Companies who have made significant and successful investments in their digital supply chain are pulling ahead of their competitors in terms of profitability according to research by Boston Consulting Group.
The management consulting group found that such companies have 40 per cent to 110 per cent higher operating margins and 17 per cent to 64 per cent fewer cash conversion days.
Called, Three Paths to Advantage with Digital Supply Chains the paper reveals several other impressive data points.
For instance digital supply chain leaders enjoy increases in product availability of up to 10 percentage points, are able to respond much more rapidly to changes in market demand, and deliver almost a third better realization of working-capital reductions, on average, than their laggard competitors.
As to why they are winning BCG offers three suggestions;
- Fix performance gaps. Some companies apply digital technologies to relatively straightforward supply chain problems that are too cumbersome to address with conventional approaches… Ultimately, companies can create a single version of the truth, thus improving decision making, customer service, and asset and working-capital utilization.
- Innovate business processes. Digital supply chain technologies are helping some companies achieve a step change in performance in more complex areas… Increasingly sophisticated and integrated control-tower technologies can automatically track components down to the individual unit in real time, enabling teams to predict delivery times much more accurately, quickly reroute parts around disruptions, and communicate solutions proactively to customers when things go wrong.
- Disrupt the supply chain. Leading companies are using digital supply chain technologies to redesign their operating models and go-to-market approaches in order to generate significant growth in revenues and margins. Companies can find new routes to customers, decentralize activities, and substantially speed up delivery, among other tactics.
According to the authors, “Digital supply chain management has matured and is generating substantial value. Organizations need to move quickly to apply the highest priority opportunities to their business and industry context. They must find the right mix of fixing performance gaps, innovating business processes, and disrupting the supply chain.”
They say, “Companies cannot afford to wait. The competition is already making moves, and the leaders in digital supply chain management are building a financial advantage that will be more difficult to overcome with each passing year.”