Want to build a digital supply chain? Focus on capabilities

This is an excerpt of the original article. It was written for the November 2020 edition of Supply Chain Management Review. The full article is available to current subscribers.

November 2020

Supply chains have been in the spotlight like never before over the last eight months. That hasn’t always been a good thing. The perception, reinforced by shortages of products essential to our daily lives, is that supply chains were not up to the task and failed. The reality, as argued by MIT’s Yossi Sheffi in his new book, “The New (Ab)Normal: Reshaping Business and Supply Chain Strategy Beyond COVID-19,” is that supply chains performed as designed—they did what we expected them to do.

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Executives across all industry sectors are rapidly adapting organizational strategies and structures to “digitally transform” their supply chains. Multiple factors are driving supply chain digitalization, including the growth of big data, artificial intelligence (AI), robotics and the Internet of Things (IoT). Some organizations are combining these advances with developments in hardware (e.g., servomechanisms) and software (e.g., analytics) to improve supply chain processes. Yet many supply chain managers are operating in a “wait-and-see” mode when it comes to digitalization.

Digital capabilities

Over the past three years we have studied the state-of-the-art of digital supply chain transformation to understand the factors that enable successful transformation as well as the obstacles that impede development. We conducted in-depth interviews with senior leaders of over a dozen large companies, all household names, across a range of industry sectors. We then conducted deep case studies in two companies, one a major airline, the other a leading consumer electronics firm. Through multiple site visits, data gathering efforts and analysis, we observed and participated in the process of digitalization at these firms.

Our findings point up three key factors that separate leading firms from laggards. First, successful transformation efforts build upon a set of common underlying features that differentiate a digital supply chain from a traditional supply chain. Second, more advanced firms pursue visions of digital maturity that follow a natural progression of core attributes. Third, and perhaps most important, successful leaders strategically target well-defined capabilities. Many supply chain leaders make the mistake of focusing on technological solutions rather than building capabilities. Our key takeaway is that companies need to focus less on the technologies themselves and more on the capabilities they enable.

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