The Intangible Benefits of a Digital Supply Chain

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How thoroughly has the digital age reshaped the average large corporation? A 2015 study by investment bank Ocean Tomo provides one way of quantifying the answer. The study calculated that in 1975, tangible assets—buildings, equipment, and so on—comprised a full 83% of the combined value of the Standard & Poor’s 500 Index. By January 2015, that number had plummeted to 16%, meaning that today, 84% of the S&P’s value is made up of intangible assets—things like a company’s intellectual property, its customer relationships or its proprietary way of doing things.

These figures tell us one thing: The average company’s value today is largely the sum of its ideas and solutions. And those solutions increasingly come from harnessing digital technology to do things better and faster along every link of the value chain—delivering more convenience, shortening cycle times, providing supply chain transparency, and other intangibles that build stronger, more enduring customer relationships.

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The problem for many traditional company executives, however, is that digital technology can quickly become overwhelming. Amid a massive proliferation of “must-have” digital solutions, just knowing where to start can often be the biggest hurdle. We find it useful to view the question through two lenses:

  • Which digital solutions enable you to either reinforce or expand the value you offer your customers?
  • Where can you invest in capabilities that enable you to create a defensible moat against the competition?

Applying digital solutions across the supply chain is a powerful way for businesses to deliver results along both these dimensions. Most companies are just starting to think about how digital can transform their supply chains, which means that the opportunity to produce a step change in performance is very real. Every company faces a different set of needs and challenges. But when defining a digital supply chain strategy, it is critical to start with the customer and work backwards.

For a business-to-business (B2B) company, the key opportunity might be to mimic the smooth and efficient business-to-consumer (B2C) customer experience that retailers like Amazon and Zappos have made commonplace. After all, if Domino’s Pizza customers can track their order from oven to doorstep, why shouldn’t business customers expect the same level of transparency and convenience when ordering a skid-steer loader? Similarly, if companies in developing markets such as India and China haven’t already adopted rapid delivery standards, they probably should. Customer expectations and competitor performance in those markets are rapidly catching up with—and even exceeding—the standards that are common in developed markets.