This article was originally published on Forbes by Denis King.
For many enterprises, there’s no function more core to competitive advantage than their supply chain, which is why many executives I talk to — on the IT and business sides of the house — see supply chain management (SCM) as the first job when it comes to digital transformation. However, incorporating real-time processing and ubiquitous access to information into such a complex and far-reaching function can be daunting.
Let’s set the scene and show a path forward.
The Importance Of Digital Transformation In The Supply Chain
Consider HP’s evolution from selling printers to offering “printing as a service.” This entails reimagining its strategy and customer engagement model and migrating from being a transactional business to a contractual business that provides hardware and services through a usage-based subscription model.
HP now must satisfy a slew of requirements related to the availability and sharing of data in real-time. The model depends on a continuous flow of information between elements across its supply chain: ERP, CRM and SCM systems, customer touchpoints, supply- and distribution-side partners, manufacturing facilities and the printers themselves. It also requires the ability to incorporate new tools like AI and machine learning, hybrid cloud, IoT, microservices, mobile computing and streaming analytics.
Digital Transformation ROI
Supply chains represent juicy digital transformation ROI because accelerating cycles like lead-to-cash and manufacturing-to-delivery offer value in three areas:
1. Cost reductions: Streamlining processes and improving visibility can minimize the cost of procuring materials and manufacturing and distributing your products and services. Detention and demurrage often lead to quick cost-saving wins.
2. Customer experience: Enabling easy access to real-time information via web and mobile apps and channels doesn’t just improve the experience of customers you serve today; it can help you expand B2B sales by building relationships with consumers.
3. Corporate agility: The Covid-19 pandemic has amplified the value of supply chain flexibility. Consider how perfume makers and distillers reallocated talent and equipment to make hand sanitizers and how apparel companies did the same to make personal protective equipment.
The ‘Pond Problem’ With Most Supply Chains
Modern supply chains must distribute data between diverse participants: suppliers of raw materials, manufacturing plants/partners, the logistics providers that get products to port, the wholesaler and retailers who get them in front of customers, and even customers. It’s an astounding amount of information.
The value of each piece of information diminishes over time, and that diminishment now happens faster than ever. Insights lie in knowing what’s happening across your supply chain right now.
That’s why it’s such a big problem that most supply chains suffer from batch-based sharing of information across siloed systems. This leaves data stranded in stagnant ponds that are only useful when some other system asks for it, which might only occur once a day.
Digital transformation is, in part, about linking those ponds via an omnidirectional network of data streams that gets information flowing in an event-driven manner. When something happens, everybody who needs to know about it is notified. This is referred to as event-driven architecture. It’s a way of designing IT systems to ensure the fast, efficient, reliable delivery of real-time information between producers and consumers of information.
Event-Driven Architecture Across The Supply Chain
To begin the journey toward implementing event-driven architecture, it’s helpful to understand what event-driven architecture looks like out in the wild. From my experience, here are a few examples from the beginning of the supply chain to the end.
1. Sourcing: A mining company might want to link its supply chain from mine to port so it can optimize fuel consumption, resource allocation, distribution efficiency and worker safety. For example, the mine’s workers could wear sensors that can detect dangerous conditions, but that’s not enough. An event-driven architecture could allow those sensors to seamlessly cascade selected alerts only to the people and systems necessary to dispatch a hazmat or medical response team, lock down a given area or sound an evacuation alarm.
2. Manufacturing: When you get an order, how do you correlate production orders with factory systems? How do you link them with core CRM, ERP and SCM systems so you know which orders are affected by which lines and which raw materials? How do you share information about line slowdowns and problematic readings from IoT sensors on the factory floor? Large manufacturers can use event-driven architecture to enable “digital factory” initiatives that let them push SAP IDocs and other information between the consumption and production sides of their business so they can dynamically shift production to improve quality control, satisfy demand spikes and mitigate delays caused by equipment failures.
3. Logistics: Modern shipping companies that are creating digital twins — completely virtual replicas of everything happening across and to their business so they can continuously analyze and model different approaches and routes based on where things are at a given moment, factoring for equipment status, port operations and weather conditions — are reliant upon an event-driven architecture. Event-driven architectures are also critical to the business of consumer product giants because they’re optimizing supply chain logistics by enabling real-time, event-based information sharing between transportation management systems and tools like ClearMetal and Oceanit.
4. Retail: Grocery chains make a living off the efficiency with which they can keep shelves stocked, perishable products fresh and customers committed to their stores through pricing and promotions. An event-driven architecture can serve as the foundation for them to create an “event mesh” that links inventory management, point of sale and customer loyalty systems, and even customer-facing channels like mobile apps.
5. Connected Vehicles: As connected vehicle capabilities evolve, multinational automotive corporations are not just elevating the driver experience. Event-driven architecture can allow them to collect information from cars and commercial vehicles to streamline their supply chain so they can optimize production, enable predictive maintenance and refine comfort, convenience and safety.
However, there are some stumbling blocks to avoid and key questions that organizations should ask themselves as they begin their event-driven journey. My next article will lay out a step-by-step approach that enterprises of all types can take to become event-driven.
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