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Supply Chain Leaders Boost Value With Digital Transformation

Dr. Achim Krüger

If you shop at REI and the particular store you’re at does not have the size or color of the item you want, an employee can quickly and accurately see where the closest item is located.

Thanks to the effective digitalization of the company’s supply chain processes, REI is a leader in inventory visibility across its stores and distribution centers. The right applications enable it to provide outstanding service, achieve extraordinary customer satisfaction scores, and increase revenue.

Walking the knife’s edge

But how do you find a roadmap for digital transformation that fits your organization’s specific strategy?

Like many leaders across industries, supply chain executives often feel like they’re walking a technological knife’s edge. On one hand, they want to avoid over-investing in every shiny new solution. At the same time, they don’t want to fall behind and dismiss a critical trend.

SCM World has collected data since 2014 on strategic disruption created by new technologies, and one trend is clear: The relevance of the digital shift is huge and still rising, and the pace of change is too fast to wait and see what happens.

When asked in a survey which technologies are “disruptive and important” to supply chain strategy, responses have changed dramatically in just a couple short years:

  • 3D printing has doubled, from 20% to 40%
  • Drones and self-guided vehicles have tripled, from 11% to 35%
  • Big Data analytics leads the pack, from 64% in 2014 to 81% in 2016

Innovating the way business has been done for decades

Not surprisingly, years of new technological advances have created faster and more standardized business processes. The emerging digital supply chain is lighter and more agile, and these three business model disruptions show the impact of digital operations on strategy:

  1. Omnichannel leadership: Omnichannel leadership is about recognizing that consumer demand is only partially represented in retail point-of-sale data. True demand includes usage behavior, replenishment patterns, and lifestyle impact. REI thrives in this model because its stores are only a small part of the total demand sense and supply response system the company uses to serve customers.
  1. Personalization of products and services: According to an SCM World survey, 90% of supply chain professionals agree that customers value personalized products. Data also shows a steady rise in the number of companies whose operations are supporting “much larger SKU assortments” in response to digital demand, up 60% overall in just three years.
  1. Lean, green, and precise manufacturing: The other major business model disruption arising from digital is a shift toward resource-efficient and increasingly localized manufacturing. IoT-enabled equipment can optimize energy, water, and material use, and combined with smaller, cheaper collaborative robots, this equipment makes local-for-local manufacturing a real possibility.

Creating real value for your company

Even as business models shift, new technology is meaningless if it doesn’t create real value for your company. Across all industries, enterprises need to use innovative thinking to reimagine how digital supply chains can improve business strategy and transform business models.

How do companies focus their efforts, and which ones are already leading the way?

  • Focus on service to the end customer: Digital supply chains can use the power of the Internet of Things (IoT) to get products delivered to consumers faster, cheaper, and in a more personalized way than before.
  • Urban Outfitters: The retailer’s pick-from-shelf omnichannel capabilities added $9 million additional revenue in a single quarter.
  • Hilti: A maker of high-performance hand tools for construction work, Hilti has developed a comprehensive omnichannel system whose asset tracking uses smart supply chain to keep real-time information on where every tool is, allowing the company to sell more and respond to different levels of time sensitivity.
  • Focus on warehouse automation and delivery: Digitalization in delivery is also creating value in warehouse management.
  • Amazon: The retail giant uses sophisticated analytics in its fulfillment centers to optimize space utilization, minimize time to find and pick items, and shorten order-to-delivery cycle times.
  • Kiva Robots: This system, which runs the fulfilment operations for Zappos, moves items to packing stations rather than making people move around the warehouse, saving time and money and increasing item density per square foot of building space.
  • Focus on efficiency and agility: Digitalization in production improves process monitoring, control, and execution to make smaller batches of production economically.
  • Harley Davidson: The company transformed its Pennsylvania motorcycle plant from an old-school assembly line to a single-flow digital line that makes unique models one at a time. This agile manufacturing approach cut costs by 7%, increased productivity by 2.4%, and increased net margins by 19%.
  • BMW: Known for its effective manufacturing process, BMW uses smart robotics, planning, and 3D simulation software to sell custom configured automobiles at prices competitive with mass production.
  • Focus on resource optimization: Digital transformation helps reduce the cost of maintaining long-lived assets. Sensors on equipment monitor temperature, friction, and pressure to allow operators to maintain peak performance with much less work and spare parts inventory. Same time the performance of the asset system can be linked to business outcomes, influencing revenue and margin.
  • Trenitalia: The primary train operator in Italy created a smart asset management strategy that takes 5,000 signals per second from hundreds of sensors embedded in the train’s hardware and feeds them in real time into a reporting and analytics database to allow precision maintenance. The company expects to reduce maintenance spending by 8% to 10% per year, cut invested capital by 6.5%, and eliminate 10–20 million euros of penalty payments for service failures.

