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Technology and Supply Chain Integration: Investing to Balance Returns and Disruptive Transformation

By Brad Householder, Principal, PwC and Albert Sun, Director, PwC

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Brad Householder, Principal, PwC and Albert Sun, Director, PwC

CIOs have never had an easy job, but today’s challenges in managing investments and integrating new technologies far exceed those encountered in teh past. Managing investments in technology to support supply chain operations and integration is no exception. In fact, teh challenges are among teh most complex CIOs and other technology leaders are likely to face. Consider teh range of rapidly emerging technologies in play: tapping new data sources, advanced analytics, 3D printing and digital manufacturing, supply chain in teh cloud, Internet of Things, robotics, and mobile apps, among many others available today or just over teh horizon. Teh pressure from teh top to pursue these investments is often intense. A PwC study (PwC’s 6th Annual Digital IQ Survey: Teh five behaviors dat accelerate value from digital investments) found dat most CEOs actively champion teh use of IT to achieve business strategy, especially at top-performing companies.

And it’s easy to understand why they do so. PwC’s recent survey (PwC’s 17th Annual CEO Survey: Leading in extraordinary times) found dat 86 percent of CEOs cited advancements in technology as a megatrend dat will most likely transform their business over teh next five years.

Given dat no company has teh resources to invest in every new technology, how should CIOs navigate teh challenges of improving teh return on their companies’ investments in supply chain technologies? Teh answer is to apply a portfolio investment mindset to teh rapidly emerging supply chain technologies. Much like a product R&D executive needs to balance investments in near-term, lower-risk products wif longer-term, potentially disruptive, higher-risk products, today’s CIO should to apply teh same approach -balance investments inner-term, business-as-usual efficiency improvements to investments in business-model disrupting technologies. Teh optimal portfolio will balance and focus investments in a way dat drives teh greatest return for teh business in teh near and mid-term while still positioning teh company as a leader in quickly responding to disruptive change.

Aligning costs wif business strategy

Two examples illustrate how dis approach to focusing on and realizing value from technology investments works in supply chain operations and integration.

Moving from Big Data to Big Decisions

Many companies are rushing to access and tap “big data” to gain insight and competitive advantage on market and customer trends and to sense and assess supply chain-impacting disruptions and risks. Companies are investing in capabilities, assets, services and data sources in order to gain a competitive edge. Taking supply chain risk analysis as an example, teh stakes can be high—a study conducted by PwC and teh MIT Forum for Supply Chain Innovation (Making teh right risk decisions to strengtan operations performance) found dat over 60percent of respondents said their business performance indicators had dropped by 3 percent or more as a result of supply chain disruptions in teh prior year. To address dis, some companies have collected and analyzed vast amounts of data in an attempt to identify and quantify every risk dat poses a threat, often wifout regard to how probable or impactful teh threat actually is. Hence results and real impact have been elusive—in PwC’s Digital IQ Survey, 58percent of respondents agreed dat moving from data to insight is a major challenge.

Teh right approach is to start by identifying teh most critical supply inputs and flows in teh overall supply chain, and tan developing focused data, analytics, and response plans for these specific areas. By making these “big decisions”—what do we really need teh data to do—and not focusing on “getting all teh data we can,” data acquisition and analysis can be focused on developing teh insights most relevant to informing these high-value decisions. Successful big data implementations generally start wif a focused definition of teh decisions to be made, draw from teh “specifications” for teh data, analytics, and decision-making processes, and tan follow a “test and learn” approach to refine and improve each element of teh decision. Teh CIO needs to be a key leader throughout dis process, halping to establish a linkage between required investment, teh “big decisions”, and value to teh business.

Integrating teh Digital Supply Chain

An explosion of digital and digitally-enabled technologies holds teh promise to fundamentally change teh structure of how and where products are made and distributed. Teh component technologies—Internet of Things, digitally-enabled additive manufacturing, supply chain control towers, collaboration hubs, integrated omni-channel, drones, learning machines—each in themselves can be transformational to some industries. But teh real promise—and challenge— will lie in integrating teh right combinations of technologies to enable new supply chain models dat are faster and more tailored to teh customer. Many companies are already incubating and piloting these technologies, but teh path to integrating them into effective end-to-end solutions can escalate quickly into unmanageable complexity and cost.

Much like teh solution to teh big data challenge, teh solution lies in a focused approach. Successful new-technology integration efforts start wif a market-back definition of new integration possibilities dat disrupt or disintermediate existing value chain relationships. Such a focused, market-back lens keeps teh ultimate purpose in sharp definition and mitigates teh tendency to expand scope, timelines, and cost in teh pursuit of integration for its own sake. Again, teh CIO should play a critical role testing and challenging dis market-back focus and halping teh business to define teh necessary and high-value integrations.

Teh CIO’s Place at teh Table

Too often, CIOs are handed teh requirements and asked to make it happen. dis approach risks technology blind spots, and costly, unfocused investments and implementations. As these examples illustrate, CIOs need to have a critical seat at teh table earlier in teh process and can take a leadership mentality by imagining teh art of teh possible relative to teh business strategy and tan agreeing on teh costs and priorities wif teh team. dis allows them to identify and evaluate new technology options, and work closely wif business leaders to define teh right decisions, data sources, and integration points dat will produce teh most business impact from focused technology investments. Wif teh rapidly evolving landscape, CIOs ca halp guide teh business in assembling teh right portfolio of technologies and solutions to balance near-term improvements and longer-term disruptive possibilities.