Building a Case For Digital Supply Chain Investment

Most businesses are starting or continuing to invest in digital supply chain tools. A recent Gartner survey found 66% of companies have done so in the last 18 months. That constitutes a 26% increase compared to 2021.

It seems the world of commerce is waking up to the prospect of possibility in digital supply chain investment and moving away from the once all-powerful spreadsheet.

But spending money doesn’t automatically make it a wise decision. And whilst many deliberate over their tech investments, spending hard-earned company cash with even the best intentions can leave some feeling underwhelmed.

The challenge is to make investments that pay off. Both initially and consistently – something which isn’t happening for many. In fact, only 17% of survey respondents here say their company’s investments in digital supply chain technology have lived up to their expectations.

That’s almost one in five. This shows that for whatever reason, expenditure often doesn’t make the grade. And yet, with the correct analysis behind the decision of where to spend, there are far more upsides than there are pitfalls.

Research from PwC backs this up. It shows that digital supply chain investment is very much worth it. Those businesses that invest in digital supply chain technology typically enjoy lower costs, increased revenue, improved sustainability, better utilisation of assets, diminished risks, and enhanced customer experience.

So where’s the money best spent?

And what questions should you ask yourself to ensure you bring about positive results and money well spent? Because two certainties in this topic are true, no matter the size or niche of your business.

Firstly, you can’t afford to be left behind and maintain your reliance on spreadsheets or other obsolete planning tools.

Secondly and most importantly, you can’t afford to make a bad decision and spend money on the wrong technology.

Here’s how to balance risk, investment and reward to build a compelling case for digital investment in your supply chain.

In this article, we’ll explore:

• What areas of supply chain tech your competitors are investing in and why.
• Common pitfalls of digital supply chain investment and how to avoid them.
• How you can create a case for digital investment in your supply chain.

What digital supply chain investments are your competitors making?

Pitchbook estimates that digital supply chain investment is likely to reach $6 trillion across the globe in the next 18 months.

Across freight, warehousing and fulfilment, and supply chain planning, businesses are following the ‘speculate to accumulate’ trend.

In the past, spend on business technology has focused on back-office solutions or customer management. But now, investments in supply chain and operational processes are coming to the fore.

More specifically, there is greater investment across the world in supply chain planning maturity, automation of operational tasks, and end-to-end supply chain planning for better visibility.

$6 trillion is an almost unfathomable number, but with such a figure on the horizon, you might ask what’s driving such impressive growth? Let’s take a look:

1. Evolving consumer expectations for free and fast delivery

Most people these days click ‘buy’ on a website and look out the window for the delivery driver. In fact, research suggests 96% percent of today’s consumers consider “fast delivery” to mean “same-day” delivery.

Obviously, those two terms aren’t synonymous.

But to keep up with heightened expectations, you have to create a more adaptive supply chain, one that’s able to pivot and meet your customer’s demands which are increasing by the week.

2. The rise of multi-channel distribution

In the past, the most favoured view of distribution was to centralise your efforts. But business is changing, and flexibility is a worthwhile pursuit in markets and networks that pivot quickly.

Taking an approach where all options are considered, with seamless integration between central distribution centres, regional hubs and local stores, your supply chain team has no option but to be dynamic and adaptive.

To keep up with this approach, you must have the technology to support you. Technology that’s fast, effective, and accurate for efficient and error-proof replenishment.

3. A shift in the traditional supply chain model

Businesses are increasingly turning to outsourced logistics partner to support supply chain critical supply chain processes.

Perhaps this is being expedited by the great warehouse squeeze with businesses everywhere running out of space?

Alternatively, maybe worldwide skills shortages are forcing businesses to rethink where their time and energy is best spent?

Or it could simply be due to the soaring costs of the supply chain in general.

Whatever the reason, as supply chains become more complicated, you need the best tools to facilitate your end-to-end operation and keep everyone involved connected.

Proving a positive return on digital investment: A real customer case

Find how Verfsterk Group adopted our award-winning supply chain planning, Slim4, to transform its operation and unlock the following benefits:

• 15% increase in efficiency
• Improved purchasing power to exploit opportunities for volume discounts
• Cut inventory levels by 10%, reducing costs and freeing up working capital

Click here to read the full story: How Verfsterk Groep manages complex inventory challenges

Common pitfalls of digital supply chain investment

Digitalisation in the supply chain isn’t a one-time undertaking.

If your chief supply chain officer is looking to future-proof the business, they’ll be continually transforming the department into a digital operation at almost every turn.

It’s a necessity for a fully operable supply chain department. Especially one that’s trying to grow the revenue of the overall business, manage inflation, hit sustainability targets and enhance business resilience.

But the digitalisation of your supply chain isn’t exactly an easy undertaking. It’s full of challenges.

Over 67% of respondents in a recent survey expected that making their supply chain digital would require additional staff training. But only 7% said it was their top priority.

