Though both retailers and manufacturers recognize the competitive value of enabling digital supply chains, each has different priorities and challenge when incorporating advanced technologies into their business networks.
In their digital supply chain benchmarking report, JDA and KMPG exposed key differences in how retail enterprises and manufacturers approach digital innovations in the supply chain. While retailers primarily are motivated to meet customers’ evolving demands and expectations for things like real-time visibility (57 percent) and new fulfillment nodes (50 percent), in contrast manufacturers put a strong emphasis on agility and innovation (40 percent). In fact, half of surveyed manufacturers said that in the next 24 months they’ll be experimenting with blockchain and autonomous vehicles, which they described as the “most disruptive technologies” facing their industry. Blockchain, the distributed ledger technology, can help manufacturers securely and transparently store and share data with external trading partners, saving time and helping to deliver products to market more rapidly.
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“As the threat of Amazon extends from retail into manufacturing (Amazon Basics, Fashion) and logistics (FBA, Shipping with Amazon), we see an increased focus on innovation,” the report noted. “Manufacturers realize that sitting still is no longer an option.”
Retailers understand the importance of investing in supply chains to separate from their peers and yet many in the surveyed said they’re held back by a lack of commitment from their leadership (70 percent) as well as insufficient IT resources and budget (60 percent)—an all-too-frequent bone of contention. Another 30 percent pointed to lack of a clear and integrated supply chain strategy as an obstacle.
“Retailers have been behind the eight ball on developing their digital supply chain strategy. They have been playing catch up with the expectations set by Amazon and other digital leaders,” the report said. “A follow-the-leader approach to transformation will no longer work.
“It is neither strategic nor capital efficient as it focuses on adoption of capabilities to get to competitive parity, rather than on re-establishing the supply chain as a key driver of competitive differentiation.”
As commerce spreads across stores, digital and multi-brand marketplaces, retailers must rethink how supply chains can serve new business and fulfillment models.
Unlike their retail counterparts, manufacturers don’t cite budgets or other monetary issues are their primary challenge when it comes to digital supply chain investments. Instead, survey respondents indicated that their organizations are reluctant to change (57 percent) and have difficulty managing the complicated decisions that accompany major investments in a major area of the business.
“As manufacturers get into the weeds with execution, they have come to realize that transforming the supply chain isn’t just about plugging in new systems or turning on new capabilities,” the report said.
Data will continue to play a significant role in gaining actionable insights to enhance the supply chain. Cognitive and predictive analytics in particular are of high interest among both retailers and manufacturer, who believe it can improve virtually every aspect of the supply chain—from optimizing inventory to forecasting demand to routing fleets.
