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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.

Is Your Supply Chain Prepared For The Digital Future?

Kristin Ulrich

Ninety percent of CEOs believe the digital economy will have a major impact on their industry, but only 25% have a digitalization plan in place, according to SAP research.

Most global supply chains are unequipped to cope with the world we’re entering. For that reason, supply chain managers need to shift their attention from cutting costs to enabling new processes and increasing connectivity and agility. Speed is also crucial, as product cycles are becoming shorter and more fluid. Additionally, as customers demand faster product and service development and delivery, organizations must transform their existing business processes to reduce response times.

A key part of this transition includes the transformation of traditional supply chains into demand-sensitive business networks. Standardized supply chain and logistics approaches pose threats for companies. Enterprises can use the latest digital technologies to overcome these threats a couple of different ways:

  1. Gaining a better understanding of what the customer wants while enhancing customer relationships
  1. Transforming supply chain processes and responding to the rising tide of global uncertainties and business complexities

The big move toward digitalization is coming sooner than many companies expect, according to Digital Supply Chain Management – 2020 Vision. This white paper presents an overview of supply chain digitalization best practices, courtesy of several leading enterprises. The document also provides a view of today’s challenges and trends versus the vision of a digital supply chain in 2020.

We have developed a digital maturity assessment tool based on our findings. By filling out this brief questionnaire designed for IT, operations, and supply chain managers, you’ll be able to evaluate your company’s level of digital maturity in the following categories:

  • Design
  • Plan
  • Respond
  • Produce
  • Make
  • Deliver
  • Operate

Following the completion of the questionnaire, you will receive a customized summary of your individual results, free of charge. We’ll also send you a global analysis of industry and peer-group maturities at the end of the year.

Early adopters of digital transformation have increased revenue by nine percent, market valuation by 12%, and profitability by 26%, according to SAP research.

Take your first step toward digitalizing your supply chain today by completing your very own digital maturity assessment.

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Kristin Ulrich

About Kristin Ulrich

Kristin Ulrich is a business consultant for Supply Chain Management of Business Transformation Services at SAP. As part of her responsibilities, Kristin developed a digital maturity model, the underlying concept behind the SAP Digital Supply Chain Maturity Assessment. Prior to her role at SAP, Kristin has worked in different industries in operations management, procurement, and supply chain management while gaining a broad understanding of trends and challenges of the digitalization of business processes. For further inquiries, please contact her at kristin.ulrich@sap.com.

Leading In Digital Manufacturing: Overcoming Challenges In A Time Of Automotive Disruption

William Newman

Today’s manufacturing leader is confounded by a modern-day “who moved my cheese” dilemma. As automakers increasingly move from traditional personal vehicle sales – what you and I buy today and drive and keep in our garage overnight – to a more robust set of rideshare vehicles and autonomous “living spaces” that are constantly in use in a large population fleet – complexities arise around not only what to make but also how and when to make. In fact, data suggests that those personal vehicle sales will account for only two percent growth from now until 2030 (McKinsey, 2016). Where will the new revenue come from? All the digital services that you and I will consume while we rideshare and transit in our mobile living spaces – to the tune of $1.5 trillion in consumer services.

This leaves manufacturing leaders with a dilemma. As traditional business models of personal vehicle sales (i.e, OEMs sell a vehicle to you, and you own and operate it) and their associated value chains continue to be a significant but stagnant growth market, emerging business models and those new digital services and value chains will account for the lion’s share of 50x industry growth in digital services and transportation – and ultimately the future of Automotive 4.0 companies. While we are in this transition, manufacturing leaders will need to maintain their profitability in current business operations while ramping up and capturing those new digital markets. Specifically, manufacturing leaders that thrive and survive will need to be quick and agile at determining what to make, how to make it, and when to make it. But how does a manufacturing leader transform its operations?

modes of automotive manufacturing

We need to go back over 100 years to understand this long structural change in automotive manufacturing. In the early years of the industry, expert craftsmen built vehicles by hand and created modern luxury machines. This represented Mode 0 manufacturing, with a lack of automation. With automation in the 1960s and 1970s came Mode 1 manufacturing, whereby machines and tools were automated to perform tasks based on operator programs. Today, new concepts in machine learning, artificial intelligence (AI), and predictive processes present manufacturing leaders with new complexities – and opportunities – to move from Mode 1 manufacturing to Mode 2 operating models and processes. This represents a natural progression from original manual operations and work tasks to taking advantage of advances in technology, integration, and Big Data.

This enables manufacturers to consider a brand new operating model of what to build, how to build, and when to build that were never before possible. As automotive manufacturers move to Mode 2 operations and address vehicle-market opportunities that the new automotive market offers, manufacturing leaders also must consider the current revenue market during the shift. The ability to operate in a “bimodal” manufacturing environment allows carmakers and suppliers to build vastly different components and assemblies within a confined, integrated, and flexible environment.