And if you need more data to support the fact this process will be difficult, 80% of respondents said their staff lacked digital skills. A quarter said they found attracting, developing and retaining digitally qualified people who could transform their supply chain hugely difficult.

The outcome of this?

Digital initiatives go awry for many, despite their best intentions.

The reasons for this vary and it’s obvious is that there’s a mixture of causes for the disappointment.

Rather than being perturbed by these results, however, you should view them as guidelines to steer you in the right direction.

It may be common for businesses to invest in supply chain digitalisation without defining specific objectives or roadmaps that could dramatically improve the chances of success, but it’s not wise.

Here’s how you should plan the company’s digital investment in order to avoid failure:

How to create a case for digital investment in your supply chain

Your digital supply chain initiatives need a strong foundation if you want them to survive and thrive.

They need buy-in from every stakeholder in your business, and a strong business case with investment from the top.

This section will run through how to secure all of the above:

Step 1: Align stakeholder and organisational priorities

What do your stakeholders want? And how does this compare to the wider business objectives?

Your first job is to find out.

And when we consider stakeholders, that means anyone who’ll be directly or indirectly impacted by digital change. So, budget owners, department heads, new starters, and even temporary workers.

Does the solution you’re suggesting have the capacity to address both considerations?

You should consider the opinions, goals and targets of every department, not just the supply chain. And think about IT more than you normally do, given the department’s likely involvement in rolling out any technological changes.

Their perspective may well be crucial.

And if you haven’t already invited someone from IT to be on the buying team, do so now as their ongoing involvement may be a shrewd acquisition. Most importantly, make sure the new system works with your existing tech stack.

At some point, you’ll almost certainly be presenting this new technology to those within the chain. Knowing how it works, why it’s a worthwhile investment and how it fits in with your current tech will pay off handsomely.

Good things to document might be how it shares data, the way it conforms to security standards and how it lowers company risk.

Step 2: Measure projected outcomes in business terms

“This process might cost us a lot of money, but it should save us a lot too.”

You need to be ready for questions over the legitimacy of this process from those in the company. You already know it’s going to be tough to train staff on new systems and that you’ll definitely need them to be trained.

But people hate change, so be ready to justify this digitalisation. You’ll put a far more powerful argument forward when the questions arise if you’re able to demonstrate the business impact, together with projected outcomes in value. This way, you’ll be far less susceptible to people questioning your authority or that of the adaptation.

Ask your teams what matters most to them.

Chances are, the tool you’re implementing will help them achieve their goals too. But you’ll only know that if you know what those goals are.

Articulating the value of the proposed investment from their viewpoint and that of the company will give you a head start towards its successful implementation.

Step 3: Balance costs, value and risk

“What’s this going to cost?” might be the first question asked. But you must look beyond the initial investment of the tech. It might even be that training staff in new methods costs more in lost time than the initial cost of the software but think of future benefits. To accurately balance the costs, value and risks, you’ll need as much information as you can find.

You need to research data and evidence that shows the overall value of the solution. What value could it bring in improved sales? What about hitting sustainability initiatives, or employee happiness and staff retention?

You must address the total cost of ownership (TCO).

This includes “downstream” implications, support requirements, management, maintenance and end-user training costs.

You must also address the risks – not only the risks of investing and not investing but also the risks of less than satisfactory adoption, adopting too late, or adopting a less able tool.

As proven above, the risk of missing out on this project is likely to be far greater than the cost of adoption.

Step 4: Document and communicate your business case

This is the final step and arguably the easiest of the lot.

Once you’ve got all the information you need, relaying it should be easy providing you’ve documented it carefully.

Turn your analysis into a business case that starts with a problem. Ideally, your company’s problem overlaps with those of multiple members of your team.

It’s your job to explain why the problem must be addressed, and how this new solution can do that perfectly.

If you present the technology as being critical to your company’s success, whilst simultaneously solving one of the major problems multiple people have, you’ll be well on your way to navigating its initial adoption.

Make sure you’re able to show all activities you can optimise with the technology, including how the solution will improve the company’s KPIs and business outcomes.

When delivering the story, tell it through the eyes of the people to whom you’re presenting. Use their language and you’ll engage them more readily. C-suite executives like language that’s concise together with high-level solutions. You’re unlikely to wow warehouse staff with the same presentation.

Talk to the specific audience when you’re presenting, and you’ll be far more effective in your delivery.

Digital supply chain investment takeaways

The results are in.

Digital supply chain investment is the right way to go for future-proofing your business in the supply chain.

But like every investment, you need careful consideration over what, where and how you spend that money. You face risking the business if you ignore the crucial background research and invest in incorrect tools that don’t help the overarching business goals, much less the people in the business.

With careful analysis and research into digitisation, there are incredible opportunities available for the vast majority of companies.

Would you like to examine the potential impact of one of the best tools in the market? Then here’s a free value analysis calculator that could turn you into the saviour of your company.