Tech-enabled transformations: Three supply chain success stories

| Article

As widely reported, the manufacturing and supply chain landscape has become increasingly challenging over the past decade, with port congestion, spillover impacts from geopolitical conflicts, and freight transportation issues causing major disruption.

Organizations across industries also face mounting pressure to reduce costs, improve service levels, optimize working capital, and find solutions that deliver immediate impact. Businesses now often need to adjust supply chains in a matter of hours or days, rather than weeks.

To address these upheavals and thrive in this volatile environment, successful companies are harnessing the power of Industry 4.0 technologies and undergoing digital transformations that focus on agility, customer centricity, sustainability, speed to market, and customer satisfaction.

But these transformations are inherently difficult—and often fail—costing businesses time and money, putting them at risk of falling further behind their competitors.

However, a different transformation story is possible—and successful enterprise-wide platform transformations (EPTs) are happening across a range of industry sectors, from life sciences and heavy industries to consumer packaged goods (CPG).

These successful organizations have one core element in common: a committed and holistic approach to transformation, where the technology is not prioritized over the needs of stakeholders in the business but rather harnessed to achieve genuine impact that sustains over time.

Finding a solution to supply chain struggles

An effective enterprise platform can act as the technological backbone of a digital transformation. It facilitates data integration across corporate and operational systems and eliminates siloes to improve the quality of solutions across channels while enhancing ROI.

These platforms are genuinely transformational but require committed investment and effort to embed them successfully across the manufacturing or supply chain organization, or indeed any other part of business operations.

Many attempted transformations, however, are driven by the IT department, taking the seemingly quicker, more efficient route to results. This approach often fails to ensure lasting, sustainable change and crucial buy-in from stakeholders across the business.

The key is to shift away from a tech transformation and toward a tech-enabled businesswide transformation. This approach ensures long-term growth and change because it considers all stakeholder perspectives, works within budget limitations, and brings in expert input from technology teams.

By adopting a holistic approach—an end-to-end integration of business and tech—that includes EPT, companies could improve their supply chain resilience (through, for example, better integration of advanced planning systems [APSs]) and enhance their ability to respond swiftly to unexpected external disturbances.

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To demonstrate the difference that can come from combining a platformwide approach—an enterprise view—with a platform transformation, we explore how three companies have found success by shifting from a tech transformation to a tech-enabled transformation.

Life sciences company achieves genuine transformational change

An Asia-based life sciences company with a global operations footprint faced a significant setback when its data-driven transformation project was terminated after just six months.

The project had failed to align with stakeholder objectives and lacked a clear connection to business priorities, focusing primarily on IT aspects. Inadequate governance, a narrow scope, and a short-term approach further contributed to the transformation project’s lack of success.

Recognizing the need for a holistic approach instead, the company launched an EPT effort focused on achieving combined business and IT benefits. This involved seven cross-functional and cross-geography working groups, which together identified over 40 operational initiatives across the entire value chain, involving both digital and nondigital levers. The potential savings from these initiatives amounted to approximately $250 million. The transformation took around 12 months, and the identified opportunities included the following:

  • Source to pay. This area of the EPT effort accounted for around 70 percent of the total transformation impact. The transformation incorporated a new sourcing platform to improve efficiency, and used spend cube analytics to generate spend insights. Alongside this, a new global target operating model was integrated to create interconnected global procurement teams. A category management strategy was harnessed to optimize and ultimately reduce costs.
  • Supply chain control tower. The integration of a control tower enabled prompt implementation of risk mitigation measures for shortages or excess inventory. This was achieved through a combination of standardizing risk alert detection criteria methods to manage supply-demand fluctuations, and centralizing and visualizing the required data.
  • Sales and operations planning. Factoring in sales and operations planning allowed the company to achieve a more stable supply chain, reduce manual work, optimize inventory, and cut waste for all products globally. Planning included automatically centralizing and visualizing sales results and demand forecasts in each region and inventory at each manufacturing site, alongside optimizing monthly supply and production plans for each site, according to demand.
  • Logistics costs. Standardized freight and logistics cost items in three regions helped to inform manufacturing and distribution logistics. This supported cost-saving measures and a regional-level cost structure, as well as cost-saving activity evaluations globally.

