Q&A | The Promise and Challenges of Supply-Chain Digitization | 2019-10-30

Kevin Wong, chief operating officer of Nulogy, offers advice to companies about to embark on the digital transformation of their supply chains.

SCB: What advice would you give to companies that are about to embark on the so-called digital transformation of their supply chains?

Wong: A lot of people are talking about digital transformation now. Companies should be thinking about not only how it affects their operations, but their external suppliers as well. There’s a growing demand for more supply-chain agility, and they need to be considering the partners they depend on to provide that. Contract manufacturers, third-party logistics providers, and contract packagers provide the flexibility to scale up or down, launch new capabilities, and adapt to change. That’s becoming more and more of a requirement for responding to changing consumer demands.

SCB: It’s enough of a challenge just doing that internally, though, isn’t it?

Wong: It is, and it might actually make more sense to look at doing that first with external suppliers. It’s counterintuitive in some ways, but there’s a lot of deep investment in the way things are done internally, and it’s almost easier to break off smaller segments and try things out with an outside supplier — get a bit of digital transformation going in a contained way, then expand it out once you’ve proven some success. You can eat the whale one bite at a time, so to speak.

SCB: What do we mean by digital transformation? What’s being transformed digitally?

Wong: Visibility is an important part of that — being able to see inventory capacity, especially within your external supply chain. But it goes beyond that. We talk about inter-enterprise workflows, where external suppliers and a brand or consumer packaged goods producer are working together. Say you’re viewing aging materials in the external supplier network. Rather than having to make a phone call or send an email to figure out how to deal with that, you hit a single button, then redirect some materials from one supplier to another, or reallocate them to a new product. You’re working seamlessly, as if you’re all one company. To do that, you need tight integration between the parties. Ideally, you’re working off a single platform that both the suppliers and brand can share.

SCB: So you’re eliminating the siloed spreadsheets that individual functions used to keep. Everybody has access to the same pool of data, and it’s digitally entered and maintained.

Wong: That’s exactly right. You hear stories of companies that spend 45 minutes arguing over the accuracy of the data, and barely 15 minutes talking about how to make some improvement. If you have a shared platform and trust the data, you can spend all that time on figuring out how to work together better as partners, and actually solve the problems.

SCB: Most global supply chains involve multiple tiers of suppliers. As you go further up, they tend to be less sophisticated in their capabilities to go digital. Is there a challenge in getting sub-tier suppliers on board?

Wong: There’s always going to be that sort of spectrum with web-based technology. But with modern API [application programming interface] technology, it’s becoming easier and easier. The bar is lowering for almost anyone to be able to connect to a platform like this. So I don’t know if that’s as big an issue as it used to be.

SCB: So what are the big obstacles now?

Wong: A lot of it is cultural and mindset. If the relationship between suppliers and brands is adversarial, traditionally vendor-supplier oriented, then you’re going to have more of a challenge. But if people are thinking of suppliers as more strategic partners and an extension of their business, they become interdependent and their success is shared.

SCB: Do companies feel a sense of urgency about supply-chain digitization today?

Wong: We see it as becoming almost a matter of survival, to have this kind of supply chain agility. Comfort with the status quo is a problem. If you put the right energy into it, and find suppliers who want to be part of the journey, you’re going to be much more successful.

SCB: Does digitization raises concerns on the part of both parties about the release of proprietary information that they might not want to share?

Wong: Potentially. I go back to what we were saying about the vendor-supplier mindset. Companies that are successful have more of an open-book attitude, and are more trusting. Modern technology provides the ability to silo information and make sure that confidential data is kept aside.

SCB: Where have you seen this done successfully?

Wong: We’re starting to see it more and more. There are a few companies like Colgate — we’ve done some work with them. L’Oreal as well is doing a great job of working closely with suppliers to make this kind of transformation. Progressive companies are considering their external suppliers as part of their strategy.

SCB: Is digitization also a valuable step to take with downstream customers?

Wong: Absolutely. They’re all part of a supply-chain community. The lines are blurring between who’s a brand, who’s a manufacturer, and who’s a retailer. Private labels are a classic example of that. It’s more about the work being done to get products to consumers, and who’s doing which part of that is becoming more and more blurry. So you want a platform and a strategy that are a little independent of who’s calling the shots.