DIGITALISATION MEANS CUSTOMERS REALLY ARE KING

Supply chain digitisation means that businesses are having to rethink what customers really value, says Venky Arun of Kearney

WRITTEN BY: SEAN ASHCROFT

Every part of the supply chain will benefit from digitalisation including quality control

Sometimes, progress requires out-of-the-box thinking – the ability to seek inspiration from unusual quarters.

A pizza delivery service and the banking sector might seem unlikely use cases to help a business digitally transform its supply chain, yet, interestingly, bestpractice deployment of tech is often transferable from sector to sector.

So much is changing, and so fast, in supply chain that lessons have to be learned wherever one can find them. Predigitalisation supply chains were typically designed to balance costs. In terms of performance, the goal was to give customers similar service levels, with a bias towards the needs of the largest customers.

But technology means businesses now have increased access to data across the supply chain, and with increased data comes better insight, which allows them to provide a bespoke service to customers. In short, supply chain digitisation requires that businesses rethink what customers really value.

Digitalisation helps segment markets

Venky Arun, Partner of Strategic Operations with Kearney, is an expert in this field. He says digitisation “enables companies to further segment its customers across channels and provide customisation on what they truly value”.

Not just this, but he also says technology allows organisations to adjust evolving priorities – such as real-time visibility, customised promotions and growing demands – for sustainable supply chains.

Venky says: “In terms of real-time visibility, customers want to know about status and updates throughout the order to delivery process. The more transparent your supply chain is, the more your company can meet the wants, needs, and expectations of customers.”

He gives as an example the pizza giant, Domino’s, who pioneered real-time order tracking in 2008 when it introduced a feature that let customers know when their pizza order was received, when the pizza was in the oven, and when the order was en route.

“This concept has extended across business-to-business (B2B) and businessto-consumer (B2C) segments in the supply chain,” says Venky.

As well as causing businesses to shift the focus of supply chain away from costsavings and on to customer needs, digital transformation is also changing the nature of supply chain roles – particularly through automation. Businesses are increasingly having to strike a balance between automation and human expertise, says Venky, who cites collaborative warehouse robots – ‘cobots’ – as an example.

“These are used in areas where humans are also working, and, together, they complete tasks such as sorting, carton loading, case packing, and tray placement.”

Here, he references Unilever’s production plant in Katowice, Poland, which uses cobots “to speed up the palletising process, to optimise work ergonomics and to relieve employees from strenuous tasks”. Another nuanced automation use case that he mentions is the balance between AI-driven chatbots and human feedback.

“Answers to basic questions, such as returns policies for a retailer, can be handled through a chatbot,” he says, “but enquiries that require empathy and personalisation need to be delivered by humans.”

In light of this, Venky suggests Supply chain managers would do well to study the banking sector, which has deployed bestpractice automated customer support.

“For bank relationship-managers, the automation of manual tasks has enabled a more efficient way of working, so they can refocus their time on higher-value engagements that help deepen relationships with their clients.”

So which organisations does Venky feel are best-practice leaders in supply chain digitisation?

He begins with a rider, saying that digitisation of supply chains “is still in its early stage” and that most companies “are working on improving the what, where, and how they digitise their supply chain”.

PepsiCo ‘digitally mature’

He adds: “There is no one leader in digitisation, but we do see companies that have more mature digital capabilities.”

Such as PepsiCo, which Venky says is using one of its biggest brands – Frito-Lay – to launch new Industry 4.0 initiatives.

“Its Frito-Lay manufacturing plant uses lasers to hit chips and then listen to the sounds coming off the chip to determine

Venky Arun

TITLE: PARTNER OF STRATEGIC OPERATIONS

COMPANY: KEARNEY

INDUSTRY: PROFESSIONAL SERVICES texture. Algorithms process the sound and determine the chip texture to automate the quality check for Frito-Lay’s chip processing systems.”

Arun has been with Kearney for over 10 years. He was previously Vice President and Associate Partner. He was previously an Associate Engineer with Accenture.

Another example is UPS, which is using an AI-powered GPS tool called ORION (On-road Integrated Optimisation and Navigation) to create the most efficient routes for its fleet.

“Customers, drivers, and vehicles submit data to the machine, which then uses algorithms to create the most optimal routes,” he explains. “Instead of backtracking or getting stuck in traffic, ORION helps drivers make their deliveries on time and in the most efficient manner. The routes can even be changed on-the-go, depending on road conditions and other factors.

Asked what his advice to businesses would be if they could afford to digitalise just one aspect of their supply chain, he returns to the subject of customer-led decision making.

“The customer is at the core of any supply chain. Availability of the right product at the right time is becoming more and more important and that’s an area where digitisation can enable businesses to make more-accurate inventory decisions.

“Digitisation and advanced analytics can help predict consumer habits and forecast seasonal demand to minimise the costs of overstocking excess inventory. When applied to demand forecasting, AL and ML principles create highly accurate predictions of future demand.”

Here, he gives the example of US retail giant Walmart, which is using AI- and ML-based predictions to balance its network “and is placing inventory in the right location, at the right time”.

Frito-Lay uses lasers to gauge texture and determine quality

UPS uses an AI-powered GPS tool to create the most efficient routes for its fleet

McKinsey 5-point formula for digitalisation success

An ongoing McKinsey study into skills requirements shows that companies need inhouse digital supply chain talent to support digitisation efforts.

And to help organisations in their quest to plug the skills gap, McKinsey has published a five-point “capability building formula” based on action taken by businesses who have successfully upskilled their supply chain people. The five points are:

Focus

Focus on the skills that matter –something that is often hindered by a lack of understanding of what ‘good’ looks like, says McKinsey.

Incentivise

Incentivise participation and engagement

Scaleability

Set up the program to scale beyond the initial pilot

Diversify Impact

Use diverse and effective learning methods

Drive for impact on the company’s operating performance

He explains: “Shoppers pack their physical or digital shopping carts. Walmart uses AI to enhance daily supply chain workflows, helping anticipate cycles in demand, especially amid peak or unexpected events in customer traffic.”

Tech is sustainability boon

Staying on the theme of advanced analytics and AI, Venky says such tech is helping in another hugely important area: sustainability.

“AL and ML can help optimise routes, reduce fuel consumption, improve inventory management and reduce overall waste,” he says. “Advanced analytics is also helping companies improve efficiency, as well as enhancing their reputation by allowing them to play a bigger role in preserving the environment.

“For example, since 2015, Amazon has reduced the weight of its outbound packaging by 33%, eliminating 915,000 tonnes of packaging material.

“Once a customer orders a product, an ML solution powered by Amazon SageMaker identifies the type of packaging needed – whether this is paper bags, padded paper mailer – as opposed to defaulting to predefined boxes.”