Across industries, the digitalization of processes and operations is changing what’s possible for supply chain practitioners. Download the full report, Smart Operations and the Internet of Things: Digital Impacts on Business Strategy, to learn more about how to offer customers a more personalized experience, where and how they want it, with less money and fewer resources spent along the way.

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Dr. Achim Krüger

About Dr. Achim Krüger

Dr. Achim Krüger is Vice President of Operational Excellence (EAM and EH&S) at SAP. After starting his career as an officer with the German Air Force, he held several positions in the areas of maintenance of helicopters and transport aircraft as well as systems engineering, before he worked in higher commands as a logistics general staff officer. Joining SAP in 2002, Dr. Krüger first served as a consultant before establishing the SAP for Defense & Security industry portfolio and later assumed several other duties in Solution Management and Development,

BlockShow Europe 2017: A Look At Top Use Cases For Blockchain Technology

Jacqueline Prause

With people now looking beyond the banking industry for promising use cases built on blockchain technology, BlockShow Europe 2017 could not have come at a better time.

Held April 6-7 at the Alte Kongresshalle in Munich, Germany, the event attracted more than 560 people and featured 26 speakers, making it the largest international blockchain event in Europe to date. Organized by Cointelegraph in partnership with Nexussquared and BlockPay, BlockShow Europe provided ample opportunity for networking, knowledge sharing, and education.

The event attracted a mostly young, entrepreneurial crowd, many of whom were already working in established Bitcoin and blockchain startups. Innovation experts from the corporate sector were also on hand, as well as “explorers” who were just getting familiar with the technology. According to Cointelegraph, more than 200 individual networking meetings took place during the event.

Notable and quotable

Moderator Elizabeth Lumely, a leading expert on fintech solutions and managing director of Rainmaking, guided the program in a constructive exchange that offered information useful to both Bitcoin and blockchain people alike. She shared the results of a recent survey by Cointelegraph that asked: What is necessary for blockchain in the enterprise? Fifty-seven percent of respondents answered “security first for Bitcoin,” while 43% answered “smart contract Ethereum.”

Bitcoin entrepreneur Charlie Shrem presented the opening keynote, “The Current State of the Blockchain.” During his address, Shrem, founder of the Bitcoin Foundation and currently responsible for business development for cryptocurrency exchange Changelly, compared blockchain technology with the power of the printing press for its potential to remove corruption, power, and control from the hands of the few and put it back into the hands of the people. Shrem said, “The printing press gave people the ability to publish their own information very cheaply across borders around the world and distribute it in a decentralized way. Bitcoin is the printing press of our time. And blockchain technology is what’s powering that.”

Trust: the decisive factor

Panel discussions took on provocative hot topics like the challenges of blockchain implementation and initial coin offerings (ICOs) of cryptocurrencies. Panel experts agreed that blockchain technology is good for solving issues of trust, which they said seems to be the best measure for evaluating the promise of use cases. The blockchain community, however, is faced with challenges common to new technologies: lack of standardization; fee structure; interoperability between different blockchains; and absence of relevant legislation. One hurdle for new users of the technology may be a willingness to accept full responsibility for their data and use of the technology. As one panelist noted, there is no blockchain help line, for example, in the event that you lose your privacy key.

The banking industry was represented with a keynote from Daniel Drummer, vice president at JP Morgan, describing the blockchain-related projects underway at his company. In another keynote that resonated well with the audience, Milan Sallaba, partner at Deloitte, shared his organization’s insights and advice on how entrepreneurs can move from blockchain use cases to scalable production.

Use cases showcase breadth of new technology

Throughout the day, startups took to the main stage to present their blockchain use cases and business models. Here is a sampling of just a few.

  • Energy: The aim of SolarChange is to incentivize people and even developing nations to produce solar energy and sell it back into the grid. The blockchain billing mechanism allows people to track how much energy they are feeding into the grid.
  • Content distribution: DECENT provides a peer-to-peer content distribution network, without the absorbent fees associated with traditional publishing houses. Content on the network includes books, blogs, music, and video provided directly from the artist or author. DECENT’s Caesar testnet launched in March, and it plans to launch its mainnet in June.
  • Supply chain: Kouvala Innovation Oy, based in Finland, is using blockchain technology to enable an information backbone for the movement of goods Europe-wide – or the “Internet for Logistics” – so that every logistics company on the network can benefit from a new level of transparency into shipping activities. Test results with live data are expected at end of June.
  • Intellectual property: Bernstein.io is using blockchain-based, secured digital certificates to create a trail of record for inventors’ creations. Digital certificates can also be attached to non-disclosure confidentiality agreements to establish the existence of a creation and record who knew of it. Legal acceptance of blockchain certificates is developing rapidly because they provide reliable documentation for clients.
  • Fine art: Verisart is a startup that is using blockchain technology to provide verification of authenticity for fine art.

