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5 Supply Chain And Digital Economy Myths Debunked

Richard Howells

The digital economy is presenting businesses with myriad opportunities. But to capitalize on these prospects, companies must be willing to adapt, particularly in regard to how they manage their existing supply chain operations.

While people are finally beginning to recognize the potential benefits that come with the digital economy, too few companies are digitizing their operations in an effort to thrive in this dynamic environment. In fact, according to SAP research, 71% of organizations consider their digital maturity levels to be in the “early” or “developing” stages.

Given that fact, it’s entirely possible that people still don’t fully grasp the importance of transforming their existing business models and processes to succeed in today’s digital economy.

Below are five statements related to the digital economy and supply chain that many people believe to be true – and an explanation on why they are, indeed, false.

Myth #1: Your existing supply chain is sufficient to help you thrive in the digital economy

“To win in the digital economy,” says Hans Thalbauer, senior vice president of extended supply chain at SAP, “we have to reimagine how we design, plan, make, deliver, and operate our products and assets.”

Companies must put themselves in a position to develop environments in which they can access and manage data and processes in real time. This requires transforming your traditional supply chain into a digitized, extended supply chain, one that enables your business to be more connected, intelligent, responsive, and predictive.

By reimagining your existing supply chain, you can deliver superior customer experiences and increase revenue. In fact, companies that adapt to the digital world are 26% more profitable than their industry peers, according to MIT Sloan research.

Myth #2: Customers aren’t willing to pay for better experiences

Today’s customers crave a new type of experience. Omnichannel solutions can provide this, enabling buyers to discover a product online, research it on a mobile device, and purchase it in a retail store.

Given that these capabilities exist, your company needs to ensure it can deliver on the omnichannel fulfillment promise. To achieve this, the different channels must be able to support the development and/or delivery of goods, based on each individual customer’s preferences.

Customers are so eager for a better purchasing experience, 86% of them are willing to pay more money to get it, according to a 2014 American Express and Ebiquity survey.

By reimagining your existing supply chain and transforming it into a digitized, extended supply chain, you can gain the real-time insight you need to enable customer-centric processes and truly satisfy your buyers.

Myth #3: Customers love mass-produced products

Each and every one of your customers is wholly unique. So it’s no surprise that buyers are increasingly seeking out products that are customized to their individual preferences and needs.

Forty-two percent of consumers are interested in technology to customize and personalize products, and 19% are willing to pay a 10% price premium to individualize products, according to a Deloitte research study.

This growing demand for product customization is challenging companies considerably. Traditionally, supply chain organizations merely had to manufacture and/or ship full pallets of identical goods. Now, they’re tasked with delivering a lot size of one.

To support your customers’ growing desire for individualized products, your business must transform how it designs, produces, and delivers goods and services. It must embrace the latest technologies, harnessing the power of the Internet of Things (IoT), 3D printing, and other cutting-edge innovations.

By adopting a digital supply chain and smart manufacturing techniques, you can enable greater connectivity, responsiveness, agility, and reliability, empowering you to better meet your customers’ demands for individualized products.

Myth #4: Businesses can’t benefit from the sharing economy

The sharing economy revolves around the sharing of human and physical resources. Generally, consumers love it. Businesses, on the other hand, view it with great skepticism, wondering how it can actually benefit their companies.

At the heart of the sharing economy lies connectivity. When everything is connected, you can collaborate like never before.

Through the sharing economy, you can better link your organization with manufacturers, logistics service providers, and other partners. This larger business network enables companies to capitalize on their partners’ resources, expand their reach, innovate, and improve customer service.

Taking full advantage of a connected enterprise of companies requires putting an extended supply chain at the core of your operations. This allows you to have greater visibility into various customer, supplier, manufacturer, and other insights, ensuring you can improve decision making and respond to in-the-moment changes and demands.

Networked businesses, according to McKinsey & Company, are 50% more likely than their peers to be market leaders.

Myth #5: You simply cannot overcome resource scarcity

Resources are declining globally. Raw materials such as water, minerals, oil, and gas are becoming increasingly difficult to obtain. Human talent is also growing scarcer, as employees lack the requisite skills to manage the data that comes with running digitized, extended supply chains.

Today’s organizations need to begin building sustainability into their business processes. From a talent perspective, companies can achieve this a number of ways, from deploying a contingent labor force to replacing certain roles with robotics. To combat resource scarcity, manufacturers must start doing more with less, leveraging alternate sources of energy and reused or recycled materials.

Finally, another key to ensuring your organization is run in a sustainable manner is to emphasize safety and risk management. Protecting your staff from harm and your resources from damage go hand in hand with your company’s long-term success.

