Digital Supply Chain
Making the supply chains more
efficient, agile, and customer-focused www.pwc.se Introduction
Behind the great potential of the
In 2018, PwC conducted a worldwide
Digital Supply Chain (DSC) lies the
Global Digital Operations survey with
fourth industrial revolution, Industry
over 1,000 participants from 6 major
4.0, a transformation in both produc-
industrial sectors and 26 countries.
tion and automation. While Industry
It revealed that by digitizing, compa-
nies, over the next five years, expect to
3.0 focused on the automation of
generate 12.3% in cost reductions whilst
individual machines and processes, increase revenues by 14.7%.
Industry 4.0 focuses on the end-to-end
digitization of the supply chain. Pow-
ered by data and connectivity, it will
drive digitization in all aspects of the 1800 1900 1970s 2015+ 2030+
supply chain, leading us on the path Industry 1.0 Industry 2.0 Industry 3.0 Industry 4.0 Digital
towards a digital ecosystem with more ecosystem
flexibility, virtualization, and inte-
grated collaboration both internally The invention Mass produc- Electronics, IT, Digital supply Flexible and in-
and with value chain partners. of mechanical tion, with ma- and industrial chain tegrated value production chines powered robotics for chain networks powered by wa- by electricity advanced Smart manu- ter and steam and combus- automation facturing Virtualized started the tion engines of production process es Digital products, first industrial processes services and busi- Virtualized revolution Introduction of assembly lines Electronics ness models customer inter- and IT (such as face Data analytics computers) and as a core compe- Industry collab- the internet tency oration as a key constitute the value driver beginning of the information age
2 Digital Supply Chain New digital technology
Changing consumer expectations IoT platforms
Digital lifestyle drive proliferation of Cloud solutions
interaction models and willingness to share information Additive Manufacturing/ Customer Centric 3D printing
Consumers expect seamless experien- Push Supply Chain Pull ce across channels
Big data solutions and analytics & Operations
Demand for personalized products Industry 4.0 and sensors and services UX / eCommerce / omnichannel
Customers expect order and delivery visibility
Increased consumer expectation for “instant”order fulfilment
Driving the transformation are two
Together, these technologies will enable
Traditionally communication has been
tightly intertwined, but opposite acting
new business models, the digitization of
sequential within the supply chain, in (push-pull), trends:
products and services, and the digitiza-
the direction of goods/services, with
tion and integration of every link in a
limited interaction between the dif-
• New technology: pushing new capa-
company’s value chain (i.e. the digital
ferent steps. Industry 4.0 extends the
bilities and solutions to market by the
workplace, product development and
vertical integration of all corporate
use of big data analytics, the cloud,
innovation, engineering and manufac-
functions to the horizontal dimension,
and the Internet of Things, 3D prin-
turing, distribution, and digital sales
knitting together relevant players — the
ting, augmented reality, etc.; and,
channels and customer relationship
suppliers of raw materials and parts, the
• Expectations: More exacting expecta- management).
production process itself, warehousers
tions from consumers, employees, and
and distributors of finished products,
business partners, drive companies
At the heart of all this activity sits the
and finally the customer — through a
(pulling them) to develop more reliab-
Digital Supply Chain ecosystem, and it
network of sensors and social technolo-
le and responsive supply chains.
is key to the operations of every com-
gies, overseen via a central control hub,
pany that manufactures or distributes
and managed through an overarching
The Digital Supply Chain ecosystem will
anything. Indeed, for many companies data analytics engine.
be based on full implementation of a
the supply chain is the business.
wide range of new digital technologies.
