Earlier this year, the University of Melbourne, in collaboration with the Chartered Institute of Procurement & Supply (CIPS), released their Digitisation in Procurement & Supply 2020 report.
“The new wave of digital technologies is enabling efficiency, agility and responsiveness to the changing demands presented by customers and consumers.”
Many of the loudest voices in the business world have been singing the praises of digital transformation for years, yet much of the logistics industry has been slow to adopt new technology. Similarly, while the report tells us that 95% of the companies involved ‘have adopted at least one digital technology for their procurement and supply practice’ over the last 3 years, FCIPS Group CEO, Malcolm Harrison, concedes that there are still ‘vast digital capability gaps in all sectors’.
WHAT IS DIGITAL TRANSFORMATION?
It is useful to be clear on what digital transformation is in this context. Digital transformation is not necessarily a complete overhaul of a company’s tech stack. In many cases, existing technology is repurposed, or has its remit expanded, in order to create more value. Take for example the use of personal mobile phones in many TMS style systems, for GPS data, messaging, and more.
In the previous year’s report, they defined digitalisation as ‘the practice of redefining models, functions, operations, processes and activities by leveraging technological advancements to build an efficient digital business environment – one where gains (operational and financial) are maximised, and costs and risks are minimised’.
It is important to note that as tech stacks become more complicated and connect into ever more parts of businesses, it becomes increasingly important that new tech solutions can integrate, or at least work harmoniously in parallel with existing systems.
WHY DO COMPANIES NEED TO LOOK TO ADOPT NEW TECHNOLOGY?
They don’t, if it doesn’t add value. However, as businesses grow (and in some cases when they contract) technology can help enable them to stay connected, and maintain visibility on their operations (ideally in real-time).
As businesses grow, the way they operate needs to evolve. It is almost inevitable that as volume increases, dynamics change.
To give an example of this, let’s say I run a one-room stationery shop, and a customer comes in asking if I have a box of 2B pencils, I can simply hop over to aisle 2 and check (if I don’t already know). This process does not work if I have 5 stores in town. I can’t walk around every location to check, and would be unlikely to know their inventory by heart. I would at least need a telephone.
If I have 20 stores across several countries, the time and money involved in calling around all the stores, and then subsequently shipping the pencils to the right location is going to be prohibitively expensive. Now I need a robust inventory management system (not only to have full visibility on my inventory in its many locations, but to project demand in order to reduce the risk of falling short of my customers’ requirements), and probably some logistics capabilities.
This same increase-in-volume to change-in-process relationship exists within most businesses. While we tend to grow accustomed to processes over time, processes that have served us well over the years, there comes an inevitable point where we need to redress the situation.
This is the point (and in any growing business there will be many of these) at which the leaders within any business need to reassess their operating procedures against that which is available to them from the sphere of technology. Crucially, business leaders need to have the hunger and humility to ask themselves how they can do better.
This, naturally, is a difficult proposition. Not only do we need to accept that systems (that we have probably implemented ourselves, or at least directed) have shortcomings, but also accept that we need to take on an additional level of strain on our time.
It is the responsibility of leadership to spearhead the implementation of the change required to reconfigure the workings of their business in order to fully realise its potential in the new context afforded to them by advancements in technology.
Fundamentally, what underpins this need for change is the desire to be cost-effective, and business leaders by definition ought to be hyper-focused on how to do this.
“Cost-effectiveness factors were ranked the primary benefit of using digital technologies, followed by real-time capability, agility and transparency.”
WHY DOES VISIBILITY MATTER?
With the business world’s most popular mantra being the Drukerian “If you can’t measure it, you can’t improve it” it follows that one key goal of digital transformation is to equip businesses with better visibility over their operations.
I will concede that “better visibility” is a term that has many interpretations, and can be highly variable across even single industries. However, there are some key considerations with regards to logistics.
Visibility in supply chain terms in large part revolves around the ability to know where goods are, where assets are (trucks, bikes, drones etc.), and better still, where they are likely to be, in order to not only make the best use of your owned or leased assets, but also to manage the increasingly high expectations of customers.
Uber has a lot to answer for with respect to growing customer expectations. Ogylvy Vice Chairman Rory Sutherland firmly believes that what Uber did to the process of ordering a taxi was not in fact to revolutionise the process of ordering a taxi, but greatly improve the visibility customers have on the arrival time of their taxis. This has served to enhance the management of customer expectations, thus creating a markedly better customer experience.
No longer are we required to wait on the road in case the taxi shows up early, assumes we have had other ideas and leaves. No longer must we live with the doubt surrounding the taxi’s arrival. We know to the minute (more or less) when the car will show up, and can manage our (precious) time accordingly.
This application with its gorgeous user interface (UI), and its many rivals, are in the pockets of a large proportion of the people on the planet, thus raising consumer expectations globally, yet global freight forwarders are often not able to deliver the same visibility for their customers.
“We know technology can generate internal value by streamlining processes, functions, operations and activities. Yet it can also boost external value creation and delivery, by creating a seamless environment across the firm’s supply network, customers and consumers, regulators, government bodies and other stakeholders.”
Visibility also comes in macro form, with big well-purposed data sets around business operations. A company’s ability to understand on a day by day basis how their DIFOT (delivered in full on time) is fluctuating (and hopefully why), or what proportion of the volumetric capacity of their fleet is being used, enables them to make the necessary changes to push key performance indicators in the right direction.
If data on operational effectiveness takes months to gather because it is spread across a Frankenstein’s Monster of third party tech and manual processes, then often the damage is done before anyone in a position to implement meaningful change has even been made aware of it.
Moreover, why should these insights be passive? The right tech stack should be raising alarms as soon as potentially problematic trends start to emerge. If a dispatcher or customer service department’s first knowledge of a delay to delivery happens after the delivery window has passed, then a lot of damage (to the customer experience and brand’s reputation) has already been done.
If the ability to measure aspects of your business is critical to improving it, then it follows that serious attention needs to be paid to how accurate, relevant, and up to date those measurements are, and that they reach the right people in full, and on time.
Nicholas Zabikow is the Executive Vice President of Global Sales and Marketing for Yojee. Nicholas is a revenue growth driven Executive Sales Leader with expertise and success in Building, Scaling & Leading sales organizations within Information Technology and Supply Chain (Enterprise & SaaS) that have delivered consistent year over year revenue growth and gross margin & EBIT performance.
All diagrams and charts are sourced from ‘CIPS Digitalisation Procurement & Supply 2020’. Find about more about them here: https://www.cips.org/