The EPT approach proved a significant success, uncovering business transformation opportunities beyond technology upgrades, engaging global teams, and integrating business priorities.

By contrast, a typical systems integration approach would have focused only on technology, uncovering just those levers directly related to system upgrades to the core ERP. This IT-only, old-school approach could not produce a positive ROI, given that almost all potential improvement areas identified related to business transformation beyond technology. Such an approach would also have run a higher risk of failure due to siloed teams and a single-use operating model unable to engage all global teams.

Metals company transformation unleashes growth

A leading metals producer, still reliant on manual processes, was struggling with process inefficiencies and business losses, including excess unplanned downtime, high inventory, low throughput, and suboptimal use of equipment and labor.

The company embarked on an EPT effort to address its legacy manual planning approach, assessing the opportunities at stake and transforming business processes to capture the value identified.

Digital use cases were implemented across the entire value chain, supported by a cloud- APS technology platform, capability building for planning and IT staff, and change management encompassing tailored process mapping, RACIs, handbooks, and communication. Impact was captured in four main areas:

  • Throughput. Thanks to increased asset utilization and production planning based on specification-level throughput rates, throughput was maximized, increasing EBITDA by 2 to 5 percent.1
  • Carbon emissions. Improved planning of downstream assets increased the use of recycled material, leading to an 8 to 10 percent reduction in carbon emissions.
  • On-time, in-full delivery. Order prioritization and line allocation allowed for on-time, in-full (OTIF) delivery, improving OTIF by 5 to 10 percent.
  • Inventory. The right inventory levels were maintained by integrating inventory planning with production planning, reducing inventory levels by 9 to 10 percent.

Close collaboration between supply chain and IT teams proved instrumental in achieving these improvements, enabling a sharp focus on business value.

CPG company captures substantial cost savings

A dairy products company facing continuous margin erosion due to increased competition had launched several efficiency programs, with limited impact.

Addressing an urgent need for cash to fund growth, it launched its EPT effort, identifying over 150 initiatives across six main areas of opportunity, for a total potential savings equivalent to increasing EBITDA by about 25 percent. The identified initiatives covered many areas of the business:

  • Procurement. Design-to-value optimization reduced packaging, while supplier consolidation lowered purchasing costs—increasing EBITDA between 4 and 7 percent.
  • Sales network. Simplifying the sales portfolio and improving sales team efficiency contributed to a 1 to 3 percent EBITDA uplift.
  • Manufacturing. Automating processes to reduce raw material waste and reduce energy consumption created a 5 to 8 percent EBITDA uplift, making manufacturing the biggest sole contributor to the transformation.
  • Supply chain. Improving digital platform productivity to reduce the logistics costs of long-distance transportation accounted for 1 percent of the EBITDA improvement.
  • Revenue growth management. Optimizing discounts and promotional plans on key accounts helped to maximize ROI, leading to a rise in EBITDA of between 2 and 5 percent.
  • Support functions. Reducing reporting layers and the duplication of work through centralization improved EBITDA by 4 to 7 percent.

Cutting across these areas and pivotal to the success of the EPT program was a focus on capability building and establishing a continuous improvement culture throughout the organization. The holistic approach ensured sustained business and operational improvements, and interconnected and cross-functional teams.

As macroeconomic conditions continue to present disruptive challenges, digitalization remains a key performance differentiator—separating the leaders from the laggards. By integrating business strategy, functional operating models, and technology, organizations can unlock the true potential of digital transformations, leveraging enterprise platforms to overcome the traditional stumbling blocks associated with enterprise transformations and set themselves up to thrive amid volatile manufacturing and supply chain conditions.

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