Acknowledge and Address the (Real) Root Cause of Your Supply Chain Data Silos
In a well-optimized supply chain ecosystem, information flows in all directions, as well as to and from suppliers. Limitless access to this information, necessary to make critical business decisions, is not feasible if even a single data silo exists. However, supply chains inherently rely on many different links in the chain and, therefore, different business systems are in use (ERPs, WMS, TMS, etc.). As such, there are often multiple data silos that occur between departments, teams, and even individuals, whether they’re the result of functional or geographic boundaries. For example, a recent McKinsey survey of global executives found that functional and departmental silos are leading to digital-culture deficiencies – which is the number one self-reported barrier to digitalization effectiveness. This silo mentality, along with the physical inability to distribute information in real-time, can make it difficult to determine if and how operational decisions will affect an organization, starting with sourcing and procurement and ending with reverse logistics.
When a single department or supplier is either unable to communicate with the others or challenged to change silo mentality behaviors, then workers revert to manual information-sharing methods in an attempt to drive workflow progress. For example, if a transportation management system (TMS) does not update an inventory management system, each purchase order (PO) placed must be tracked using manual requests. This makes it challenging to track inventory, which drives an increase in safety stocks and reduction in working capital. Manual process reliance also makes it very difficult to track supplier performance. If a transportation manager or inventory manager wants to make a business decision, they must first aggregate data from other departments, then clean, format and merge that data. The time needed to gather this information could be substantial.
Supply chains are increasingly “drowning in data yet starving for insights” as Deloitte so eloquently points out in this paper. Silos are crippling the flow of mission-critical information and therefore hindering decision-making abilities. They are also contributing to the growing volume of waste and inefficiencies in your supply chain, despite the numerous technology “solutions” you have implemented in an attempt to mitigate such issues. And while it may take some effort to change company culture and overcome “silo mentality,” there is something you can do right now to eliminate the data silos, without overhauling your entire IT architecture or committing an exorbitant amount of money to disruptive technology solutions.
How to Root Out Data Silos and Build a True Digital Supply Chain – Without Starting from Scratch
No one will argue that the digitalization of your supply chain is the first step in making meaningful changes to improve operational and cost efficiency as well as profit margins. As Deloitte explains:
A recent McKinsey & Company study even suggests that, “on average, companies that aggressively digitalize their supply chains can expect to boost annual growth of earnings before interest and taxes by 3.2 percent—the largest increase from digitalizing any business area—and annual revenue growth by 2.3 percent.”
What may be debated is the idea that digitalization can be easy. Especially the digitalization of an entire supply chain ecosystem.
Many will argue that no one technology is completely capable of breaking down supply chain data silos on its own. They say that an aggregate of two or more technologies is required to completely eliminate existing silos, drive improved collaboration and decision making across the supply chain, and achieve the full transparency required to reach optimal agility and cost efficiency levels. And while supply chains may be best served long-term by integrating a combination of digital technologies into their architecture, including Demand Planning, Predictive Analytics and Blockchain solutions, the truth is that nearly every digital technology is going to fall short of expectations if you are lacking the proper “digital core”. It’s like applying for college without a high school diploma or GED – without the fundamentals it will be very challenging to succeed.
The good news is that, in fact, it is very easy and very cost efficient to introduce an effective digital core into your current IT architecture and turn your legacy systems into a powerful digital supply network. If your digital core is powered by a supply chain “orchestration engine”.
Supply chain orchestration is quickly proving to be the fundamental platform, the framework, for successful digitalization on a larger scale. Here’s why:
- Unlike supply chain management platforms that often create their own data silos, the supply chain orchestration engine integrates into the core of your existing IT architecture to technologically unify your many ERP, WMS, TMS, and back-office. It immediately eliminates the root cause of your data silos – disjointed and incompatible business systems – and simplifies the distribution of actionable intelligence to both high- and low-volume suppliers along with other stakeholders, such as your procurement, finance, engineering, manufacturing, warehousing, logistics and operations teams.
- A well-designed supply chain orchestration platform will not require you to overhaul your IT architecture or re-engineer business processes to get your data under control. Instead, it will enable you to satisfy a wide variety of workflow and technical requirements with one investment and no IT burden.
- A supply chain orchestration engine provides stability to your supply chain ecosystem as you implement more advanced digital technology systems or upgrade your ERP. You can layer on workflow automation to create a “manage by exception” business process environment and allow for more strategic utilization of resources from planning and procurement to accounts payable. You can integrate numerous new data sources without creating a single silo. And you can be confident that you will always have a single source of completely accurate and easily manipulated data available in real-time – a pre-requisite for securing any ROI from operational tools such as Predictive Analytics or Blockchain.
In other words, when you utilize supply chain orchestration to power your digital core, you are able to avoid what Ernst & Young LLP calls “the out-of-control data-growth trap” as more systems, suppliers, trading partners and acquired companies are integrated into your supply chain ecosystem. You gain – and maintain – a 360-degree, real-time view of supply chain operational performance, along with current cost-savings opportunities and revenue drivers. In turn, your team and trading partners have both the insights and tools needed to collaboratively forecast demand, execute purchase orders, maximize fill rates, and optimize the cash conversion cycle to increase profitability.