Your Digital Transformation is Only as Good as Your Supply Chain
In this article
Research tells us that 70 percent of digital transformation initiatives will fail to reach stated goals. An underlying cause is the failure to transform the modern digital assembly line: the organization's underlying business processes and tools. Areas that often fails to receive adequate attention are an organization's supply chain and the build processes used instantiate foundational technologies.
Many digital strategies assume the use of underlying technologies such as private cloud, software-defined data center and Internet of Things. The digital strategy assumes that this underlying infrastructure can innovate rapidly and scale elastically. However, the organization's supply chain and build processes must transform in order to support this vision.
Without transformation, a typical large organization can expect a lead-time of six months or more from forecast to production ready for private cloud capacity. With supply chain transformation, the lead time can be reduced by 83 percent, creating a more efficient lead time of one month.
In addition to lead-time reduction, this transformation can reduce the cost source and build infrastructure by more than 20 percent through the following means:
- overall inventory reduction;
- less rework and wasted build activities;
- reduced obsolete inventory; and
- lower build labor costs.
Without this supply chain and build process transformation, an organization's digital transformation time would likely be slowed.
Imagine the following scenario: Your organization worked really hard on your digital transformation. A key objective was to develop a pervasive DevOps culture.
Congratulations! Your company is now reaping the transformational benefits of adopting a DevOps culture. You have greatly increased the pace of innovation. The time to develop new applications and deploy into the marketplace has been reduced from quarters to weeks. To reach this milestone, you needed to undertake a comprehensive modernization strategy that included the deployment of a private cloud based on a software-defined data center architecture.
A strong supply chain is fundamental to building and maintaining the software-defined data center and provides reliability to the build process, predictable quality, delivery intervals and responsiveness to elasticity of demand. Working with a strong supply chain can reduce risks because organizations no longer must overbuild infrastructure in anticipation of supply chain failures, and they are able to conduct right-size staffing to support predictable build cadence. All in all, a strong, reliable supply chain was able to help control costs for the business!
Your experience with a strong supply chain validates this quote from Eisenhower: "You will not find it difficult to prove that battles, campaigns, and even wars have been won or lost primarily because of logistics." A well-run, efficient supply chain is a crucial element of digital transformation success.
Now, let's imagine this journey without a strong supply chain.
Private cloud was not available when and where lines of business required.
The internal demand for the new private cloud was hard to forecast, and the existing supply chain was inelastic with lead times of approximately six months from business case approval to production-ready infrastructure. The six-month lead-time interval and variability of demand for the private cloud often resulted in frequent mismatch of supply and demand. As a result, data centers regularly suffered with overbuilt and underbuilt infrastructure.
Excess hardware was acquired to compensate for issues.
Hardware sat unused for six or more months waiting for build activities to consume it. Excess hardware was acquired for a variety of reasons:
- Procurement organization's objectives: Procurement insisted upon bulk purchases of hardware to maximize pricing leverage with manufacturers without sufficient regard for the ability of the organization to consume the purchased hardware.
- Variable delivery intervals from manufacturer: Without a predictable delivery interval, project stakeholders felt compelled to overestimate demand and buy significantly more hardware than was immediately required in anticipation of unexpected delays.
As a consequence, some hardware was even written off as a loss because it was not deployed within a year from purchase.
Engineering changes made excess hardware obsolete.
Excess hardware andlack of coordination between engineering teams and the supply chain teams led to hardware that could not be deployed.
Variable quality from manufacturer impacted build activities.
The program suffered from many delays due to unexpected problems with hardware configurations. The bare metal build automation regularly failed due to hardware misconfigured by the manufacturer. Hardware dead on arrival had to be replaced before build activities could be completed.
As a result of the supply chain problems, the lines of business could not rely on the availability of the private cloud to support business transformation plans. Implementing the DevOps business transformation was delayed. Consequently, a nimbler and more efficient competitor was able to seize market share by deploying a better digital experience to customers. The bottom line is that the technology supply chain matters and is the foundation for all other business practices, so it is extremely important to develop and perfect a supply chain practice that integrates seamlessly with your business.
If you are building and operating IT infrastructure, such as a private cloud, you will find yourself working with myriad external and internal organizations that need to operate in a coordinated fashion. By definition, a supply chain is a "network of interconnected businesses involved in the provision of product and service packages required by the end customers in a supply chain."[i] Supply Chain Management (SCM) involves "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally."[ii]
Organizations with high-performing supply chains share these characteristics:[iii]
- Leadership: Focus on managing the supply chain as a complex system.
- Outside-In Processes: Use of strong analytics to sense and translate demand.
- Mature Horizontal Processes: Balance between sales and operations planning.
- The Right Staff: Recruit and hire experienced supply chain talent.
- Continuous Supply Chain Design: Lean and agile approach to process and improvements.
- Metrics-Driven Culture: Use of functional and cross-functional metrics.
- Strong Planning Capabilities: Use of planning methodologies and tools.
Organizations that successfully deploy supply chains can provide reliable, quality services while minimizing the costs. Thus, the supply chain becomes a competitive advantage and an organization's key secret weapon.
WWT is an integral part of the world's largest technology supply chains. WWT's expert staff and high-functioning business practices help drive bottom line performance for these organizations. WWT integrates a customized set of supply chain services to improve overall, end-to-end performance. A customized supply chain solution from WWT includes the following elements:
Material Planning: By analyzing historical consumption data and manufacturer lead times, we help you understand patterns in your supply chain to develop a plan for advanced stocking of products that will be consumed in the near future. We work with a variety of manufacturers to optimize the supply chain, significantly reducing or even eliminating the impact of product lead times on a business.
Order Management: We bring a centralized, global, consistent system to product quoting. The moment you are ready to place your order, we are ready to start filling it. Because we've invested in B2B integration with our major suppliers and distribution partners, we can quickly initiate the fulfillment of the material upon formal acknowledgement from the customer.
Just-in-Time Delivery: We have the flexibility to meet your consumption patterns and engineering activities. We can break out shipments incrementally to cross-dock products to the field, or we can deliver products from multiple suppliers in one shipment with consistent labeling and packaging to prevent bottlenecks at your receiving dock.
Value-added Staging and Integration: We use highly skilled employees working in our integration labs to pre-build, kit and test equipment before delivery. By doing this, we lower onsite labor costs associated with receiving, assembling and testing equipment by more than 30 percent. Shifting work to a central facility provides consistency and build quality as we follow ISO standards and manufacturing-type quality controls during the assembly process.
Implementing and improving a supply chain to support your private cloud is a complex undertaking. Getting it right is tough. Global companies rely on WWT's expertise to smoothly grow their global operations with high-quality and predictable performance. See how WWT Supply Chain Services can help your company.
[i] Harland, C.M. (1996), Blackwell Encyclopedic Dictionary of Operations Management. UK: Blackwell.
[iii] "Seven Characteristics of Supply Chains to Admire," Lora Cecere, Forbes, September 21, 2014.