Integrated supply chain ecosystem
Traditional supply chain model Plan Plan Plan Supplier Production Distribution Customer Order & confirm Order & confirm Order & confirm
Digital Supply Chain 3
Core elements and new technolo-
gies of the Digital Supply Chain
Today most supply chains operate along traditional
warehousing, efficient spare parts management, auton-
standardized processes such as plan, source, make, deliver,
omous and B2C logistics, and prescriptive supply chain
return, and enable. Every one of these elements is rapidly
analytics (illustrated below). All of these elements are
being revitalized through technological innovation. The
interrelated, and build on each other. Consequently, a
technologies disrupting the traditional processes affect
digital supply chain strategy needs to consider all of them
seven key areas of the supply chain: integrated planning
to leverage the full benefits of digitization. Let’s look more
and execution, logistics visibility, Procurement 4.0, smart
deeply at what these critical elements mean.
Integrated planning and execution Logistics visibility V ertical Integration Supplier Production Autonomous Logistics Smart Warehousing Procurement 4.0 Smart Spare Parts Management
Prescriptive Supply Chain Analytics External data
customers of endangered arrival times
1. Integrated planning and
2. Logistics visibility
and engage in mitigation actions early. execution
Visibility on transport status, expected
The key to success for any supply chain
external impacts on lead time, and the
In a world with more customized
is efficient exchange of information,
ability to change plans accordingly, will
manufacturing and more demanding
making it visible across the entire chain. be instrumental for companies.
customers, delivering the right product
And customers, both in the B2C and
to customers as quickly as possible —
B2B markets, are pushing companies to
responsively, reliably and efficiently
provide this level of visibility across the
3. Procurement 4.0
— is a huge competitive advantage and
supply chain, demanding more infor-
is quickly becoming the new norm. By
mation about shipment arrivals with
Adopting the digital supply chain
integrating data across the entire supply real-time updates.
ecosystem will require a much closer
chain, in real time and often without
relationship between the different par-
human intervention, delivery lead times
Gathering data from across the supply
ties across the supply chain. Digitization
can be significantly reduced and freight
chain and consolidating it, enriched
tools will help companies connect more
and inventory management optimized.
with cross-referenced information such
closely with suppliers and distributers
The rapid exchange of information also
as supply chain events impacting supply
to aid the planning process, improve
boosts the agility of the entire supply
shipments (e.g. weather and traffic), will
sourcing, actively manage risk, and
chain, while enabling much closer inte-
let companies increase their efficien-
boost collaboration. Resulting in lower gration with customers.
cy by optimizing their choices under
costs and faster delivery throughout the
different conditions, using the informa- entire supply chain.
tion to alert factories, warehouses, and
4 Digital Supply Chain
Integrated planning and execution Logistics visibility V ertical Integration Supplier Production Autonomous Logistics Smart Warehousing Procurement 4.0 Smart Spare Parts Management
Prescriptive Supply Chain Analytics External data
Digitizing procurement will also trans-
5. Smart spare parts management
7. Prescriptive supply chain
form the tools and skills that companies analytics
will require. This includes companies
Spare parts have historically been kept
whose supply chain needs have solely
in high volume inventories, often or-
With a more digitized supply chain, the
been limited to physical goods, which
dered as one-time requests from differ-
number and quality of data sources will
will now have to become equally adept
ent suppliers with offshore production,
increase. This will enable companies to
at buying digital supplies and services
and kept for long periods to manage
use prescriptive analytics, to in real time
such as sensors, software, digital plat-
long-living machines. With 3D printing
adjust and optimize the supply chain to form solutions, etc.
the spare parts supply chain can be re-
any number of changing factors across
duced to fewer suppliers, even enabling the entire supply chain, E2E.
4. Smart warehousing
own production. Hence, spare part pro-
duction can be done closer to customers,
As analytics become increasingly ad-
New technology or new usage of exist-
removing the need to follow cheap labor
vanced and sophisticated, it will be able
ing technology (e.g. sensors, connectivi-
rates. Resulting in faster delivery and
to better support supply chain managers
ty, etc.) is significantly improving ware-
significantly reduced inventory levels.
in decision-making. Additionally, with
housing operations, including inbound
the help of self-learning algorithms,
logistics and distribution. Managing the
prescriptive analytics will be able to
6. Autonomous logistics
data by an intelligent warehouse man-
act autonomously on simple decisions,
agement system and updating inventory
improving efficiency in the supply chain
Transportation of goods between
status in real time, will enable an opti- process.
