Whether due to the constant drumbeat of disruption or a lack of sustainable practices, manufacturing and supply chain organizations that have long competed in an environment of unconstrained resources now find themselves competing in one that is resource constrained. This has had profound implications for technology and technology-enabled operations and has been a significant driver of digital transformation initiatives. In an annual study from IDC comparing digital maturity with business performance, those companies that are further along on their digital transformation journey significantly outperform those that have fallen behind in both revenue and profit.
Over the past few years, as disruptions of both supply and demand have intensified, supply chain resiliency has emerged as a top investment priority. Indeed, companies say that a lack of supply chain resiliency and agility impairs their ability to see necessary changes in time to react to them effectively and that a lack of digital competencies limits their ability to transition the supply chain to new business models. However, many disruptions are simply not predictable. IDC has argued for years that the more important capability is to see what is happening and quickly respond. If you can respond faster than your competition, you win; if you react more slowly than your competition, you lose. There may be certain areas that call for advance mitigation, but there are also areas that call for quick response. Hence, the future Adaptive Enterprise.
Supply chains and key interwoven applications like ERP have been on a digital transformation journey for some years, yet manufacturing operations are fundamentally analog, operating in a physical world with physical assets to be managed and optimized. As we think about both the present and the future of both the supply chain and ERP, it is the physical assets that are scarce — labor, machines, and material. They are single use at any point in time and don’t scale well, and their value decreases with use. Digital resources, however, are ones of abundance and can scale almost infinitely and with very little incremental effort, and they gain value with use. As supply chains and operations blend the physical with the digital, the digital elements put more pressure on the physical. Therefore, digital tools must augment the physical.
At the same time, digital transformation is more than just technology, as companies need to optimize both people and processes to be successful. Transformation efforts can stall for many reasons. However, IDC hears repeatedly that while operations and the supply chain have been digitized, companies have not always rethought processes or approaches. In other words, companies may have turned paper into electronic files, but they are still operating with a paper-based thinking mentality. There is certainly value to digitizing information traditionally recorded on paper — input/transcription errors are reduced, and manual tasks are eliminated — but if the digitized information is not used to drive process change and improvement, a significant percentage of the transformation benefit is unrealized.
Similarly, digital transformation must recognize the key role for people. In a recent IDC talent and labor survey, 33% of companies say that labor-related operational performance and productivity challenges have materially affected their business. Additionally, 35% cite operations/manufacturing as the second most impacted area from a worker and skills shortage. IDC expects that talent/labor shortages will persist for the foreseeable future, so the use of technology offers a way to increase the productivity of people. Analytics and AI can be an effective way to handle routine tasks, thereby freeing existing people to focus on value-added roles. Technology can also drive faster “time to expertise” for new employees through modern collaboration, learning, and digitized workflows.
Traditionally, the supply chain and associated operations have been designed to meet current realities and challenges and focused on minimizing costs. In the adaptive enterprise, people, process, and technology are all harnessed to drive resiliency, agility and efficiency and to ensure that when the next disruption occurs, the business can react quickly and decisively.
To learn more about QAD’s vision for an Adaptive Enterprise, which helps organizations optimize their people, processes and systems, visit their website.
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