The truth about prospering in today’s complex digital economy

Now that you’ve read a few myths about the digital economy and supply chain, here’s an undeniable truth: Digital transformation is the only tried-and-true way to survive and thrive in today’s dynamic new environment.

Whether providing a superior customer experience, delivering the individualized products your buyers yearn for, or overcoming resource scarcity, only digitization can ensure you possess the capabilities necessary to realize your greatest business goals.

Download this free white paper, Digitizing the Extended Supply Chain, to further explore how your enterprise can combat complexity and accelerate growth in today’s complex digital economy.

Dispel more myths on the supply chain and digital economy, join us at SAPPHIRE NOW in Orlando, Florida from May 16 – 18th, 2017. Check out some of our digital supply chain sessions here and add it to your agenda today! 

Follow the conversation on @SCMatSAP and #SAPPHIRENOW.

This blog was originally published on SCW Magazine

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About Richard Howells

Richard Howells is a Vice President at SAP responsible for the positioning, messaging, AR , PR and go-to market activities for the SAP Supply Chain solutions.

Blockchain: A Rose By Any Other Name

John Bertrand

The question of what exactly blockchain is came to the fore in March with the publication of the eBook Blockchain Meets Supply Chain: Rewiring Business Operations for the Digital Age, which acknowledged “blockchain is difficult to pin down … it is a class of software composed of other technologies.” The eBook aims to clear that up a bit, as I’ll try to do here.

The blockchain is a secure, transparent, layered container. The container is distributed and made available across the Internet or cloud, with any changes reported back to all parties in the specified group. This process is referred to as distributed ledger technology (DLT).

The DLT is available to either a public or private group. Financial services activities will predominately be in private groups, for example “syndicated loans.”

The key features in the transparent container include:

  • Consensus – algorithms that confirm and accept the information as it arrives and make sure that information is distributed
  • Shared ledger – the record of information that is available to all parties
  • Immutability – cryptographic technology that ensures that records cannot be tampered with

Who says blockchain is hip and modern? The Byzantine Army in 330 AD needed to manage the diversity of loyalty in its generals through coded, distributed, hand-delivered messages. Today we use mathematicians and technology to ensure the shared ledger is robust and staying true to the course, as did the Byzantine generals.

It is the right choreographing of the different technologies that is most important, says the eBook. Given the correct combination, blockchain/DLT should appear sooner than currently anticipated.

Gone are the days banks when banks build their own technology. Most banks now only care that the technology works, with the caveat that the tech supplier is approved by the bank. To meet regulatory requirements, bank technology suppliers must be low risk, which is not the profile of most fintech companies!

The eBook suggests that more caution is needed in implementing blockchain; that is probably correct, but the banks’ situation is urgent. The long and ongoing low interest rate environment has made it very difficult for banks to generate revenue growth. The Swiss Central Bank now charges fees for money on deposit – so times really are getting hard. Banks also have very high internal cost infrastructures. Banks need to start charging for their services, cut costs, or both.

Blockchain/DLT offers efficiency, better security, and one source of the truth. As the eBook points out, the digital supply chain reduces procurement costs by 20% and halves supply chain costs, enabling controlled activity instead of caution.

The eBook’s focus on the digitalization of assets and the provenance of them, rather than crypto currency, is refreshing. I recently noticed on CoinDesk that one of the crypto currencies dropped 31% in 24 hours. That’s a Zimbabwean dollar-like fall. Maybe, like the Zim dollar, crypto currency will be officially abandoned and the U.S. dollar used instead.

One final question to ponder: What should we call the stack of technology that forms the blockchain and DLT? Every stack could be different. How about Rose? After all, U.S. hurricanes are given human names, and I believe blockchain/DLT/Rose will bring the force of the hurricane to banking. Blockchain Meets Supply Chain: Rewiring Business Operations for the Digital Age represents the calm before the storm.

To learn more about blockchain, read the Forbes Insights Briefing Report: Transforming Transaction Processing for the Digital Economy.

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Supply Chain Risk Managers Must Be Fuzzy, Or Fail

Susan Galer

I’ve been eager for the chance to inject the fashionable word “fraught” into one of my blogs for a while, and a recent conversation about supply chain risk presented the ideal opportunity.

During an exclusive roundtable at the SAP Ariba Live 2017 event in Las Vegas entitled “Managing Risk in Your Supplier Engagements,” three experts talked about how companies can prevent the worst from happening in a world fraught with stuff that can go wrong.

Their message was that companies can use advanced technologies like machine learning and predictive analytics to neutralize the impact of natural disasters, global currency fluctuations, and labor strikes, more easily ensure compliance with increasing regulations, and even address evils like forced and slave labor in their supply chain ─ but only if all that tech is backed by a corporate commitment to do good.

