UK leading the world in implementing digital supply chains

Posted on 7 Dec 2018 by Jonny Williamson

The UK is starting to realise the value in investing in digital supply chains, with more than half of businesses identifying it as one of their top three priorities.

Stock Supply Chain Digital Digitisation
According to the report, the average pay back period for supply chain automation is just 12 months.

The UK may have traditionally been more risk-averse than its international counterparts when implementing digital initiatives, but not when it comes to digital supply chains – despite the lack of strategic focus felt globally.

That’s according to a new study from Capgemini Research Institute, which reveals that investing in digital supply chains is a top priority at 58% of businesses in the UK, versus 56% in Italy, 54% in the Netherlands and 53% in Germany.

Cost savings and new revenue opportunities were the core drivers behind digital supply chains, with more than Over three-quarters (77%) of companies said their supply chain investments were driven by a desire for cost savings, followed by increasing revenues (56%) and supporting new business models (53%).

However, the findings also highlighted a clear gap between expectations of what supply chain digitisation can deliver, and the reality of what companies are currently achieving.

Only one in seven organisations has been able to scale digital supply chains due to a lack of focus, with large businesses running an average of 29 different pre-deployment initiatives such as proof-of-concepts or pilot projects. Those who successfully scaled initiatives had an average of six projects at proof-of-concept stage while those who failed to scale averaged 11.

Just 14% have succeeded in scaling even one of their initiatives to multi-site or full-scale deployment. Almost all those that have achieved scale (94%) report that these efforts have led directly to an uplift in revenue.

The vast majority of companies to have successfully scaled said they had a clear procedure in place to evaluate the success of pilot projects (87% vs. 24%) and had clear guidelines for prioritising those projects that needed investment (75% vs. 36%).

The growing enthusiasm for focusing on digital supply chains may be explained by the prospect of the return on investment (RoI) they offer. The research found that RoI on automation in supply chain and procurement averaged 18%, compared to 15% for initiatives in Human Resources, 14% in IT, 13% in customer service and 12% in both finance & accounting, and R&D.

According to the report, the average pay back period for supply chain automation is just 12 months.

Unlocking the value of digital supply chains

As well as learning from those who have successfully scaled supply chain initiatives, the report recommends that companies should focus on three key areas:

  • Advocate and Align: Ensure transformation efforts are driven by C-suite leadership and senior management. Supply chain digitisation is a complex process that spans planning, procurement, IT and HR and as such it cannot be led by any one business unit and must be driven from the top to succeed. Leadership needs to advocate for this transformation, and to provide strategic focus on objectives and what to prioritise. Supply chain digitisation is integral to achieving business objectives and must also be aligned with wider efforts – for example to increase transparency and improve customer satisfaction – so it is not considered solely as a cost-cutting exercise.
  • Build: For supply chain digitisation to be successful, both upstream and downstream partners (suppliers and distributors/logistics providers) need to be brought in and made part of the digitisation efforts. Breaking the silos among the various supply chain functions as well as the technology teams is also critical to the success of supply chain initiatives.
  • Enable: While the above help in starting the digitisation, in order to sustain it, organisations also need to invest in key areas of building a customer-centric mindset and developing a talent base. They need to devise approaches to attract, retain and upskill their employees.