Digital First: two words that summarise the major challenge that digitalisation has posed to the business world over the last 50 years. A process that began with the advent of information technology applied to the dematerialisation of data and information processing.
In an increasingly explicitly data-driven economy, the digital pervasiveness has forced companies to change the old rules and design new business models to interpret changes and support social transformations.
This phenomenon has influenced business strategies, product-service design, internal organisation and, of course, interaction with the outside world, leading companies to question themselves deeply about their structures and processes to be acted upon.
In this context, supply and distribution chains represent an essential junction.
To be competitive in an increasingly complex global market, perfect synchronisation between the demand for a product – or a service – and its availability can only be achieved through a mix of methodologies, technological solutions and high-profile skills.
This is why proper supply chain management has become of central importance: a company’s success may depend on its efficiency and effectiveness.
Although the subject of Supply Chain Management has been addressed and examined since the 1980s by Keith Oliver and Michael Webber, who coined the term when they published the book “Supply Chain Management: Logistics catches up with strategy”, the subject is now more topical than ever because the Covid-19 pandemic has represented a decisive challenge for supply chains.
A scenario that has forced companies to respond immediately to counter the shock to logistics and supply chain operations, comparable to that experienced during and after the Second World War.
We talked about this with engineer and Professor Francesco Amendola, Program Director of the Master in Data Science and Professor of Supply Chain Management at the Rome Business School, who pointed out that the Covid-19 crisis revolutionised existing certainties and forced companies to rethink the business models that had been stratified over the years, introducing the concept of operating in a context of uncertainty.
In fact, the pandemic has led to three main consequences: a change in the demand for goods and services, which has forced companies in the various roles of supplier, distributor and retailer to rethink their organisational logic; delays in the supply of products and services, caused by discontinuous production or not at full capacity, mainly due to more or less long lockdown and/or quarantine periods– on this topic has focused in particular a study conducted by ISM, the Institute of Supply Management, aimed at quantifying the impact, including the financial impact, of the pandemic on the resilience of companies.
Last but not least,Amendola emphasised that a third factor, which is no less important, is the introduction of smart working methods: many manufacturing companies that had 100% of their people on-site have been forced to deal with this work diversity, which has also led to difficulties in managing certain activities remotely.
It is interesting to note, however, that the uncertainty of the financial-economic system had already been known since the 1980s, when the term VUCA was coined, an acronym indicating the “volatility”, “uncertainty”, “complexity” and “ambiguity” of production systems. Today, of course, the VUCA environment has taken on a more concrete connotation due above all to the drastic change in consumer habits: the emblematic example is represented by the shift from physical retail to online retail, which has led to a review of the business model linked to demand-driven where it is the user who becomes the protagonist of the process because he is able to direct production choices. Therefore, if in the past the planning of the production of goods and services was based on the analysis of historical demand, today business is above all linked to the day by day.
This is where the strategic aspect of Supply Chain Management comes into play: making communication and coordination between the various players easier so that the chain can adapt almost immediately to the production choice made, as mentioned, by the user. It is therefore important to emphasise that, in order not to lose out, companies can also use demand shaping techniques, strategies to incentivise customers to buy those articles of which there is immediate availability by proposing, for example, ad hoc promotional campaigns.
According to Gartner, one of the most significant effects of Covid-19 is the return to reshoring or inshoring, i.e. the use of the nearest production sites to shorten the supply chain, abandoning offshoring, i.e. the practice of outsourcing operations abroad, usually from companies in industrialised countries to less developed countries, with the intention of reducing costs.
In the future, however, it will be important to operate with common sense because neither business model will be a winner in absolute terms.
This is why companies, Mr Amendola emphasises, now have an extraordinary opportunity to rethink business models that are fast, agile and efficient, with a strong ability to adapt and react to all kinds of unforeseen events, just as the Covid-19 pandemic has taught us.
The rediscovery of technology in its most advanced forms (Cloud Computing, Artificial Intelligence, IoT – Internet of Things, Big Data, Advanced Analytics, 5G Networks, etc.), thus becomes an indispensable tool for analysing data in real-time, for having the ability to extract those elements that will allow making choices and defining conscious strategies, the digital transformation, Industry 4.0, which a few years ago was still in the prototype development phase and today can be considered almost stable and evolving, will do the rest.
But technology alone is not enough: it is a necessary but not sufficient condition. It is necessary to have an in-depth knowledge of the business market context in order to reinvent the company, because experience has shown that, all the more so in crises, companies that plan and act quickly emerge as winners in their sector.
Of course, in this context, the green transition cannot be ignored, because changing the economic paradigm from an environmental perspective is a choice that can no longer be postponed. Sustainability, development and business can and must go hand in hand.
The green transition, however, brings with it a necessary change in infrastructure and production systems that is very significant, with possible short-term repercussions on employment that should not be underestimated. For example, in the world of transport, if vehicles become increasingly electric, there will simply be fewer traditional mechanics and more electrotechnical maintenance workers.
This change, which affects people’s lives as well as business decisions, is perhaps the challenge to be followed most closely. It is by no means obvious that the contexts and mindsets of individuals will change at the same speed. Change Management is probably the real cultural revolution, to be supported and accompanied.
FRANCESCO AMENDOLA
He currently works as the Director of the ICT Department in the largest local public transport company in Italy, and one of the largest in Europe. He was the CIO (Chief Information Officer, IT Operations Manager) for almost 10 years at one of the largest technology service providers specializing in solutions for the global gaming market. His most relevant experience is in IT Service Management and IT Governance, in which he is also certified by ITILv3 Foundation and Green Belt Six Sigma