Cognitive computing changes the game for risk managers

Investigators and risk managers require both data transparency and context, something Padmini Ranganathan, vice president, products & innovation at SAP Ariba, said is foundational to how the SAP Ariba network of buyers and sellers operates. Dan Adamson, CEO of OutsideIQ, an SAP Ariba partner, discussed his company’s cognitive computing platform, which, together with SAP Ariba, changes the game.

Ranganathan noted that advanced technologies can help companies make sure they have the right data at the right time in the right place, and with the right person able to act. “When your supplier is tripping up somewhere, you need to be there to catch it,” he advised. “Technology is a very powerful tool with the ability to machine learn and pattern match to find out what’s going on.”

“Until now, machines have been great at combing through vast amounts of data but not providing context,” he added. “We bring in the right data and apply the first layer of context to make sure it’s a risk you would care about. How you deal with it is another level of context. We’ll see an evolution because some of your suppliers, depending on your industry, might have a heavy regulatory slant, and you need to treat them differently. Our layers of cognitive computing help filter out the noise and bring the relevant events to bear.”

Outside IQ conducts research far beyond simple watch list monitoring. “We go deeper with our cognitive process, replicating what a researcher would do, looking for patterns and links,” Ranganathan continued. “What might be clean today may have a news report tomorrow. Companies need to know before something becomes an explosive issue. The power SAP Ariba brings in is the whole layer of scoring indicators with relationship insights.”

Purpose-driven supply chain

James Edward Johnson, director of supply risk and analytics at Nielsen, said companies have a shared responsibility in managing supply chains for the greater good. The SAP Ariba network helps Nielsen conduct due diligence at scale faster and more cost-efficiently.

“World development has made some people richer and left a lot of people behind,” Johnson noted. “Because we’re so active in the supply chain, we actually touch millions of lives. How do you make sure that’s a force for good, that when you negotiate deals your push for price isn’t merely favoring companies that will cut corners, abuse their workers, enslave people, or rip up the environment by dumping chemicals into lakes?

“SAP Ariba is a great platform because it’s to a degree, data-neutral. A group like Outside IQ will find and read documents from everywhere in the world. If we can find and solve problems in our supply chain, we can make a difference in the world.”

Forget focus, follow the arc to uncover bad behavior

Responding to an audience member question, Johnson cautioned against zeroing in on risks.

“The moment you start focusing, you’re going to fail to capture risk, which is about seeing the unseen,” he said. “Sometimes your peripheral vision is more effective than your central vision. This is the arc of whatever risk you’re looking at. For example, I can guarantee financial indicators are a good leading indicator. The moment a company starts to fail at meeting their numbers, they’ll start taking risks. The question is where those risks materialize. You have look at other things that might provoke bad behavior.”

Every risk manager should be willing to say, “The answer I just gave you is wrong.”

Make data actionable, but accept fuzziness

These experts agreed that people need to factor risk indicators into contract negotiations while recognizing the level of uncertainty inherent to all kinds of data.

“Everyone in risk management should be willing to say ‘the answer I just gave you is wrong’ – the question is by how much and in what direction,” said Johnson. “Too often people are called on to give specific answers they can hang their hat on. That might teach people to manipulate the data or give people who are politically capable an advantage over people who are technically capable, so you might end up promoting people who are better at talking.”

Machine learning promises to strip out biases like recency and sample selection to give decision makers greater objectivity in understanding actual and potential risks and how to address them. “We should have science-based answers, we should have the data, and we should be able to know how well we know what we say we know,” said Johnson.

For more supply chain risk management strategies, see Managing Third-Party Risk Through Verified Trust.

Follow me: @smgaler

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The Future of Cybersecurity: Trust as Competitive Advantage

Justin Somaini and Dan Wellers

 

The cost of data breaches will reach US$2.1 trillion globally by 2019—nearly four times the cost in 2015.

Cyberattacks could cost up to $90 trillion in net global economic benefits by 2030 if cybersecurity doesn’t keep pace with growing threat levels.

Cyber insurance premiums could increase tenfold to $20 billion annually by 2025.

Cyberattacks are one of the top 10 global risks of highest concern for the next decade.


Companies are collaborating with a wider network of partners, embracing distributed systems, and meeting new demands for 24/7 operations.

But the bad guys are sharing intelligence, harnessing emerging technologies, and working round the clock as well—and companies are giving them plenty of weaknesses to exploit.

  • 33% of companies today are prepared to prevent a worst-case attack.
  • 25% treat cyber risk as a significant corporate risk.
  • 80% fail to assess their customers and suppliers for cyber risk.