Mode 2 manufacturers can create standard-capability vehicles alongside those completely outfitted for ridesharing and digital services. Additive manufacturing allows 3-D printed tooling to build plastic parts as and where needed, reducing vendor-managed inventories, production constraints, and bottlenecks.

difference between mode 1 and mode 2

As the need to maintain current production volumes remains while traditional automotive vehicles give way to more advanced transportation, connected vehicle automakers and suppliers are creating bimodal manufacturing capabilities. Both Mode 1 and Mode 2 manufacturing capabilities coexist, driving manufacturing executives to manage assets, processes, and talent flexibly with greater plant integration.

Today, leading Mode 2 automotive manufacturers are taking advantage of flexible, intelligent operating models to drive profit and increase competitiveness while taking advantage of new market opportunities in the rideshare, electrification, and connected vehicle segments. But why change? Perhaps Harvard Business School’s Clayton Christensen – who introduced the theory of disruptive innovation 20 years ago – says it best: “The incumbent leaders never see it coming. They focus on their best customers and try to provide what they need [today]” versus what the market needs to deliver tomorrow.

For manufacturing leaders, it will indeed be a wild ride until 2030 and beyond.

Learn more about the changing nature of vehicle ownership in Enter The Digital Consumer, Driver, Services Buyer.

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William Newman

About William Newman

William Newman is a Strategic Industry Advisor, providing industry perspective, strategic solution advice, and thought leadership to support SAP automotive and discrete industry customers and their co-innovation programs. He helps build and maintain SAP's leadership position in the automotive industry and associated industry segments. He manages SAP’s annual digital aftermarket survey program and serves as the ASUG Point of Contact for the NA Automotive SIG. He is the author of two SAP Press books and a LinkedIn Editor’s Choice contributor.

Taking Learning Back to School

Dan Wellers

 

Denmark spends most GDP on labor market programs at 3.3%.
The U.S. spends only 0.1% of it’s GDP on adult education and workforce retraining.
The number of post-secondary vocational and training institutions in China more than doubled from 2000 to 2014.
47% of U.S. jobs are at risk for automation.

Our overarching approach to education is top down, inflexible, and front loaded in life, and does not encourage collaboration.

Smartphone apps that gamify learning or deliver lessons in small bits of free time can be effective tools for teaching. However, they don’t address the more pressing issue that the future is digital and those whose skills are outmoded will be left behind.

Many companies have a history of effective partnerships with local schools to expand their talent pool, but these efforts are not designed to change overall systems of learning.


The Question We Must Answer

What will we do when digitization, automation, and artificial intelligence eject vast numbers of people from their current jobs, and they lack the skills needed to find new ones?

Solutions could include:

  • National and multinational adult education programs
  • Greater investment in technical and vocational schools
  • Increased emphasis on apprenticeships
  • Tax incentives for initiatives proven to close skills gaps

We need a broad, systemic approach that breaks businesses, schools, governments, and other organizations that target adult learners out of their silos so they can work together. Chief learning officers (CLOs) can spearhead this approach by working together to create goals, benchmarks, and strategy.

Advancing the field of learning will help every business compete in an increasingly global economy with a tight market for skills. More than this, it will mitigate the workplace risks and challenges inherent in the digital economy, thus positively influencing the future of business itself.


Download the executive brief Taking Learning Back to School.


Read the full article The Future of Learning – Keeping up With The Digital Economy

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About Dan Wellers

Dan Wellers is the Global Lead of Digital Futures at SAP, which explores how organizations can anticipate the future impact of exponential technologies. Dan has extensive experience in technology marketing and business strategy, plus management, consulting, and sales.

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Why Millennials Quit: Understanding A New Workforce

Shelly Kramer

Millennials are like mobile devices: they’re everywhere. You can’t visit a coffee shop without encountering both in large numbers. But after all, who doesn’t like a little caffeine with their connectivity? The point is that you should be paying attention to millennials now more than ever because they have surpassed Boomers and Gen-Xers as the largest generation.

Unfortunately for the workforce, they’re also the generation most likely to quit. Let’s examine a new report that sheds some light on exactly why that is—and what you can do to keep millennial employees working for you longer.

New workforce, new values

Deloitte found that two out of three millennials are expected to leave their current jobs by 2020. The survey also found that a staggering one in four would probably move on in the next year alone.

If you’re a business owner, consider putting four of your millennial employees in a room. Take a look around—one of them will be gone next year. Besides their skills and contributions, you’ve also lost time and resources spent by onboarding and training those employees—a very costly process. According to a new report from XYZ University, turnover costs U.S. companies a whopping $30.5 billion annually.

Let’s take a step back and look at this new workforce with new priorities and values.

Everything about millennials is different, from how to market to them as consumers to how you treat them as employees. The catalyst for this shift is the difference in what they value most. Millennials grew up with technology at their fingertips and are the most highly educated generation to date. Many have delayed marriage and/or parenthood in favor of pursuing their careers, which aren’t always about having a great paycheck (although that helps). Instead, it may be more that the core values of your business (like sustainability, for example) or its mission are the reasons that millennials stick around at the same job or look for opportunities elsewhere. Consider this: How invested are they in their work? Are they bored? What does their work/life balance look like? Do they have advancement opportunities?

