Posted: 23 Dec. 2019 3 min 42 sec min. read

Giving supply chains their due: How to bring a critical area into the innovation fold

In this era of exciting disruptive technologies, talking about supply chains may seem to some a bit underwhelming. To be sure, as the digital enterprise over the past decade has risen so has the role of supply chain strategy. Enabled by technology, supply chains today have evolved into complex, interconnected, digital supply networks. But to many, that’s where the potential ends. Despite being recognized as an integral part of business strategy, when it comes to innovation, supply chains are too often considered the poor relation.

Supply chain’s critical role

There is no doubt that supply chains are considered a critical part of the digital organization. According to the Deloitte survey, The Industry 4.0 paradox: Overcoming disconnects on the path to digital transformation, 62 percent of respondents name supply chains as a priority for future digital investment—ahead of planning, product design, and substantially ahead of the highly hyped smart factory. In fact, when it comes to actual digital transformation efforts underway, supply chains is one of the top areas.

Further evidence of supply chain’s import is the emergence of the chief supply chain officer (CSCO) role. As of 2016, nearly 70 percent of Fortune 500 companies had some sort of executive role devoted to supply chains, up from a mere 8 percent in 2004.

So, with high-priority digital investment and a dedicated C-suite leader, supply chains would seem to be a natural focal point for innovation. But this is where a disconnect occurs—and quite possibly a missed opportunity. 

Supply chain’s image problem

Supply chains are just not perceived as at the cutting edge of innovation. Despite their apparent importance, supply chains rank fairly low when it comes to driving the most digital innovation—with only 34 percent of respondents in the Deloitte survey deeming it as such. Even those earmarking supply chains for digital investment give it a middling rank—at 38 percent.

Despite this perception, surely CSCOs with their access to the C-suite would be able to advance the role of supply chains as drivers of innovation? But this isn’t the case. CSCOs—whether due to its relative newness as a leadership role or the indifferent views toward supply chains—don’t appear to have much involvement in key decision-making. In fact, less than a fourth of survey respondents named this role as a decision-maker—lower than any other C-suite position. CSCOs themselves even acknowledged their lack of influence—especially when it came to digital transformation investment decisions.

Clearly the C-Suite has not caught up to the reality of supply chains’ evolution into truly digital networks. Yet it is the digital nature of today’s supply chains that gives them such strong potential for innovation. With the advent of fourth industrial revolution technologies, there’s no telling what kind of solutions can arise when it comes to digital supply networks.

Getting supply chains a seat at the table

So how can supply chains receive their due when it comes to innovation? There are several steps organizations can take:

  • Validate the increasing strategic importance of the supply chain—and, by extension, those who run it. Supply chains figure prominently in the implementation of digital technologies—both now and going forward—and the company should say so unambiguously. The organization should also formally elevate the status of the CSCO, ensuring that those who have day-to-day, touch-and-feel oversight of the implementation and operation of digital technologies have a seat at the decision-making table.
  • Train future CSCOs to think strategically. If a company wants a more strategic supply chain organization, it needs to train CSCOs and those who work for him or her to think strategically. A supply chain culture that promotes understanding of the bigger strategic implications of decisions will help CSCOs align supply chain goals with the broader strategic objectives of the organization.  

Leverage the opportunities for digitally driven innovation inherent in a digital supply network: Digital supply networks open new opportunities for truly innovative and transformative uses of technology to guide end-to-end supply chain transparency, intelligent optimization, and flexible, intelligent decision making.

Organizations can no longer afford to send mixed signals about supply chain strategy. By deeming supply chains worthy of investment while being blind to their innovation potential, they are leaving money on the table and making themselves vulnerable to the competition. Because recognizing supply chains as a driver of innovation is not only an opportunity, in the digital era, it is now an imperative.

Key contact

Vincent Rutgers

Vincent Rutgers

Global Leader—Industrial Products & Construction

Vincent Rutgers is the global leader of the Industrial Products & Construction (IP&C) sector at Deloitte Touche Tohmatsu Limited (Deloitte Global) and a Consulting Partner at Deloitte Netherlands. As a consulting partner, he has been the global lead client partner (GLCSP) for a large Dutch IP&C client since 2013. Vincent has more that 25 years of experience working with major companies in the manufacturing, telecom, and utility sectors. His key areas of expertise include providing management consulting advisory on cost management, pricing, strategy development, new start ups, cost reduction, change management, and large transformations. Vincent studied production process optimization and initially worked for global manufacturing companies. He joined Deloitte in 2012 and led Deloitte Digital in the Netherlands before focusing on his GLCSP role.