March 15, 2022 Transforming Supply Chains to Digitized Value Networks

Digital operating system implementation requires a three-stage ‘Assess, Plan, Execute’ approach to deliver a successful transformation.

Digital operating systems, or DOS, enable manufacturers to leap to a next-generation demand-driven value network (DDVN). With heightened efficiency levels, end-to-end agility, and real-time intelligence and data capabilities, DDVNs represent the modern-day pinnacle of digitized manufacturing competitiveness.

However, challenges are inherent in change, and – although there are common issues and obstacles – each organization’s transformation is framed by unique circumstances. As such, the successful implementation of DOS requires careful orchestration involving comprehensive pre-assessment, detailed planning, and sustained execution. This three-step approach – Assess, Plan, Execute and Sustain – represents a roadmap to transition effectively from supply chain to DDVN.

Stage 1: Assessment as the foundation for progress

It is imperative to understand the organization’s competitive context, to appreciate its specific capabilities, and identify weaknesses or prioritized improvements. This assessment roots the DOS transformation program and directs its implementation plan. 

The assessment stage should drill into four critical aspects of organizational capability:

• Digital maturity. Acquiring and adopting new technologies is fundamental to a smart factory and a digitized value network. However, a manufacturer’s true state of digital competency goes beyond simply having leading-edge technologies: the essence of digital capability is how digital tools and applications are systemized and used to leverage human ingenuity. Are there clear mismatches between technologies and skills and, if so, which are critical? How does the company’s technology status compare to the overall industry? Are operations primed to cope with disruptions that may occur during change? Answers to these types of questions will optimize plans for smooth transition to the next phase of digitization.
• Integrative improvement. Continuous improvement (CI), as a foundation of traditional production systems, remains fundamental. However, DOS requires shifting towards an integrated mode to improvement methodologies. What is the existing approach to improvement, especially its practical implementation? Is there an organizational culture of seeking marginal gains, constantly, and is this executed in synchronized ways throughout workflows and processes, and between functions?
• Operations alignment. Successful DOS implementation also depends upon supply chain alignment within the company. Transforming to next-generation digitized systems is a recipe for problems where there is an existing state of misalignment between production and upstream processes or downstream delivery. Assessing the degree of alignment is not only vital for overall transition planning, but also helps to identify operational flaws which may require specific improvement initiatives – and which the DOS implementation can be tailored to fix.
• Value chain alignment. Over-and-above internal alignment, assessing the degree of seamlessness throughout the broader network of external value chain partners will uncover wider opportunities. The full potential within the concept of a DDVN is to leverage the links and information flows between manufacturing and supply, distribution, and customers, in real-time, to create more value throughout. Assessing the extent of network alignment will pinpoint where opportunities exist to maximize value creation as part of the planned DOS transformation.

Stage 2: Plan for success

The assessment phase informs the design of a comprehensive plan towards digital maturity and a DDVN.

The plan’s components will be specific to the organization, aligned to its business strategies and unique challenges and opportunities. But it should specify a technology upgrade program involving data and analytics, detail how digital upskilling of the workforce will be facilitated, and identify timelines for meeting milestone objectives.

It should also address the appropriate phasing, or synchronization, across all functions and divisions of the company. Remember: the vision, inherent within a DDVN, is the organization’s internal integration and fluidity across the entire value chain.    

Overall, whilst being cognizant of return-on-investment (ROI) requirements, the plan should weigh towards action, so that competitive or even first-mover advantages are secured.

Stage 3: Execute with confidence – and sustain

Executing the DOS transformation plan requires one further, crucial ingredient for success: an organizational culture committed to change. Implementing the planned transformation is the responsibility of leadership, and to a significant extent a leader’s attitude – encapsulated in the behaviors and practices of leader standard work – which orients the company’s culture and drives the willingness to make the transformation work.

Then, to keep at it. Sustaining the change is based on understanding that regressing to traditional supply chain thinking and siloed operations is to miss the opportunities of a DOS-enabled DDVN. The buy-in to integrative improvement facilitated by digitized systems liberates new areas for collaboration, innovation, and overall value creation.

Measurement, too, is key, both to instill accountability and to sustain progress through continuous re-setting of standards. Andy Grove, legendary CEO of Intel, noted that we manage what we measure: “Measurement against a standard makes you think through why the results were what they were.”

Finally, understand the need for flexibility. Integrative improvement is a constant quest to find a better way. Although a roadmap will smooth the digital transition, the purpose – and the paradox – of well-designed plans is to forge readiness even for unforeseen challenges.

To find out more about how to transition to DOS by means of a three-stage roadmap, download CCi’s white paper Digital operating systems: The organizational need for guidance, or contact CCi for further information about how to orchestrate holistic digital transformation in your organization. 

CCi is a privately held global company that enables organizations to deliver sustainable results across the supply chain through TRACC, a continuous improvement solution.

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