More and more enterprises are understanding the role digital supply chains can play in increasing business efficiency and agility and driving new growth. But what does supply chain digitization really mean? And how should it best be applied to existing supply chains and supply chain organizations?

As businesses look for enhanced profitability and new growth in post-COVID economies, these questions are more pressing than ever. In this timely report, two leading voices in supply chain analysis, MIT’s David Simchi-Levi, and Accenture’s Kris Timmermans, set out what they believe are the central requirements of a supply chain digitization strategy.

Their key takeaway? An intelligent supply chain strategy needs three key components: a unified view of demand, a segmentation strategy that tailors the approach for each type of supply chain, and the ability to automate the use of data and analytics to support smarter planning and execution.

Underpinning all three of these components is a combination of digitization, data analytics and greater automation. It is this, ultimately, that drives a true supply chain transformation.

However, companies don’t have to embark on a full-scale organization-wide transformation to enjoy the benefits of a digital supply chain. As the report argues, many gains—from lower costs to higher revenues to better customer experience and retention—can be realized from more modest financial investments.

That means looking to bring together data that is readily available with some degree of automation and smarter analytics, and then combining them with operational processes that have been designed to leverage the value from the investment.

A key goal should be to enable the business to move away from traditional consensus or intuition-based demand forecasting by analyzing data from a range of internal and external sources. This enables the organization to develop a more accurate, flexible and automated five-step "circular" process for supply chain planning across a fifty-week planning horizon.

A five step circular process for demand planning

Using a case study from consumer packaged goods, the report explains how, by segmenting the organization’s supply chains according to a range of drivers (such as sales volatility, volume and margin), a series of detailed sourcing, manufacturing and logistics strategies can be developed.

This means a business can pick and choose the most suitable strategy for each of its different products’ supply chains, enabling it to find the right balance between supply chain efficiency and responsiveness. That, in turn, means it can reduce risk and drive greater customer-centricity—while still benefitting from economies of scale in areas like sourcing, infrastructure and manufacturing capacity.

Smart planning brings together digitization, data analytics and an automated optimization engine to develop advanced planning capabilities that can drive the entire organization—from master production schedules and material planning all the way to supply planning.

Combined with real-time key performance indicators (KPIs) and key performance predictors (KPPs) the business acquires the ability to understand not only what is happening in its supply chain at any moment, but also what’s likely to happen in the near future.

As the report shows, companies that have used the digitization strategies it describes have seen significant benefits. That includes better customer experience (with service levels reported to have improved between 5 and 10 percent).

Those companies have also seen up to a 10 percent reduction in lost sales, leading to higher revenue, and a 10 to 20 percent reduction in inventory and waste, translating to cost savings for the business.

The report explains how other companies can enjoy similar benefits by understanding the role of analytics and automation in supply chain planning and execution—and how that fits within a broader supply chain digital transformation.