Sharing Supply Chain Data in the Digital Era

There has been plenty of discussion in the mainstream business press about how digital technologies are transforming companies’ business models and customer-facing activities. But what’s discussed less widely is how those technologies are also transforming companies’ supply chains.

We believe that supply chains in coming years will become even more “networked” than they are today — with significant portions of strategic assets and core capabilities externally sourced and coordinated. This will be powered by two trends. First, as digital advances continue to reduce communication and coordination costs, companies will find it easier and more efficient to secure external solutions rather than inventing solutions in-house. Second, companies will find it increasingly challenging to sustain best-in-class internal supply chain competencies across a diverse set of emerging digital technologies that range from the “Internet of Things” to sophisticated artificial intelligence algorithms.

Effectively managing and coordinating tomorrow’s networked supply chains will require organizations to develop and adopt more structured collaboration models — scalable approaches to enabling true data transparency and frictionless cocreation that are largely absent in today’s collaboration models.

In particular, access to transparent, accurate data is a prerequisite for effective supply chain collaboration and coordination. Lack of transparency is often born from a lack of trust or confidentiality issues. But we are already seeing progressive companies developing novel solutions to this dilemma — such as data “cleanrooms” and digital marketplaces.

What we call data “cleanrooms,” often managed by a third party, allow the sharing of sensitive data (for example, consumer demand, product cost breakdown, and asset utilization) in a legal and secure data environment that lets participants better identify and size opportunities for joint value creation.

Companies can also use a digital marketplace to transform supply chain dynamics within their own units.

A.T. Kearney recently helped build a cleanroom for a global fast-food chain and its key capital equipment vendors. The chain shared forecasted future demand and outlet expansion data. Capital equipment vendors provided data about topics such as their global manufacturing footprint and total landed cost for products. This integrated data environment provided a more accurate view of how a fully optimized supply chain of the future would look and the size of the potential prize, while protecting all parties’ sensitive margin and cost information.

Like data cleanrooms, digital marketplaces encourage network partners to contribute data, information, and ideas in exchange for gained reciprocal benefits. For example, one leading global wholesaler created an online market tool that allows suppliers to enter key operational metrics, product specifications, and bidding information as part of its annual supplier scorecard and product sourcing process. Suppliers are given access to aggregated benchmarking that they can use to evaluate their own performance and competitiveness in the supply chain. This exchange provides valuable competitive intelligence for the suppliers, an up-to-date baseline of specification and pricing data for the wholesaler, and a more streamlined and less labor-intensive RFP bidding process for all parties involved.

Companies can also use a digital marketplace to transform supply chain dynamics within their own units. For instance, a leading holding company designed an online forum that allows its portfolio companies to explore and virtually simulate buy scenarios for complex products such as metals and capital equipment. All internal stakeholders simply log into an online marketplace, where they can rapidly explore and compare hundreds of supply options and generate online shopping carts. Simulating a shopping cart checkout, a digital dashboard immediately reports total landed cost for their proposed purchases, as well as supplier quality ratings, product requirements, and specification metrics. Through this marketplace, the holding company’s operating companies are able to discover better-valued supply options and arrive at a purchase plan in days instead of weeks.

But the real power of this approach is unleashed when different operating companies come together to jointly simulate collective buying scenarios to maximize company-wide scale. Over two days, operating companies play consecutive rounds of “buy games.” During each round, they enter their proposed individual purchase allocation plan, and the system reports out dashboards for both individual companies and the system. Between rounds, advanced analytics provide buying recommendations — for example, the system may recommend that all the operating units, rather than each buying slightly different variations of a product, collectively switch to buying the same variety. After each round, the operating companies vote to determine if their last scenario would be acceptable for pilot implementation. After playing 10 to 15 rounds, they are able to agree on buy scenarios that reduce costs through economies of scale and reduce total product and supplier complexity but also meet their individual business requirements. This powerful cocreation forum is able to create benefits for all participants in a fraction of the time and effort required by their traditional approaches.

In order to anticipate and adapt to the current and projected rapid rate of innovation in digital technologies, successful supply chain organizations need to adopt new tools like these, as well as new skills and capabilities, new corporate structures and new models for trading-partner relationships. Even more critically, supply chain executives need a new mindset — one that embraces innovative thinking about how supply chains are structured and managed.