The Digital Economy: Changing The Mindset Of Supplier Networks

Kai Goerlich

The last decade has brought strong economic growth and created a global and networked economy. According to the World Trade Organization, worldwide trade volume tripled between 2000 and 2015 and will continue to grow as high as $70 trillion by 2030. To take full advantage of this market opportunity, logistics service providers need to increase their capacity for transporting by ship, railway, roadway, and air by 50%. At the same time, financial transactions will have to double and reach a volume of 9 trillion transactions.

Further fueled by a global middle class that is expected to grow three-fold by 2030, this demand will likely outgrow natural and economic capacity. Estimates from a variety of nongovernmental organizations and analysts predict the need for 50% more water, 50% more energy, 50% more food, and 100% more metals by 2030. Not only will this demand lead to over-exploitation of the world’s natural resources, but it will also result in high and volatile commodity pricing.

From accumulating knowledge to creating innovation

Companies can benefit from supply-chain digitalization by moving away from accumulating and filtering data. Now, they are creating insights and forecasts in real time and driving faster, more-flexible decisions and innovations.

Not only does the increase of network capabilities enable more-efficient sharing on the knowledge that was once highly managed and siloed, but it can also create a learning experience that is faster and interactive while accelerating innovation.

Resource optimization in the digital economy: With challenges come opportunities

Traditional business networks will soon undergo another revolution to form fully digitized supplier networks that are data-driven, real-time, and context-sensitive. Companies have to reimagine their business processes throughout the extended supply chain. More important, they will likely rely on partners that offer more choice and address four critical challenges impacting every supply chain.

Challenge #1: Activating the traditional world

Digitalization of physical assets opens up new opportunities for saving costs as well as serving customers better. By driving front-end operations with the Internet of Things, machines are becoming more intelligent and interactive. Companies will be able to improve their supply chain on a broad range – covering the maintenance of their assets, creating an interactive, intelligent logistics processes, and serving customers better with smart vending and maintenance. 

Challenge #2: Saving resources while innovating

Resources are a major competitive factor in today’s global economy, which complicates business operations when once-abundant resources are clearly dwindling. When dealing with issues such as a limited talent pool, rising commodity prices and energy costs, volatile markets for raw materials, and climate change relying on a restrictive analog world is not an option.

Supply-chain digitization can help build up a resource repository within a company and along the extended supply chain. And for the business, this means improved conservation of resources, reduced risks and volatility, and innovation-driven processes.

Challenge #3: Connecting to the digital customer

As buyers become more active in the digital economy, they are steadily changing the economy. No longer are they passive with behavior patterns that are predictable and allow limited product choice. Instead, the landscape has evolved into an ever-changing, fast-moving, real-time market with highly customized products and demanding and interactive consumers and business-to-business customers.

To answer the needs of digital customers, companies are reconstructing their supply chains and supplier networks into a flexible web of business partners – spanning across regions, involving consumer networks and active participation, and speeding the introduction of new products and innovation.

Challenge #4: Improving outcomes

Partner interactions within the context of business-to-business and business-to-consumer networks will power flexible formation and restructuring of supply chains. Analytics will turn the data stream within those networks into a more-aware operating network with greater insight into demand, supply, production, and logistics. In turn, those networks will react more quickly to change in the business ecosystem, reducing risks and resource use, spotting opportunities earlier, and improving outcome for customers.

Four business models that can help companies get started

Whether the decision is made to overcome one or all of these challenges, leaders open up the business to new ways of running its operations and serving its customers. This evolutionary approach to digital transformation creates an opportunity to embrace new business models such as:

4 Business Models Digital Transformation Makes Possible %282%29

Without a doubt, the digital economy is changing everything around us – especially our supply networks. However, no company should fall victim to these changes. This is the time to imagine – and reimagine – how your business can better serve its customers. And your supply network is a great start to do just that.

How has digital transformation impacted your customers? See What Is The Customer Experience In A Digital Economy?

 


Kai Goerlich

About Kai Goerlich

Kai Goerlich is the Chief Futurist at SAP Innovation Center network. His specialties include competitive intelligence, market intelligence, corporate foresight, trends, futuring, and ideation. Share your thoughts with Kai on Twitter @KaiGoe.