The escalating uncertainties and complexities globally, whether due to the Covid19 pandemic, trade conflicts, or evolving customer requirements, are exerting unparalleled demands on companies and, in particular, supply chain management. In this context, understanding the distinction between supply chain digitisation and digitalisation becomes increasingly critical.
The age of digital disruption has seen several industries transform or fade away. The year 2018 was tagged as “the year of retail bankruptcies,” yet this disruption isn’t confined to retail alone. To survive and thrive in this digital era, businesses need to adapt swiftly, which requires an understanding of various elements that contribute to digitalisation.
One of the main challenges arises from the misinterpretation and interchangeability of key terms central to digital transformation. While digitalisation is a process capable of driving significant transformation within an organisation, it’s crucial to recognise that it can only be successfully executed after achieving a certain degree of digitisation.
The digitisation process entails converting information and products, such as documents, data, and records, into a digital format. Post digitisation, these resources can be utilised to optimise and streamline processes, thus eliminating the need for rudimentary aspects like paperwork and in-person interactions – especially advantageous during challenging times like the Covid19 pandemic.
Why does this distinction matter?
A 2019 IBM global C-suite study reported that 84% of chief supply chain officers identified the lack of visibility across the supply chain as their most significant challenge. This lack of visibility contributes to inefficiency, waste, and increased environmental footprint. A report by McKinsey indicated that up to 90% of a company’s environmental impact is through its supply chain. Digitising the supply chain can lead to substantial savings and reduced carbon emissions.
However, digital transformation isn’t merely about altering systems; it starts with understanding people. McKinsey reported a staggering 70% failure rate in digital transformations, primarily due to organisations not defining clear outcomes. Digitalisation isn’t self-serving; it’s about serving the broader business and society. A successful transformation necessitates a clear roadmap, beginning with understanding people.
Transformation doesn’t start at the top; it begins with understanding the challenges and needs of those on the front lines and in supporting roles. This understanding allows alignment between their wants and the organisational goals, leading to defined outcomes for digital transformation.
Emphasising this alignment ensures the broader team’s engagement. When everyone understands the benefits of digitalisation for both individuals and the business, they’re more likely to support the transformation process, even if it initially requires additional work.
An inevitable revelation when involving the entire team across functions is the persistence of silos. These become evident when digitalisation efforts only deliver value at certain supply chain points and fail to translate the potential value across other functions. Some initiatives merely solve immediate problems (digitisation) without being transformative enough to disrupt and open up new efficiencies and opportunities (digitalisation). This truth is particularly evident in the supply chain and logistics sector, historically slow to adopt technology.
However, when different functions recognise the potential of digitalisation to improve interdepartmental operations, they’re more likely to embrace the digitalisation process enthusiastically.
Ultimately, what changes an organisation isn’t just the “what,” but the “why”. Once we understand the “why,” we can better address the “what.”
While there might be an initial mistrust towards new technology, the ultimate goal of digitalisation isn’t to create a dystopian future. The objective is to make technology serve the user’s needs. It’s not about replacing a clipboard with an electronic device; it’s about adding value.
In the realm of supply chain management, the term “disruptive” often evokes fear and mistrust. However, if we embrace digitalisation and ensure our teams understand and support this process, we can align their needs with the business’s objectives. A nimble digital transformation not only strengthens the business today but opens up novel opportunities for tomorrow.