How Much Should You Invest? Quantifying the Value of Data-Driven Decisions
Most supply chain leaders already recognize the supply chain of the future will need to be agile and digital to sense, respond and quickly adapt to disruptions and take advantage of market opportunities. The strains placed on supply chains during the Covid-19 pandemic showcased this need and challenged many senior leaders to question their own organization’s ability to react to volatility, uncertainty, complexity, and ambiguity.
Too many supply chains came up wanting. Stakeholders discovered their supply chains—which needed to function as integrated ecosystems—did not have the ability to operate with agility and capitalize on digital capabilities. As a result, they did not provide organizations a competitive advantage that contribute sustainable business results to the bottom line.
Organizations are beginning to come to grips with these supply chain gaps. In a recent McKinsey global survey, 58% of respondents said that closing skill gaps had become a higher priority since the pandemic began. And 69% engage in more skill building than they did prior to the crisis. Critical thinking and decision making are the two skills that are being prioritized.
This prioritization bodes well. The ability to leverage the information gleaned from data for better and faster decision-making is one of the key pillars of an agile and digital supply chain. Accordingly, Gartner predicts that by 2022, 90% of corporate strategies will call out information as a critical enterprise asset and data literacy as a critical competency. (1) Where then is investment needed to improve the value of data and enable improved decision making?
One of the most effective methods to improve the speed and quality of decision-making is to invest in the capabilities of employees. Most, if not all, employees, regardless of roles, need to access, interpret, and leverage operational data to make key operational decisions. The data is often readily available if they know where to find it.
To execute decisions effectively, questions frequently arise such as:
- How much raw material needs must be ordered to meet changing demand patterns
- What can be done to balance labor, material, and work center capacity to meet service levels
- How can we manage by exception when information highlights potential supply chain breakdowns
- What safety stock levels are required to ensure consistent supply without consuming too much working capital
The more supply chain complexity grows, the more important it is for leaders to equip their employees to analyze the information, leverage digital horsepower and algorithms, and make fast, informed decisions. Expecting management to be involved in the majority of decisions will constrain any organization’s agility and hinder the ability to sense, adapt and respond to market disruptions and opportunities.
Equipping employees means developing their knowledge and skills so that they understand what data is available, how to ensure its quality and effectiveness, and how to analyze the information. It is here where most companies go astray. Not only is most of the training in today’s companies ineffective, but the reason, timing and content misses the mark.
The learning and development functions of most companies fail at developing the critical thinking required to manage today’s supply chain. A Harvard Business Review survey reveals that 75% of managers surveyed from 50 organizations were dissatisfied with their company’s learning and development function. In the same survey, 70% of employees reported that they don’t possess the mastery of the skills needed to do their jobs. (2)
One of the key reasons for this failure to develop critical thinking is that most learning occurs when it is immediately applied. Learning sticks when we are forced to solve a problem or develop a new skill to advance(or in some cases survive). Applying what is learned to real-world situations strengthens the focus and determination to learn, especially when it is tied to business outcomes.
At Reveal we don’t just educate SAP-centric supply chain team members about the data and SAP capabilities. Rather, we require them to apply the new learnings, embed the knowledge quickly, receive real-time feedback from their decisions, deliver business outcomes and create “aha” moments that encourage greater curiosity and the desire to learn more.
Learning, doing, and maturing in the use of the data ensures that supply chain team members learn the right things, at the right time, and for the right reasons. The result is improved retention. By improving operational decision-making using data and SAP capabilities more effectively, we have seen sustainable inventory reductions of 15+% and improved inventory turns. We have also reduced operating costs by 10+%, and increased business process efficiencies by 20+%.
Executing an agile and digitally enabled supply chain will establish a sustainable competitive advantage for organizations. Supply chain leaders need to evaluate what skills and competencies their teams need, invest in the education and training, and empower their employees to make better decisions by improving how they use their available data and digital tools. Only then will they gain the competitive edge.
Reveal transforms strategy and execution to accelerate supply chain Results. Our focus is to challenge the traditional thinking of the modern supply chain to ensure sustainable and successful businesses. We change the way people think and operate by revealing the hidden value in existing processes and deploying the smart use of technology. Our approach is to assess the opportunity and then to transform the people, processes and technologies that ensure a sustainable organization.
Some firms provide high-level SAP-based supply chain strategy, with no technical execution. Others provide technical implementation, with no support for business functions. Reveal works differently.
We take a hands-on approach to understanding the root causes of barriers to effective digital transformation and unlock more value in the SAP investment companies have already made. Success measures are mapped to KPIs, and ROI increases are both tangible and sustainable. Organizations become Intelligent Enterprises driven by data they trust to help drive growth.
1 CSCMP Supply Chain Quarterly, Q2, 2021, 2 Harvard Business Review, October 2, 2019