ORLANDO, Fla. — The exhibition floor of the Gartner Supply Chain Symposium is annually marked by rows of providers of technology solutions operating out of booths adorned with buzzwords: AI, transparency, resiliency. “Transform” and “transformation” also make frequent appearances.
But what Sumit Dutta of EY Americas knows is that the success rate on true supply chain digital transformation isn’t good: 70% of them fail.
Dutta, whose formal title is EY Americas’ supply chain and operations field of play leader, offered up that number and knows that when EY is leading the type of transformation that his company gets hired to implement, he’s pushing up against odds that are stacked against success.
Dutta, in an interview with FreightWaves at the Gartner event, said of digital transformations of company supply chains, “There are several things which clients continue to deal with and they’re getting better at it. But the industry continues to struggle.”
Dutta ticked off some of the key issues that are undercutting the possibility of a successful digital overhaul.
— “No. 1,” he said, is the data itself. “How do I get the right information, the quality information into these digital platforms?”
— Another issue is visible just in the sheer number of exhibitors at the symposium. “The number of options down there is also a bit of an issue with clients trying to figure out the right solution,” Dutta said. “How do you cut through a lot of this clutter?”
— The need to “stay back.” That was the term Dutta used to describe the risk of his clients “getting besotted with the next shiny object” instead of saying, “‘What is the business problem that I’m trying to solve?’” He cited a current client whose initiative was focused on compliance with negotiated container rates through the supply chain. Compliance rates climbed from about 25% to 80% as a result of the technology effort. It wasn’t “shiny” but by improving compliance it saved money.
— The need to “get out of a pilot,” Dutta said. “Everyone’s very good at piloting.” But a lot of companies involved in a pilot of transformative technology “don’t know when to draw a line and say, yes, it’s successful.” At a certain point, the decision needs to be made to either go ahead with the technology or drop it and move on. The in-between is a condition that Dutta referred to as “pilot purgatory.”
— A technology transformation cannot just be about the software. Dutta said he has seen companies introduce “an end-to-end digital platform, which spanned across logistics and manufacturing and they rolled out one of the top solutions.” And in some cases, “not a single person used it. … The process hadn’t been properly defined, people hadn’t been trained and people hadn’t been coached on why they should use it. Some of the technology solutions “just become idle things on the side.”
Another key point that Dutta raised: The companies hired to make the changes need to be straight with the clients. “We tell them, ‘Listen, you should be aware and we should be aware together,’” he said. “‘Just because you’re embarking on a transformation journey doesn’t guarantee success.” And part of that blunt chat involves noting the 70% failure rate.
Dutta agreed with one observation: The functionality of those software solutions on display at the Gartner event heavily overlap and success comes from finding that sweet spot that differentiates one offering of supply chain software from another.
How that happens, according to Dutta, has several possible pathways. One key is to provide “best practices” rather than trying to fix the existing system.
“You can’t just automate an existing workflow,” Dutta said. Ensuring the transformation relies on best practices makes it “so that that is not just a renovation but a reimagining.”
Part of that, Dutta added, is that whatever technology solution is designed is targeted at a company’s needs rather than any sort of “one-size-fits-all” approach.
And even after the solution is implemented, Dutta said it needs to be “future proofed” so that after the 12 to 18 months that might be the length of the implementation process, a client doesn’t need to realize that it’s already obsolete. “You need to make sure that what you have is not the best solution of yesterday.”
Dutta has seen the importance of supply chain issues soar post-pandemic, citing data that before COVID, supply chain issues were mentioned on just 1-in-6 earnings calls. Today, it is above 70%.
Even internally at EY, Dutta said the consultancy’s management “has declared that supply chain is among our top two priorities across all of our competencies,” which number about a dozen.
It isn’t just an issue of making sure supply chain problems are avoided, according to Dutta. There’s a realization among companies that a broken or inefficient supply chain is going to crimp growth. “What you can do as a business is now informed by what a supply chain can enable you to do.”
That replaces what Dutta described as the previous view toward the supply chain: It was a “lights on” function, meaning that it was an activity that was needed just to keep the lights on rather than providing a route to expansion. “It was like you just had to make sure you didn’t screw up.”
He’s seen that in the recall of some of his former colleagues and friends who were supply chain managers and thought they had retired. Instead, they’re getting called back into action, often by private equity companies looking to invest in logistics and tapping into their knowledge base and experience.
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