The fourth Industrial revolution is driving the creation of a more connected ecosystem within a variety of different functional areas. Organizations are re-shaping their supply chain strategies to move toward entirely integrated boundaries and to become increasingly transparent in their business practices which leads to supply chain management (SCM) 4.0. Digitizing the supply chain is an SCM 4.0 movement towards a completely integrated sequence of planning and production solutions that work in tandem to create a more visible supply stream across each touch point of the entire value chain.
According to the MHI annual report, 80 percent of supply and manufacturing industry leaders believe supply chain digitization will be the norm in five years while 16 percent think that day is already here. This trend isn’t new, but what is catching the attention is the introduction of OKRs to manage supply chain strategies towards digitalization.
OKRs – Objectives and Key Results – have been used by some of the world’s leading organizations for years now. The aim behind setting up OKRs is to manage strategies, increase employee-company vision alignment, foster transparency and encourage a focused and streamlined approach towards goal attainment. OKRs in supply chains help organizations align strategy and enable business capabilities to accelerate growth.
Road to Supply Chain Digitalization
Supply chain leaders who achieve supply chain digital transformation successfully integrate well-established business capabilities with emerging digital innovation. By first developing foundational supply chain capabilities and then incorporating proven business and technology innovations, leading supply chains are able to move beyond exploration to integration and optimization.
End-to-end transparency is the ultimate goal for a number of supply chain operators, as the crucial component to achieving significant efficiency gains. In a system with end-to-end transparency, every member of every business process along the supply chain network has access to all information leading to improved visibility and providing full control along the chain.
To achieve these ambitious goals and blend digital capabilities with supply chain visibility, Gartner mapped out a three-step plan for supply chain digital transformation as below:
-Embed supply chain in the digital ecosystem
-Implement autonomous supply chain
-Synchronize with digital business
However, a recent McKinsey Global Survey reports that just 14 percent of the respondents state that their supply chain digital transformation efforts have made sustained performance improvements. This is an incredibly low number, which alarms there are still challenges to either implement or sustain the digital transformation.
The new global research survey went on to investigate the main obstacles organizations have so far encountered on the digital transformation journey.
-44 percent of executives reported a general lack of awareness throughout the internal ranks of their own organization
-39 percent also noted a lack of the required skills across their workforce
-50 percent of respondents said that their supply chain partners lacked the necessary awareness
-42 percent said their supply chain partners lacked the required skills
–70 percent of all digital transformation initiatives do not reach their goals (Tabrizi et al., 2019)
These obstacles appear to slow down progress outside the four walls of the organization (e.g. suppliers, partners) as well. OKRs aim to address the strategy and non-technology-related digitization challenges to seek integration and collaboration and gain efficient performance management.
OKRs in Supply Chain Digital Transformation
The executive leadership has already started looking at OKRs as the option to sail through most of the strategic digitization challenges. Here comes the major opportunity for OKR driven by supply chain digitalization that includes managing the digital transformation strategy, focussed vision, transformation alignment, and providing end-to-end organization visibility for the digital transformation.
Supply chain digitalization is not just about technology; it should be guided by a broader strategy and a mindset of change. This is related to applying the right strategy to match digitalization and focal firms, supply chain actors (such as multi-tier suppliers, multi-tier customers) based on different approaches at different development stages. A retailer, for example, might define its supply-chain digitalization strategy with respect to its aims for enhancing customer experiences: “Provide customers with the seamless digital shopping experience.” In such a case, OKR acts as the strategy management framework to define and manage such overarching company strategies to handhold the transformation execution.
The vision for supply chain digitalization provides the organization with reference points for the second step in transformation planning (aka strategy execution): a comprehensive assessment of how the objectives need to be met. To make the assessment simpler, organizations need to define the performance measurement goals (also known as key results), which complete the company’s vision for its transformed supply chain.
Setting performance goals requires a company to gauge its current performance and then determine achievable improvements. A company that aims to reduce lost sales by a specific amount, for example, would need corresponding supply-chain performance goals—improving the speed and reliability of shipments to customers. Such goals can be defined as key results in OKRs and can be measured and tracked in terms of agility, service, capital and cost measurements.
Digital transformation is not a simple IT-enabled organizational transformation; it is about the alignment of different supply chain touchpoints with organizational strategic objectives, structures, core values; and structuring and implementing supply chain processes reengineering. Ultimately, the supply-chain vision should be aligned with the company’s strategic goals. While the need for such alignment has always existed, what’s new is that both the strategic goals and the vision can be connected and interlinked to measure the execution through OKRs.
End-to-End Organization Visibility
A 2016 report by IDC predicted that 70 percent of siloed digital transformation initiatives would ultimately fail. An effective transformation depends on a transparent, forward-looking concept for the future supply chain. Visibility is extremely important to these organizations as it can play a major role and help guide organizations through transformation challenges.
OKRs create clarity and provide transparency in supply chain digitalization goals throughout the organization and supply a real-time progress report via frequent check-ins and updates. This key result heartbeat is important to ensure that corrections can be made in real-time to accommodate the ever-increasing speed of business. This means thinking about the outlook for the company amid the pressures and trends that influence its competitive situation, as well as the changing expectations of its customers.
How Do You Ensure OKRs Are Adopted and Stuck To?
It actually comes down to the solution that an organization adopts. Digitalizing the supply chain starts with digitizing the supply chain transactions including the OKRs. If OKRs are not recorded, they are set and forgotten about. If they are simply entered on excel, it would be a colossal admin task to maintain. By recording the OKRs on a digital platform like Profit.co where everyone can view whenever they need to, targets and performance stay in front of mind and the information can be made at the fingertips.
Organizations reap greater benefits when they develop a comprehensive vision for the future of their supply chains, carry out a disciplined assessment of existing performance, and draw up a long-term transformation road map. Business leaders find OKRs to be an effective mechanism for establishing strategies, defining goals, setting priorities, and ensuring that the activities are connected to those digital transformation goals. They should also recognize that supply-chain transformations must extend to both technology and operations. Organizations that employ these approaches amalgamated with OKRs for supply-chain digital transformation stand a better chance of capturing the full value that digital technology can provide.
Bastin Gerald is the CEO and founder of Profit.co, an intuitive cloud-based SaaS platform, integrating OKRs and task management plus 300 other data-driven metrics to help companies successfully implement the model and reach new heights. Profit.co helps companies focus, align and engage teams for optimal productivity and company success. To learn more, visit https://www.profit.co/.