B2B, within production facilities, and
mized flow through the warehouse.
between B2C (the last mile) constitutes
Embracing the technological advance
PwC has seen examples where pro-
an integral part of the supply chain. will allow:
gress in analytics is being made within
Logistic fleets will include numerous
individual steps of the supply chain.
• Trucks on the way to a warehouse to
driverless vehicles and other robotic
The challenge companies are facing,
communicate their position, load, and
innovations (e.g. drones), which will
is to connect and integrate these steps
arrival time prior to arrival, allowing
play an increasingly important role in
horizontally so that they can reach the it to be optimally planned;
moving goods around the world.
supply chain eco-system that PwC pre-
• RFID-GPS tags to update the entire dict is the future.
supply chain on goods location and
The virtues of such innovations include once they have been delivered;
faster and more reliable delivery times,
lower labor costs, the elimination of
• Guiding tools to significantly enhance
human error, and reduced emissions
the workforce efficiency and accura-
thanks to more efficient operations, such cy; and,
as routing and convoying of trucks.
• Control the warehouse environment,
Additional benefits can include im-
(e.g. temperature, light and humidi-
proved on-site employee safety and
ty), reducing energy consumption.
freeing up resources to conduct more value-adding tasks.
Digital Supply Chain 5 Blueprint for Success
Understand your starting point and map out your strategy
Many businesses have already begun digitizing, but often in silos rather than via a holistic
approach. Hence, it is important to understand the digital maturity and how to leverage the
existing strengths. When developing the company vision, consider the supply chain design 1
that best supports it, the road map and necessary implementation steps, and the champions
who need to be engaged to achieve the vision. Deploy pilot projects
Many applications that make up the digital supply chain represent a radical change for most
organizations. Companies should first carry out smaller pilots that showcase benefits and
help develop the right capabilities. These “lighthouse” projects should aim at testing the 2
end-to-end flow for a specific supply chain (rather than implementing a limited set of tech-
nologies on a broader scale) and gain buy-in from the organization as well as funding for a larger roll-out. Define the capabilities needed
Building on the lessons learned from the pilot projects, it is important to define what capa-
bilities across the four dimensions: organization structure (e.g. incubator, idea labs, etc.),
people (e.g. attract the right skills), process (e.g. processes to foster new collaboration), and 3
technology (e.g. develop an agile IT function); that are required to make the roll-out of the pilot projects successful. Becoming a data virtuoso
Key to successfully adopting Industry 4.0 will be to identify, gather, and use data correctly,
as well as analyzing it efficiently. Developing an effective data analytics strategy, and how it
will be implemented is essential. Considerations will include data platforms, development 4
of a master data management procedure, and organizational structure (e.g. starting with a
cross-functional expert team before fully embedding the capabilities in a standalone function).
Transform into a digital enterprise
Even for companies whose supply chain needs have solely been limited to physical goods, it
will be essential to transform the company culture. A digital culture and mindset is highly
collaborative and crosses company boundaries to include partners and customers. To suc- 5
cessfully implement such a mindset change, it is important that there is a strong leadership
commitment from top management.
Actively plan an ecosystem approach
Industry 4.0 needs to extend far wider than horizontal and vertical integration within an organi-
zation. Breakthrough performance is achieved when companies understand consumer behavior
and offer a comprehensive digital ecosystem and orchestrate its role within an ecosystem of 6
partners, suppliers and customers. The biggest challenge will be to set the right incentives and
find suitable sharing models that compensates everyone fairly for their contribution.
6 Digital Supply Chain
Digital Supply Chain 7
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