Supply Chain Evolution: Digital Transformation Is the Way Forward

SUPPLY-CHAINEVOLUTIONA STRATEGICPERSPECTIVEWritten by ABOUT THIS REPORTSUPPLYCHAIN EVOLUTION: A STRATEGIC PERSPECTIVESPONSORED BY1 Includes automotive, machinery, chemicals, aerospace and telecommunications1Supply-Chain Evolution: A Strategic Perspective is a report written by The Economist Intelligence Unit (The EIU) and commissioned by GEP. It explores how increased disruption, a push towards greater supply-chain sustainability and technological advances are changing the supply-chain function within organisations.The report’s findings are rooted in a survey of 400 senior supply-chain and procurement executives, conducted by The EIU in November and December 2020. The respondents represent five sectors (agriculture and food, industry,1 consumer goods and retail, healthcare and pharmaceuticals, and energy and utilities) and eight countries across North America (the United States) and Europe (Belgium, France, Germany, Ireland, Luxembourg, Netherlands and the United Kingdom). Respondents work in senior roles in large organisations. Sixty percent are C-level executives, and the remainder work at the director level or above. Half of the respondents work in organisations with annual revenues of over US$1bn.The report supplements the survey findings with secondary research and in-depth interviews with experts. The EIU and GEP would like to thank participants for their time and insights, including the following interviewees:Terrance Brick, Vice President of Global Supply Chain, Boston ScientificOmera Khan, Professor of Supply Chain Management, Royal Holloway UniversityHau Lee, Thoma Professor of Operations, Information and Technology, Stanford Graduate School of BusinessDavid Paulson, Global Vice President,Avnet Inc Lutz Quietmeyer, Head of Transport and Logistics Operations, AirbusLeigh-Ann Russell, Senior Vice President of Procurement, BPYossi Sheffi, Director of the MIT Center for Transportation & Logistics, Massachusetts Institute of TechnologyManMohan Sodhi, Professor of Operations and Supply Chain Management, City, University of LondonMourad Tamoud, Chief Supply Chain Officer, Schneider ElectricMatthew Winterman, Head of Supply Chain, RocheApril 2021 FOREWORD BY GEPSupply chains have come a long way since the first industrial revolution. They’ve evolved through the decades, driven by globalisation, changing market dynamics and customer preferences. However, the evolution of supply-chain management has been slow and gradual, often limited by the technologies prevalent during that period. But today, we’re at a pivotal point in the history of supply chains. Recent global disruption, exacerbated by the covid-19 pandemic, has altered the supply-chain landscape, perhaps for the better. There’s increasing consensus that there is a pressing need for a step change in how supply chains should function. Indeed, as a recent study by The EIU shows, more than50% of enterprises want to make significant changes to their supply chains in the next few years. This is telling, but not surprising as many enterprises had struggled to cope with the disruption. This new and rapid wave of supply-chain evolution will be powered by digital transformation. Enterprises that had taken the lead in digital transformation, and the ones that hadn’t, have experienced the impact it can have on their operations. The pandemic catalysed the digital transformation of supply chains. And we’ll continue to see this digital evolution gain momentum in the foreseeable future. SUPPLYCHAIN EVOLUTION: A STRATEGIC PERSPECTIVESPONSORED BY2Pramod GuptaVice President, ConsultingGEPThis new and rapid wave of supply-chain evolution will be powered by digital transformation... We’ll continue to see this digital evolution gain momentum.“ INTRODUCTIONSUPPLYCHAIN EVOLUTION: A STRATEGIC PERSPECTIVESPONSORED BY32 https://eiuperspectives.economist.com/sustainability/business-costs-supply-chain-disruption-1This report is the second in a two-part series exploring the impacts of supply-chain disruption—a new normal for businesses. The first report, The business costs of supply-chain disruption,2 explored how disruption has become more common and more costly than ever, in terms of both operational and reputational costs. Over half of the executives surveyed (54%) acknowledge that they must make significant changes in order to effectively manage supply-chain disruptions over the next five years. Fifty-one percent of executives also believe that they need greater visibility and control over theirsupply chains. This report explores how these and accompanying trends—including a push towards greater supply-chain sustainability and transparency, and technological automation—are changing the supply-chain function within organisations. It unearths a strategic evolution that is underway in modern business, as supply-chain managers navigate evolving threats and opportunities. The increased regularity and severity of disruptions have brought supply-chain operations to the top of