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The case for process-led supply chain transformation: 20+ key statistics
You’ve heard it before, and you’ll hear it again (and again, and again): disruption is the new norm for supply chains. Though global pressures may have eased off from their peak in 2021, supply chain professionals are still facing down numerous, competing challenges that seem to change by the day.
Some 69% of companies cite ongoing geopolitical disruption as a major supply chain issue, while analysts are calling out extreme weather events as a top risk. And inflation hasn’t spared supply chains either, contributing to rising production and transportation costs, and decreasing purchasing power and resource availability.
So how should supply chain teams cope? At this point, there’s really only one option. Enterprises must transform their supply chains or face increasing fragility and eventual failure.
MIT agrees, and even adds a carrot. The university’s Center for Transportation and Logistics found supply chain transformation could halve process costs and increase revenue by 20%, namely through the efficiencies and value opportunities gained through more widespread (and more effective) adoption of digital tools.
But transformation is easier to speculate about than to actually do.
That’s why we worked with Supply Chain Digital to highlight why and how processes should drive any supply chain transformation. Keep reading for some top findings, and to get the full picture, download the whitepaper.
Supply chain transformations have low success rates
The state of supply chain transformation is, according to research, abysmal. Organizations are trying valiantly to reshape their supply chains to become fit for whatever gets thrown at them — but they’re having a lot of trouble making transformation stick.
Within logistics (which we can hold as representative of the larger supply chain realm), Gartners says a whopping 76% of transformations aren’t meeting critical performance metrics. That means only 1 out of every 4 transformation projects actually works.
Procurement advisor David Loseby reinforced this, telling Supply Chain Digital that about 60-70% of digital transformations fail.
And the industry definitely knows that it needs more effective transformations: 60% of executives told Kearney that their businesses should be doing more to build regenerative supply chains.
The breaking (percentage) points: visibility and technology
Supply chain leaders are finding it’s nearly impossible to transform what they can’t see — and even harder when their technology investments aren’t helping as intended.
Immediately after the chaos of 2020, supply chain teams surveyed by McKinsey ranked visibility and planning as their top digitization priorities for multiple years running, with 77% of enterprises investing in supply chain visibility technology in 2021.
But, two years later, Deloitte found that most organizations’ supply chain visibility remained severely limited, with only 13% of enterprises able to map their entire supply chain network, and 22% reporting that they have no visibility beyond immediate suppliers.
KPMG confirmed that visibility is still sub-par for most enterprises when it ranked visibility as one of 2024’s top supply chain trends, urging businesses to build it in order to find root causes, flag risks, and comply with regulations. Alarmingly, 43% of organizations have limited or no visibility of tier 1 supplier performance (meaning they don’t know what’s going on with their direct supplier’s own sources).
As supply chain leaders react by investing in new technologies, making the most of new tools can be tough. Of Chief Supply Chain Officers (CSCOs) surveyed by IBM, 47% reported adopting new technologies to respond to disruption,and 52% said they’re investing in digital tools to manage risk. But 44% also said technology infrastructure is one of their greatest challenges.
Summing up a solution: process-led transformation
Per the experts at Supply Chain Digital, there’s a thread connecting lack of visibility, inconsistently-effective tech, and failed transformations, and it ties back to an organization’s business processes.
In the aforementioned whitepaper, they discuss how Supply chains are one mega-process made of millions of smaller processes. This means that, without clear process understanding, it’s difficult to understand the ripple effect of any action taken to transform a supply chain.
It also means that entering into any supply chain transformation project — changing technologies, shifting strategies, or even reskilling or reorganizing staff — without understanding of all of the processes that feed into or intersect with the project is a recipe for failure.
Supply chain leaders know that business processes can make or break supply chains, and they know their processes aren’t working as well as they should. In the Process Optimization Report, 46% of them said siloes and limited visibility are preventing process optimization.
They also reported an array of consequences for processes not working as well as they should:
But processes have just as much capacity for good as they do for unintended harm. They’re the building blocks of any supply chain, running across an enterprise’s systems, programs, departments, job functions, locations, partners, vendors, and more — and this reach makes them a powerful lever for change.
When organizations follow processes end-to-end, processes can not only reveal how things truly happen — they can be used to drive transformation more successfully and predictably. Robust process knowledge and greater process control can help supply chain teams better plan for and make changes that will yield maximum benefit and minimum negative impact.
When enterprises put processes at the center of their supply chain transformation strategy, they can get results like:
Smurfit Westrock: Unlocked millions of euros in value each year through process improvements in Manufacturing and Inventory Management
Hitachi Energy: Saved thousands of hours across supply chain processes and used end-to-end visibility to save $1 million thanks to automations
Stada: Drove six-digit quarter-over-quarter P&L savings through greater visibility within, and control over, supply chain processes and better material shortage management
Want the full story on why process-led supply chain transformations are the way forward, and advice for getting started on yours?
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