SCM: Hesitant digital transformation due to high complexity

SCM: Hesitant digital transformation due to high complexity

2. June 2021
Supply Chain Visibility im Mittelstand

Too much complexity and the fear of possible errors are among the key factors that prevent companies from investing in the digitization of their supply chain. This was recently revealed by the results of the 14th Hermes Barometer. For example 42 percent of the logistics decision-makers surveyed, agreed that they were reluctant to invest due to the high level of complexity and fear of making mistakes. On the other hand, eight out of ten logistics managers are of the opinion that companies should invest in the digitalization of supply chains in order to stand out from the competition. The majority of the companies surveyed are therefore aware of the need for digital transformation. In fact, 59 percent of respondents said they believe strategic supply chain management now plays a significantly greater role than it did before the pandemic. Key objectives on the road to the digital supply chain include: cost reduction, lean management and effective inventory management. 

High complexity and high cost drivers

Coordinating and mapping workflows along cross-enterprise processes is a highly complex issue. In cross-company supply chains, different players from different corporate structures and cultures come together. In addition companies have diverse heterogeneous IT landscapes that must be brought together and placed in a common context. Added to this are the partners’ varying degrees of willingness to cooperate and disclose information and data. This often makes it difficult for companies to bring together the information and data of the players centrally. All these factors make it difficult to implement a suitable system that is feasible with the given resources. 

Large companies are making headway

In general digitization is progressing, but only slowly. According to the Hermes survey, one in ten supply chains  are now digital and around a third of respondents have already launched their first digitization projects. However there are major differences between large companies and smaller SMEs.

Since large companies have greater financial and human resources, digital transformation is generally easier to implement. According to the survey, eight out of ten logistics managers (80 percent) with more than 1,000 employees had successfully implemented (40 percent) or started (40 percent) a transformation project.

Smaller companies, on the other hand, often lack the human and financial resources to tackle large-scale digitization projects. In our current free e-paper “Supply Chain Visibility im Mittelstand” (German), we look at the particular challenges SMEs face in generating transparency in supply chain management and how these challenges can be overcome. Click here to download. 

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