The digital supply chain – a source of competitive advantage
To keep pace with the changing demands of customers, today’s companies are under more pressure than ever to have faster and more precise supply chains.1 As a result, companies are investing resources to digitize their supply chains.
Digital supply chains use new technologies – like the Internet of Things, advanced robotics, analytics, and big data – to transform supply chains into more efficient and flexible machines. 1 The easiest way to understand what it means to have a digital supply network is to understand the characteristics of one.
Characteristics of a Digital Supply Chain:2
- “Always-on” agility – constantly aggregating and analyzing data sets to drive faster and more accurate decision making allowing the supply chain to react more quickly and flexibly
- Connected community – the supply chain ecosystem – from suppliers to partners and customers – shares information in real-time allowing the supply chain to adapt to the most up to date information from across the ecosystem
- Intelligent optimization – humans, machines, and predictive analytics work together to make optimal decisions for the supply chain
- End-to-end transparency – operators have visibility into all elements of the supply chain and can understand the flow of materials and financial implications
- Holistic decision making – decision making incorporates information from the entire supply chain network including: efficiency / performance data and financial data
As firms’ supply chains become more digital, companies become increasingly resilient and responsive, helping them meet customer needs more efficiently and transparently.3 Digital supply chains are emerging as a key competitive advantage.
Case study: Colgate-Palmolive embracing supply chain digitization
With $15.2B in revenue in 2016 and 45 manufacturing sites around the world,4 it’s no surprise that CPG player Colgate-Palmolive has leaned into this trend. Specifically, Colgate-Palmolive’s focus has been on improving analytics and automation in the supply chain.
Analytics: Colgate-Palmolive utilizes SAP HANA – a database services and analytic processing solution – for deep analysis and decision making. Employees at all parts of the supply chain have access to the system and rely on it for KPI assessment and issue notification. The information helps Colgate-Palmolive employees better manage tradeoffs between cost, service, and inventory; it also allows them to focus on continuous improvement by diving into the root causes of identified issues.4
Automation: Industrial robots are already well established in Colgate-Palmolive’s supply chain and more recently the company has progressed to collaborative robots to help production workers with material handling. It has also incorporated automated guided vehicles (AGVs) to move around the factory more independently. Director of Factory Performance and Reliability for Colgate-Palmolive, Andres Bejarano emphasized “the idea is to automate everything that can be automated in the manufacturing process and supply chain operations;” 4 accordingly, the company is also rolling out other automation tools: 4
- Sensors to predict failures
- Hand-held wireless devices to assist with material flow
- RFID (radio frequency identification) tags to track pallets and inventory
- Video feeds and cameras to enable remote operator support
Longer term we can also expect to see 3D printing and wearables like smart glasses incorporated into the supply chain for printing spare parts and supporting factory inspections, respectively. Both are currently being piloted. 4
Where will Colgate-Palmolive go from here?
Already, Colgate-Palmolive is known as a supply chain leader, ranking #9 on Gartner’s Supply Chain Top 25 for 20175 and its digitalization efforts should only perpetuate its leadership into the future.
To ensure its supply chain remains a point of competitive advantage, it’s likely Colgate-Palmolive will pay attention to the changes industry peers are making to their supply chains.
One potential area of focus for Colgate-Palmolive could be Corporate Social Responsibility, currently a relative weakness for the company. Many companies are focusing on limiting emissions and the usage of water and natural resources. Even more sophisticated CSR programs focus on preventing hazardous waste and adopting circular processes as opposed to the linear “take, produce, throw” model. 5
P&G, for instance, plans to eliminate manufacturing waste by 2020 across 100 of its global plants. Unilever has already eliminated waste to landfill and is working on sustainable sourcing and adopting a circular model. 5
Another area of potential focus for Colgate-Palmolive may be to implement technologies that connect the supply chain more directly to the end consumer. One of its peers, Nestle, has launched an app that consumers can use to look up the availability and freshness of Nestle products in any store. 6
Where Colgate-Palmolive goes from here will likely be dictated by what will best improve performance / efficiency and meet the adapting needs of the customer. Considering all the changes, it does raise the question: how is the workforce at Colgate-Palmolive evolving to keep up with the changing technology? What skills does Colgate-Palmolive look for in its new hires? A discussion for another post…
1 K. Alicke, D. Rexhausen, and A. Seyfert, “Supply Chain 4.0 in consumer goods,” McKinsey & Company.
2 Doug Gish, Adam Mussomeli, Stephen Laaper, “The rise of the digital supply network: Industry 4.0 enables the digital transformation of supply chains,” Deloitte University Press.
3 S. Schrauf and P. Berttram, Industry 4.0: How Digitization Makes the Supply Chain More Efficient, Agile, and Customer Focused, PWC Strategy& (2016).
4 Andres Bejarano, Colgate-Palmolive Company: Driving Change through Measuring the Digital Supply Chain, interview by APQC, June 13, 2017. https://thecge.net/case-study-colgate-palmolive-transforms-supply-chain-with-smart-manufacturing/.
5 Stan Aronow, Kimberly Ennis, Jim Romano, “The Gartner Supply Chain Top 25 for 2017,” Gartner, Inc., accessed November 15, 2017.
6 Dave Blanchard, “Top 25 Supply Chains of 2017,” Industry Week. June 19, 2017, http://www.industryweek.com/supply-chain/top-25-supply-chains-2017, accessed November, 15, 2017.