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The last few years have ushered in a remarkable supply chain digital transformation. Organizations have implemented next-generation technologies and new processes, upending the traditional linear supply chain model.
The effect is noteworthy: Companies are pushing siloed ERP systems out of the back office and creating digital supply networks that open up the systems and connect organizations in new ways. The supply chain digital transformation delivers benefits like greater visibility and more accurate demand planning. However, it also requires new ways of thinking and demands new skill sets from workers.
In this Q&A, Madhav Durbha, group vice president of industry strategy at Llamasoft Inc. in Ann Arbor, Mich., discusses the effects of the supply chain digital transformation. In his 20-year career, Durbha has worked with a number of organizations on supply chain transformation projects, including his last two years at Llamasoft.
What are some of the characteristics of supply chain digital transformation?
Madhav Durbha: Traditional supply chains are structured in a siloed manner. There's the demand planning organization, the commercial organization and the sales organization. Supply chain for them is like electricity. You click the switch and the product needs to appear when your customer needs it. But a lot of gaps and silos have existed across these organizations. Fundamentally, what organizations are looking to do in digital transformation is to A, provide end-to-end visibility, so that they'll get demand signals from their customers from the marketplace, and B, have the demand signal translate through their supply chain to their distribution centers, into their manufacturing facilities.
Is a supply chain transformation needed to meet today's business requirements?
Durbha: The world is turning into a complex web of interactions and transactions. So what happens there matters here -- and it matters very quickly. The leading organizations are starting their digital transformation by enabling a digital twin supply chain. Essentially in a digital twin, you're mimicking the physical structure with all the transactions that are taking place, but in an environment where you can simulate the future and optimize your plans and strategies.
How are the changes affecting the people who work under the old models?
Durbha: Most of the workforce has grown up in the ERP paradigm, where ERP is built with a very structured model, which allows you to exert control over the organization and the transactions that take place. But a lot of the action now is shifting outside of the four walls of the company, so people run into limitations with ERP systems, having them as the backbone for their digital transformation. We're seeing a best-of-breed model emerging, but that is also creating a skills gap for people steeped in ERP. For example, a demand planner typically looks at the three-year history of a transaction and uses that as a basis to generate a forecast. But now in the world of outside-in thinking, you need people who can bring in the external data sources and external intelligence into the demand planning process, and that requires different types of skills. One skill set is data integration: what data sources are needed and how do you tap into those sources, because they're not traditionally structured databases? Increasingly, the data is unstructured and streaming. You need to know how to harness and harmonize that data to make it consumable by a demand planning process.
What can organizations do to address the skills gap issue?
Madhav DurbhaGroup vice president of industry strategy, Llamasoft Inc.
Durbha: In general, the days when you learn a set of skills at school and build a career on them are behind us. Organizations are taking multipronged approaches. One way is through things like distance learning, and some organizations are encouraging their employees to take massive online open courses [MOOCs]. Some organizations are having success creating learning opportunities and use a bit more of a carrot-and-stick approach, where they make learning part of their employees' goals and objectives.
Will the supply chain digital transformation change the job market? Will AI and machine learning lead to job losses?
Durbha: I'm more of an optimist about what these technologies can enable. There will definitely be a realignment of jobs and, unfortunately, some of the workers will be left behind with that transition. But those who are willing to accept that change is happening and are willing to reskill and reorient themselves and repurpose their capabilities, I think there will be a lot more opportunities opening up for those types of individuals.
So there's an opportunity for creativity if people get the skills up to what's needed?
Durbha: Look back to the historical analogy of ATMs, when people were worried about jobs being eliminated. Some studies show there are more teller jobs now than when ATMs were introduced. [Banks] were able to repurpose workers to take on more customer-service-oriented functions. The job responsibilities got broader, but that also required employees to become more cross-skilled. Supply chains are no exception to that. In general, I'm very optimistic. The future is not going to be about ripping and replacing existing technologies, but organizations will need to get smarter about how they layer in innovative technologies and constantly think about how they prepare for the best-of-breed future.