How the CIO and CSCO build the autonomous supply chain together

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In brief

  • Gaining visibility into dynamic supply and demand is a critical first step in establishing the CIO and CSCO partnership.
  • Emerging technologies, such as control towers and digital twins, compliment data analytics for more informed decision making.
  • Together the CIO and CSCO can digitally transform their partner, supplier, and employee ecosystems.

Since the beginning of the COVID-19 pandemic, supply chains have continually been featured in the news and mainstream publications, especially as stocks of cleaning supplies, toilet paper, and even food items have disappeared from store shelves. The crisis exposed vulnerabilities in supply chains built for speed and cost, but not necessarily resilience. As change continues to accelerate, and demand and supply become increasingly dynamic and complicated to predict, the Chief Information Officer (CIO) must be ever more strategic and collaborative with the Chief Supply Chain Officer (CSCO).

Collaborating on a strategic roadmap for the supply chain: new skills, new technology

The COVID-19 pandemic has accelerated the CSCO’s drive toward the resilient and dynamic supply chain. Together, the CIO and CSCO can build a strategic roadmap to a networked ecosystem of suppliers, alliances, customers and firms producing complementary products. This transformation agenda will need to balance sustainability, resilience and agility with cost and speed in mind.

Gaining visibility into dynamic supply and demand is a key step on that journey and is a perfect example of how CSCOs rely on CIOs. In the pandemic, there have been wild swings in demand for many products, especially consumer staples. For many SKUs this means that historical data is not completely useful for predicting what needs to be produced and where it should be shipped. In fact, traditional IT systems have not allowed for the “plug and play” of data that is not within an organization’s four walls. Augmenting forecasts with data from outside sources such as COVID-19 cases, weather, consumer location, and feeds from government databases provides better accuracy. Adding these new sources of data to product forecasts helps companies better deliver the right products to consumers at the right time.

On the supply side, CSCOs are contending with limited visibility of the end-to-end supply chain, along with complicated and hard to analyze risks such as tariffs, trade wars, cyberattacks and climate change. Emerging technologies, such as the internet of things, control towers, AI and digital twins are poised to improve supply side visibility – when paired with upskilling in data analytics and are implemented thoughtfully and strategically.

Visibility is only one step on the journey to the autonomous supply chain. To create an on-ramp to the future, the supply chain operating model will need to be redesigned with resilience, agility, sustainability and digital built in – all while keeping costs low.

New technology and new skills enable these changes and grow in importance and complexity. Change has already begun in earnest. In a 2020 EY survey of 200 senior level supply chain executives, 51% said they are investing in data science skills and 73% are piloting or planning to use machine learning in the next 12 months. CIOs need to be at the center of these changes, ensuring new skills and technologies are adopted strategically and efficiently, enabling the results that CSCOs and line of business leaders seek.

Five areas of focus for the CIO

To react nimbly, lead strategically and prepare for the now, next and beyond of the autonomous supply chain, CIOs need to collaborate with CSCOs on five elements:

1.      Strategic architecture

The CIO and CSCO must rapidly redefine and integrate a new supply chain strategy and operating model. They need to be in lockstep on strategy and execution across people, processes, technology, information and more in order to enable end-to-end supply chain visibility. In addition, with lockdowns a continual reality around the world, the CIO and CSCO will need to work together to understand how they adapt to the rise of e-commerce, omni-channel, and last-mile delivery.

2.      Transparency and resiliency

CIOs should work with CSCOs to improve supply chain response through real-time monitoring and scenario planning. For instance, agility needs to be designed and built into the supply chain footprint and supplier network. This may include strategies such as building in spare capacity, leveraging adjacent product lines, assessing the hardest hit sectors and stress-testing to identify issues and challenges. CIOs can enable these changes through technology such as cloud, data fabrics that connect data silos, and building out persona-based business insights based on key performance indicators.

Beyond technology, these changes also require a mindset shift of people and partners to visibility and trust, rather than control, as visibility into suppliers and partners requires communication and collaboration outside the bounds of the organization.

3.      Cost reduction and cash extraction

The CIO and CSCO need to consider how to fund a supply chain transformation through cost reduction strategies. The CIO can assist the CSCO with data and analytics to assess spending and inventory. This will inform how to adjust working capital to help provide ongoing delivery and define savings targets by category and geography. The CIO can also provide insights into retiring various supply chain applications and data stores (if minimally used) or suggesting that certain workloads shift to cloud-based platforms that provide pay-per-use options.

4.      Sustainability

A 2020 EY Supply Chain study shows that big changes are on the horizon for supply chains in terms of environmental sustainability goals (ESG). Of the 200 senior supply chain executives surveyed, 85% said that environmental and sustainability goals will take on added importance in the next 12-36 months. The supply chain needs to fully embrace social compliance, green consumerism and a future of a circular economy (regenerative by design, where growth is not linked to the consumption of finite resources). The CIO can assist CSCOs in improving their environmental footprint by providing data, information and systems that can help make the circular economy a reality.

5.      Digitally connected supply chain

The supply chain is moving from physical to digital. The future is not one of trading paper invoices and holding clipboards. There is still a long way to go however; a 2019 EY supply chain survey showed that only 26% of companies were either digitally networked with their suppliers or mostly autonomous. Shifting from linear to fully networked ecosystems will be a requirement for organizations to keep up in the future and move toward the autonomous supply chain. To enable this shift, the CIO needs to work with the CSCO to identify technologies such as internet of things and control towers that enable end-to-end visibility to identify, assess, and mitigate risk across the business, partners, and suppliers. The CIO will also help digitize supply chain platforms with AI, machine learning, and robotic process automation for better decision making.

Four questions to build collaboration between the CIO and CSCO

It’s time for the CIO to take a leadership role in enabling the future of the supply chain with the CSCO. Together, they can digitally transform the ecosystem of partners, suppliers, employees and get ready for an autonomous future where driverless trucks, forklifts, and drones are commonplace along with fully automated “lights-out” planning systems.

To get started, the CIO and CSCO should work together to explore the following questions:

  1. How can we manage increasing supply chain complexity and risk?
  2. How do we balance supply chain efficiency with the need for agility and resilience?
  3. How do we better understand demand signals to reduce risks and costs?
  4. How can we adapt supply chain design to cope with increasing omnichannel fulfilment?

To prepare for the autonomous supply chain of the future, CIOs need to be at the center of technology decisions, working strategically with CSCOs to build in transparency, resilience, agility and sustainability. Working together, they can redesign and redefine the supply chain ecosystem – and usher in a new era of collaboration among internal and external stakeholders.

Summary

The future reality of the autonomous supply chain is much closer than expected, according to EY research. CIOs and CSCOs must be in lock-step to implement the supply chain technologies and data strategies required to enable a successful transformation that balances sustainability, resilience, and agility with cost and speed in mind.

This article was originally published on ey.com. For more information about how Ernst & Young LLP can help you unlock long-term value for your stakeholders and thought-provoking content for technology professionals visit ey.com/CIO.