Blockchain Oscars: more use cases!

The event also featured a Blockchain Oscar Competition to select the most promising startups working with blockchain technology. The winner for “Most Innovative Blockchain Startup” was Etherisc, a German startup specializing in providing a blockchain solution for the insurance industry that uses smart contracts. The prize in this category was €5,000 worth of Bitcoins.  The winner for “Startup with the Biggest Potential for Betterment of Humanity” was SolarChange. The prize in this category was €5,000 worth of tokens from Humaniq, a next-generation bank offering solutions for the unbanked.

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

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Jacqueline Prause

About Jacqueline Prause

Jacqueline Prause is the Senior Managing Editor of Media Channels at SAP. She writes, edits, and coordinates journalistic content for SAP.info, SAP's global online news magazine for customers, partners, and business influencers .

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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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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How Digital Transformation Is Rewriting Business Models

Ginger Shimp

Everybody knows someone who has a stack of 3½-inch floppies in a desk drawer “just in case we may need them someday.” While that might be amusing, the truth is that relatively few people are confident that they’re making satisfactory progress on their digital journey. The boundaries between the digital and physical worlds continue to blur — with profound implications for the way we do business. Virtually every industry and every enterprise feels the effects of this ongoing digital transformation, whether from its own initiative or due to pressure from competitors.

What is digital transformation? It’s the wholesale reimagining and reinvention of how businesses operate, enabled by today’s advanced technology. Businesses have always changed with the times, but the confluence of technologies such as mobile, cloud, social, and Big Data analytics has accelerated the pace at which today’s businesses are evolving — and the degree to which they transform the way they innovate, operate, and serve customers.

The process of digital transformation began decades ago. Think back to how word processing fundamentally changed the way we write, or how email transformed the way we communicate. However, the scale of transformation currently underway is drastically more significant, with dramatically higher stakes. For some businesses, digital transformation is a disruptive force that leaves them playing catch-up. For others, it opens to door to unparalleled opportunities.

Upending traditional business models

To understand how the businesses that embrace digital transformation can ultimately benefit, it helps to look at the changes in business models currently in process.

Some of the more prominent examples include:

  • A focus on outcome-based models — Open the door to business value to customers as determined by the outcome or impact on the customer’s business.
  • Expansion into new industries and markets — Extend the business’ reach virtually anywhere — beyond strictly defined customer demographics, physical locations, and traditional market segments.
  • Pervasive digitization of products and services — Accelerate the way products and services are conceived, designed, and delivered with no barriers between customers and the businesses that serve them.
  • Ecosystem competition — Create a more compelling value proposition in new markets through connections with other companies to enhance the value available to the customer.
  • Access a shared economy — Realize more value from underutilized sources by extending access to other business entities and customers — with the ability to access the resources of others.
  • Realize value from digital platforms — Monetize the inherent, previously untapped value of customer relationships to improve customer experiences, collaborate more effectively with partners, and drive ongoing innovation in products and services,

In other words, the time-tested assumptions about how to identify customers, develop and market products and services, and manage organizations may no longer apply. Every aspect of business operations — from forecasting demand to sourcing materials to recruiting and training staff to balancing the books — is subject to this wave of reinvention.

The question is not if, but when

These new models aren’t predictions of what could happen. They’re already realities for innovative, fast-moving companies across the globe. In this environment, playing the role of late adopter can put a business at a serious disadvantage. Ready or not, digital transformation is coming — and it’s coming fast.

Is your company ready for this sea of change in business models? At SAP, we’ve helped thousands of organizations embrace digital transformation — and turn the threat of disruption into new opportunities for innovation and growth. We’d relish the opportunity to do the same for you. Our Digital Readiness Assessment can help you see where you are in the journey and map out the next steps you’ll need to take.

Up next I’ll discuss the impact of digital transformation on processes and work. Until then, you can read more on how digital transformation is impacting your industry.

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Ginger Shimp

About Ginger Shimp

With more than 20 years’ experience in marketing, Ginger Shimp has been with SAP since 2004. She has won numerous awards and honors at SAP, including being designated “Top Talent” for two consecutive years. Not only is she a Professional Certified Marketer with the American Marketing Association, but she's also earned her Connoisseur's Certificate in California Reds from the Chicago Wine School. She holds a bachelor's degree in journalism from the University of San Francisco, and an MBA in marketing and managerial economics from the Kellogg Graduate School of Management at Northwestern University. Personally, Ginger is the proud mother of a precocious son and happy wife of one of YouTube's 10 EDU Gurus, Ed Shimp.