Overview of the digital supply chain

‘Work in progress’, said a satisfied Stephan Mueller, extending his hand to bid his interlocutor goodbye. Müller returned to his seat at the head of the table in the conference room of a major German retailer. White walls, white table top, a rough grey concrete ceiling, interrupted only here and there by bright, funnel-shaped LED lights. Only a few minutes prior, at this very spot, he had completed his presentation before the entire management board; the ceiling- mounted projector was now whirring loudly, cooling itself back down to operating temperature while still shining a model at the wall, drawn in painstaking detail and consisting of several planes, various towers, connecting lines and numerous icons. The model read: ‘The Exploded View: How to Succeed in the Digital Supply Chain’ and was identical to the title of his presentation.

The aim is no longer to simply participate in digital business – with difficulty. The aim today is to master it. That is the declared mission of this family-run maker of consumer goods, with its workforce numbering six figures. The senior management had long since realised that interrelationships and dependencies, along with information, service and distribution channels, had changed in recent years – at an express-train pace. ‘Success’, Stephan Müller argued, ‘is now only accessible through a new and changed perspective on one’s own business, through the support of a new business model. For a long time, even here within the company, the motto was: ‘business as usual’. After all, the focus was on the traditional supply chain’, Stephan Müller continues. ‘The first approach to the digital supply chain occurred rather half-heartedly. For the most part, it was neither thought through nor did it involve tangible, let alone measurable, parameters for success. A procedure you could transfer one to one to countless other companies.’

The traditional supply chain: purchasing, production, distribution – and then what?

For years, the executive suite devoted a great deal of time and effort – not to mention money – to establishing and expanding the physical supply chain of product performance, improving the flow of goods step by step: from the production operation to the retailer to the customer at the shop counter. In-house processes were perfected, and collaboration and processes were optimised and shaped to make them more efficient and thus more cost-effective. The number of channels that a company required, needed and maintained could (seemingly) be easily grasped and monitored. ‘The path of the supply chain was one-way, making it relatively uncomplicated to ‘handle’: this is how a company could remain state-of-the-art, and market sales figures confirmed the approach – at the time.’

‘Good times’, some readers who are involved in the topic will think to themselves, before supplementing the first thought with: ‘times long gone’. The traditional supply chain is – unquestionably – business-relevant, but it is no longer decisive by itself. The missing piece of the puzzle is digital supply chain management.

Nowadays, globalisation and digitalisation – or, to use the buzzword, ‘the digital transformation’ – are prompting more and more organisations to constantly expand their own flow of services, repositioning themselves internally as well as externally. To accomplish this, however, it is not enough to conjure up an online shop at maximum speed out of thin air, toss mobile apps onto the market that do not harmonise with a company’s own point of sale or its online shop, and inundate customers with campaigns that have not been thought through. The steps known as ‘quick wins’ are anything but sustainable solutions deeply anchored within the enterprise.

According to Stephan Müller, questions the answers to which are crucial to a company’s success include: ‘How do I deal with digital data around my services and customers? How do I ‘handle’ my product’s digital ‘twin’? How do I respond to new technological trends? Should I integrate these into my services, and, if so, how? How do I position my organisation in a promising way, and, first and foremost: how can I inspire the customer and gain their long-term loyalty?’

Müller carefully weighed his next words. ‘The strategic planning and operational implementation of the digital supply chain must be a core competence of every company. This is the only way to react quickly and flexibly to changes in the market, and to act just as quickly whenever the need arises. Along with a company’s own business-relevant needs, the needs of its partners and retailers also need to be integrated and factored into the company strategy. The flow of information to and from the customer must be tapped – and all of this is supported by a coherent and guiding model such as Exploded View.’

Digital supply chain – not a one-way business any more

The number of channels involved – be it mobile apps, online shops, websites and even ecosystems such as Amazon and the like, which distribute the products of countless manufacturers the way retailers do – has undergone a virtual explosion in recent years. For enterprises, the resulting flood of information means that they must deal not only with classic data types such as product data, vendor data, employee data or customer data, but also with data types such as user-generated content. More than simply deal with these data types, they also have to process them, embed them, enrich them and make them available again – for internal and external purposes. In a successfully run digital supply chain spanning the entire process – from the concept, design and production of whatever a company performs or manufactures, to delivery and feedback – all of the necessary data and digital building blocks generated and derived over the course of this process dovetail with one another seamlessly and efficiently. This is for instance how an organization’s product data from the Data Layer is deployed to the Experience Layer through the Orchestration Layers. Parallel to this, the company feeds the same product data into the database of relevant sales partners and retailers to permit them to retrieve whatever information they need about the respective product, revise it for their own purposes and then publish it themselves through the appropriate channels.

Information was once packed in simple texts about a product’s length, width and height, for instance. Today, the array of data required by a company’s own point of sale, website, online shop and assorted social-media channels, not to mention service providers, business partners and retailers interested in presenting, offering and selling their own services now includes photos and videos and even 360-degree images or data for augmented reality applications.

Digital supply chain of customer data

Now, after a few minutes of technical discussion, the last listener has said goodbye to Stephan Müller. Looking at the open door to the now-empty conference room, Müller continues: ‘As a result of the increase in channels described, the customer now has many more options for contacting a company, and for using a very wide variety of its services, even directly from the manufacturer, without intermediaries. This creates an even greater flow of data for an enterprise to process – for example via app use, website visits, links clicked in promotional emails, etc. Added to this are new technological achievements that are making their appearance not only in the retail sector, such as the Internet of Things (IoT).’

Here, the customer has a product connected to the internet. This continuously transmits status information to the manufacturer, which manages the data (as a so-called ‘digital twin’ of the individual article) and provides the customer with password-protected data. This can easily be illustrated, for example using the Philips ‘Hue’ with integrated motion detection, the lighting system by the electronics group of the same name. Rather than use a light switch, one’s own four walls are illuminated using a free mobile app activated via iPhone or tablet, or else the lights go on automatically when a room is entered. All of the data in which this results, such as motion-detector data, usage data, contact data, location data and information provided by the user, such as feedback, opinions, reviews, comments and much more, is transmitted to the manufacturer via Wi-Fi.

‘For a company, this means that the effort required to process and use this volume of data is immense and at the same time an essential element of a digital supply chain strategy’, Stephan Müller notes. ‘It offers the enterprise an opportunity to generate much stronger customer loyalty’, as the business deals directly with the customer and can bind them even more closely through additional offers and services. This creates completely new business areas, sales concepts and services and can launch additional projects and develop and offer products – if the company is in control of the digital supply chain.

‘IoT has since been integrated into this company’s portfolio, too. An app for a lawnmower that included mobile customer service, material-care instructions and free deliveries of spare parts timed by the manufacturer based on the machine’s use represented the beginning of a large number of digitalisation projects that are gradually being implemented.’

Visibly relaxed, Stephan Müller now stands up and turns off the projector. The whirring sound from the ceiling suddenly stops, and the model vanishes from the white wall – but the audience has long since understood the message. ‘Our work together over the past several months has made the deeper context and the challenges of a digital supply chain visible, comprehensible and especially addressable by all stakeholders. The Exploded View has provided clarity from a strategic and operational point of view, providing instrumental support in implementation of the digital supply chain. Work in progress: the development curve in terms of digitalisation is now pointing upwards, and that’s exactly the way it should remain.’