Ping-pong tables and bringing your dog to work might be trendy, but they aren’t the solution to retaining a millennial workforce. So why exactly are they quitting? Let’s take a look at the data.

Millennials’ common reasons for quitting

In order to gain more insight into the problem of millennial turnover, XYZ University surveyed more than 500 respondents between the ages of 21 and 34 years old. There was a good mix of men and women, college grads versus high school grads, and entry-level employees versus managers. We’re all dying to know: Why did they quit? Here are the most popular reasons, some in their own words:

  • Millennials are risk-takers. XYZ University attributes this affection for risk taking with the fact that millennials essentially came of age during the recession. Surveyed millennials reported this experience made them wary of spending decades working at one company only to be potentially laid off.
  • They are focused on education. More than one-third of millennials hold college degrees. Those seeking advanced degrees can find themselves struggling to finish school while holding down a job, necessitating odd hours or more than one part-time gig. As a whole, this generation is entering the job market later, with higher degrees and higher debt.
  • They don’t want just any job—they want one that fits. In an age where both startups and seasoned companies are enjoying success, there is no shortage of job opportunities. As such, they’re often looking for one that suits their identity and their goals, not just the one that comes up first in an online search. Interestingly, job fit is often prioritized over job pay for millennials. Don’t forget, if they have to start their own company, they will—the average age for millennial entrepreneurs is 27.
  • They want skills that make them competitive. Many millennials enjoy the challenge that accompanies competition, so wearing many hats at a position is actually a good thing. One millennial journalist who used to work at Forbes reported that millennials want to learn by “being in the trenches, and doing it alongside the people who do it best.”
  • They want to do something that matters. Millennials have grown up with change, both good and bad, so they’re unafraid of making changes in their own lives to pursue careers that align with their desire to make a difference.
  • They prefer flexibility. Technology today means it’s possible to work from essentially anywhere that has an Internet connection, so many millennials expect at least some level of flexibility when it comes to their employer. Working remotely all of the time isn’t feasible for every situation, of course, but millennials expect companies to be flexible enough to allow them to occasionally dictate their own schedules. If they have no say in their workday, that’s a red flag.
  • They’ve got skills—and they want to use them. In the words of a 24-year-old designer, millennials “don’t need to print copies all day.” Many have paid (or are in the midst of paying) for their own education, and they’re ready and willing to put it to work. Most would prefer you leave the smaller tasks to the interns.
  • They got a better offer. Thirty-five percent of respondents to XYZ’s survey said they quit a previous job because they received a better opportunity. That makes sense, especially as recruiting is made simpler by technology. (Hello, LinkedIn.)
  • They seek mentors. Millennials are used to being supervised, as many were raised by what have been dubbed as “helicopter parents.” Receiving support from those in charge is the norm, not the anomaly, for this generation, and they expect that in the workplace, too.

Note that it’s not just XYZ University making this final point about the importance of mentoring. Consider Figures 1 and 2 from Deloitte, proving that millennials with worthwhile mentors report high satisfaction rates in other areas, such as personal development. As you can see, this can trickle down into employee satisfaction and ultimately result in higher retention numbers.

Millennials and Mentors
Figure 1. Source: Deloitte


Figure 2. Source: Deloitte

Failure to . . .

No, not communicate—I would say “engage.” On second thought, communication plays a role in that, too. (Who would have thought “Cool Hand Luke” would be applicable to this conversation?)

Data from a recent Gallup poll reiterates that millennials are “job-hoppers,” also pointing out that most of them—71 percent, to be exact—are either not engaged in or are actively disengaged from the workplace. That’s a striking number, but businesses aren’t without hope. That same Gallup poll found that millennials who reported they are engaged at work were 26 percent less likely than their disengaged counterparts to consider switching jobs, even with a raise of up to 20 percent. That’s huge. Furthermore, if the market improves in the next year, those engaged millennial employees are 64 percent less likely to job-hop than those who report feeling actively disengaged.

What’s next?

I’ve covered a lot in this discussion, but here’s what I hope you will take away: Millennials comprise a majority of the workforce, but they’re changing how you should look at hiring, recruiting, and retention as a whole. What matters to millennials matters to your other generations of employees, too. Mentoring, compensation, flexibility, and engagement have always been important, but thanks to the vocal millennial generation, we’re just now learning exactly how much.

What has been your experience with millennials and turnover? Are you a millennial who has recently left a job or are currently looking for a new position? If so, what are you missing from your current employer, and what are you looking for in a prospective one? Alternatively, if you’re reading this from a company perspective, how do you think your organization stacks up in the hearts and minds of your millennial employees? Do you have plans to do anything differently? I’d love to hear your thoughts.

For more insight on millennials and the workforce, see Multigenerational Workforce? Collaboration Tech Is The Key To Success.

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