Even if you don’t have time to watch the entire webinar right now, be sure to check out the approximately 3-minute segment that starts at 6:58, which demonstrates the powerful possibilities for an effective DSN.
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