Companies Hesitate to Drive Digital Transformation in SCM Due to Complexity
Companies often avoid investing in digitalizing their supply chain due to the complexity involved and the fear of potential errors. Many logistics decision-makers are reluctant to invest in such digitalization projects.
The reasons for complexity in the digitalization of supply chain management include:
- The current state of IT systems: outdated, not integrated, and difficult to use
- Potential upgrade projects of the ERP system
- The lack of resources to implement digitalization projects
- The need for change management in order to include all partners in the supply chain
- The use of too many formats in the supply chain
- Competing priorities between driving strategic initiatives and daily business operations
- Difficulty in calculating the ROI of such projects
However, based on interviews with several logistics managers, it is believed that companies should invest in digitalizing their supply chains to stand out from the competition. The majority of the companies are aware of the need for digital transformation, as strategic supply chain management now plays a significantly greater role than before.
Key objectives on the road to digital supply chain include reducing costs, implementing lean management, effective inventory management, and improving the customer experience.
High Complexity and High Cost Drivers
Coordinating and mapping workflows across cross-enterprise processes is a highly complex issue. When it comes to cross-company supply chains, different players from different corporate structures and cultures come together. Additionally, companies have diverse, heterogeneous IT landscapes that must be brought together and placed in a common context. To make things more challenging, partners may have varying degrees of willingness to cooperate and disclose information and data. This often makes it difficult for companies to collect and combine the information and data of the supply chain stakeholders in a centralized manner. All these factors combined make it difficult to implement a suitable system within the given resources.
Large Companies Have an Advantage
Although the digitalization of the supply chain is progressing, it is doing so slowly. However, there are significant differences between large companies and smaller SMEs.
Large companies have greater financial and human resources, making digital transformation generally easier for them to implement.
Smaller companies, on the other hand, frequently lack the human and financial resources necessary to carry out end-to-end digitalization projects.
Here are 5 Ways to Overcome Complexity:
- Do not make it an IT project – Choose SaaS
Many companies are traditionally very ERP-focused and try to include as much as possible in the ERP system. These projects are often difficult, as they require taking into account too many partners and data formats. Changes in the future will be difficult and expensive. Modern SaaS tools that integrate with your ERP are the smart choice.
- Walk before you run
Set realistic milestones and plan accordingly. Do not try to boil the ocean. Start with a core team and process like shipment management. Once this first step is implemented, move to expand it into other processes like end-to-end tracking, order management, or collaboration with external partners.
- Make it Lean
Resources are scarce these days, and your daily jobs will continue. So, set up a lean and pragmatic project. The key objective is to have all partners integrated and all workflows automated. However, it will take steps to get there. Therefore, build it step by step.
- Choose realistic implementation times
The mountaintop is often further away than it seems. Realistic planning ensures that everyone has an understanding of when the project will be finished, and helps to take pressure off the organization and keep morale high.
- Communicate More and Get Top Management Buy-In
The digitalization of the supply chain involves many internal and external partners who need to buy-in and support this project. It is, therefore, essential to communicate with all involved stakeholders as much as possible to ensure success.
We are a young logistics startup with the ambition of creating the world's most efficient supply chain workflow solution and revolutionizing communication in the international movement of goods. We are a small, dynamic team located in the beautiful Duisburg Inner Harbor. If you want to learn how we can help your organization achieve an end-to-end digital supply chain, schedule your free consultation here: https://calendly.com/limbiq-scm.