SAP research shows that 72% of CEOs believe that impending technological changes over the next 3 years will have more impact for their industries than the last 50 years combined. Only 5%, however, have been able to turn “digital” into a competitive advantage.Our research has shown there are 9 fundamentals that hold organizations back from capitalizing on digital intelligence.
1. Having a Digital Core to Build From SAP’s solution to the digital core is S4/HANA. Organizations are considering a greenfield implementation of S/4HANA. Implementing (starting from scratch) is significantly more expensive than migrating (brownfield) to S/4HANA but the justification is “we will do it right this time….” Setting up the migration for success will depend on how well we complete the next 8 foundation elements, prior to implementing (migrating) to S/4HANA.
2. Moving from a Push to a Pull Supply Chain Are you demand driven? Most companies believe they are demand driven, but often we see that the demand and forecasts in the system are generally not trusted. As a result, companies tend to default back to manufacturing what the capacity and tribal knowledge allows. The benefits of a demand-driven organization include more precise production, less waste, smaller lots, shorter cycles, and vision into real-time consumption to proactively respond to the realities of a supply chain.
3. Having a Single Source of Truth Usually, when SAP is perceived as complex, the challenge is less with the system itself, and more with a lack of the right data rules and governance, as well as a lack of employee enablement to maintain the data in an effective way. Getting this right is critical to capitalizing on the Intelligent Enterprise. All data - and the team itself - must be living within the SAP system, so that everyone is empowered with the same level of visibility.
4. Having a Clear Business Model Are you repetitive or discrete? Are you Make to Stock? Make to Order? Engineer to Order? Assemble to Order? Being clear on the operating model matters, and more importantly, it matters per finished good. Ultimately, you need to know who you are, what you want, and how you want to plan. Then you can execute your operating model and then learn how to apply the right business strategies to make the shift and optimize.
5. Leaning-out The Processes and Eliminate Waste Although general supply chain challenges require some buffer to make up for the unplanned event, our research shows that companies are carrying (or buffering) excess due to process inefficiencies and a high number of exceptions, as much as 50%. This waste across the supply chain contributes to operating costs, excess working capital requirements, workarounds, overtime, etc. These hidden costs become revealed with the effective use of the integrated system.
6. Have the Ability to Make a Promise and Keep a Promise Can you make a promise to your customers that both they and you can trust? To achieve this requires good processes, good people, and the right integrated core to enable enough agility to adjust. Available to Promise (ATP) depends on how effective and predictable the supply side of the supply chain is. With the intelligent enterprise, there is an expectation that there is complete transparency across the supply chain, from product creation to customer delivery (DIFOT – Delivery in-full and on-time).
7. Optimize Procurement Process to Meet Demand As companies move from mass production to customized environments (lot-size-of-one concepts), companies need to be able to be agile downstream in how they procure materials with long lead times. Our research has shown that companies which have been able to lean out their procurement processes, optimize their material flow, and update and manage the right business rules, have been able to save between 10-15% of purchasing spend. Not only is that an immediate benefit to the company, but it also sets us up to capitalize on being an Intelligent Enterprise.
8. Having an Integrated and Long-Term Business Plan Most companies have a long-term vision and plan. Sales and Operation Planning has been around since the ’80s. Nowadays there are many names for the same concept, i.e. Long-Term Planning, S&OP, SI&OP or IBP (Integrated Business Planning). It is the organization’s ability to match its financial business plan with the sales demand, its rough-cut capacity and inventory requirements.
9. Establishing organizational trust in our Human Capital Assets The most untapped source for competitive advantage is your human capital. A results-driven team that works together seamlessly, resolves conflict, and builds trust, delivers every time. Investing in the Intelligent Enterprise means investing in intelligent human capital first. By empowering your overall team, you will ultimately capitalize on your investment in SAP.
In conclusion, leveraging the digital supply chain is not just about installing software. It is about making a commitment to your business by adopting the right business model to capitalize on the investment. It requires shifting the supply chain, leaning-out the operational process, and streamlining procurement. It means clearing your path to maturity in order to make the right technology infrastructure investments, maintaining effective data rules and governance to create a single source of truth, and keeping promises to your customers and partners. And perhaps last, but not least, creating an environment which drives organizational trust and teamwork.
How is your company leveraging the intelligent enterprise to disrupt your market? Over the coming months, we will be providing a webinar for each of the above 9 principals. Listen in to our “Are You Mature Enough To…” webinar series to get further insights into how to best answer that question- and take the right steps to optimize on the SAP digital supply chain.