The ROI of Zero Trust

Perimeter security will not be enough. As interconnectivity increases so will the adoption of zero-trust networks, which place controls around data assets and increases visibility into how they are used across the digital ecosystem.


A Layered Approach

Companies that embrace trust as a competitive advantage will build robust security on three core tenets:

  • Prevention: Evolving defensive strategies from security policies and educational approaches to access controls
  • Detection: Deploying effective systems for the timely detection and notification of intrusions
  • Reaction: Implementing incident response plans similar to those for other disaster recovery scenarios

They’ll build security into their digital ecosystems at three levels:

  1. Secure products. Security in all applications to protect data and transactions
  2. Secure operations. Hardened systems, patch management, security monitoring, end-to-end incident handling, and a comprehensive cloud-operations security framework
  3. Secure companies. A security-aware workforce, end-to-end physical security, and a thorough business continuity framework

Against Digital Armageddon

Experts warn that the worst-case scenario is a state of perpetual cybercrime and cyber warfare, vulnerable critical infrastructure, and trillions of dollars in losses. A collaborative approach will be critical to combatting this persistent global threat with implications not just for corporate and personal data but also strategy, supply chains, products, and physical operations.


Download the executive brief The Future of Cybersecurity: Trust as Competitive Advantage.


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To Get Past Blockchain Hype, We Must Think Differently

Susan Galer

Blockchain hype is reaching fever pitch, making it the perfect time to separate market noise from valid signals. As part of my ongoing conversations about blockchain, I reached out to several experts to find out where companies should consider going from here. Raimund Gross, Solution Architect and Futurist at SAP, acknowledged the challenges of understanding and applying such a complex leading-edge technology as blockchain.

“The people who really get it today are those able to put the hype in perspective with what’s realistically doable in the near future, and what’s unlikely to become a reality any time soon, if ever,” Gross said. “You need to commit the resources and find the right partners to lay the groundwork for success.”

Gross told me one of the biggest problems with blockchain – besides the unproven technology itself – was the mindset shift it demands. “Many people aren’t thinking about decentralized architectures with peer-to-peer networks and mash-ups, which is what blockchain is all about. People struggle because often discussions end up with a centralized approach based on past constructs. It will take training and experience to think decentrally.”

Here are several more perspectives on blockchain beyond the screaming headlines.

How blockchain disrupts insurance, banking

Blockchain has the potential to dramatically disrupt industries because the distributed ledger embeds automatic trust across processes. This changes the role of longstanding intermediaries like insurance companies and banks, essentially restructuring business models for entire industries.

“With the distributed ledger, all of the trusted intelligence related to insuring the risk resides in the cloud, providing everyone with access to the same information,” said Nadine Hoffmann, global solution manager for Innovation at SAP Financial Services. “Payment is automatically triggered when the agreed-upon risk scenario occurs. There are limitations given regulations, but blockchain can open up new services opportunities for established insurers, fintech startups, and even consumer-to-consumer offerings.”

Banks face a similar digitalized transformation. Long built on layers of steps to mitigate risk, blockchain offers the banking industry a network of built-in trust to improve efficiencies along with the customer experience in areas such as cross-border payments, trade settlements for assets, and other contractual and payment processes. What used to take days or even months could be completed in hours.

Finance departments evolve

Another group keenly watching blockchain developments are CFOs. Just as Uber and Airbnb have disrupted transportation and hospitality, blockchain has the potential to change not only the finance department — everything from audits and customs documentation to letters of credit and trade finance – but also the entire company.

“The distributed ledger’s capabilities can automate processes in shared service centers, allowing accountants and other employees in finance to speed up record keeping including proof of payment supporting investigations,” said Georg Koester, senior developer, LoB Finance at the Innovation Center Potsdam. “This lowers costs for the company and improves the customer experience.”

Koester said that embedding blockchain capabilities in software company-wide will also have a tremendous impact on product development, lean supply chain management, and other critical areas of the company.

While financial services dominate blockchain conversations right now, Gross named utilities, healthcare, public sector, real estate, and pretty much any industry as prime candidates for blockchain disruption. “Blockchain is specific to certain business scenarios in any industry,” said Gross. “Every organization can benefit from trust and transparency that mitigates risk and optimizes processes.”

Get started today! Run Live with SAP for Banking. Blast past the hype by attending the SAP Next-Gen Boot Camp on Blockchain in Financial Services and Public Sector event being held April 26-27 in Regensdorf, Switzerland.

Follow me on Twitter, SCN Business Trends, or Facebook. Read all of my Forbes articles here.

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