The Smart Connected Ecosystem-How Supply Chains will Generate Customer Value in the Future, Enabled by Technology

Frank Vorrath, VP-Global Supply Chain, Johnson Controls [NYSE:JCI]
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Frank Vorrath, VP-Global Supply Chain, Johnson Controls [NYSE:JCI]

Several global megatrends are driving opportunities for companies. Changing demographics encompassing a move toward urbanization with a surging middle class concentrated in urban areas and aging populations; energy availability and resources; sustainability and regulations; and digitalization all create opportunities for companies to grow.

We live in a new world of an engagement, an ecosystem-driven economy where everything around us is changing exponentially. In the future, a company will not only compete against another company. Every company is and will be part of an ecosystem and success will depend on how a company can create a strong and sustainable ecosystem that is able to compete and win in the marketplace.

All supply chain ecosystems, which consist of the entire supply chain and value chain network, must focus on creating value for every partner with the goal of serving customers in better ways. Companies must aim to create a highly competitive ecosystem, to drive greater efficiencies, higher quality and lower costs so we can do that. In that way, supply chains can become a competitive advantage for companies in serving customers. The overall question will be how ecosystems can be enabled by smart technology to deliver value exponentially faster, and how smart connected products transform competition. Value chains will transform into ecosystems of ecosystems, highly connected and dependent on each other.

  Smart, connected ecosystems combined with artificial intelligence integrated in products is game changing and disruptive 

Smart, connected ecosystems combined with artificial intelligence integrated in products is game changing and disruptive. Organizations can link products and services at the front-end of a business with the back-end of a business. There are solutions that connect with the front-end to provide business intelligence, which creates visibility and transparency in supply chains–key to responding to customer demands. In the commercial world, you have to be responsive and reliable to the end user to unlock value. B2C e-commerce has created new B2B customer expectations: I want to buy products when and how I want, and will find someone who will sell it to me my way. That is becoming the new reality for B2B businesses. To respond to that mindset, you need to streamline processes to enhance performance, and adopt systems and technology that enable that. That’s why every organization needs a digital strategy. Without a solid digital plan, organizations will find themselves no longer relevant in a global marketplace.

Connected products and services mean we can collect a lot of data. However, it is even more important to know what to do with that data—how to make it work for our business to deliver value to customers. This is a huge driver to set up a digital supply chain. For example, if you establish a preventative maintenance business model and collect data on products regularly, you can foresee product breakdowns and be organized to deliver a new product or spare part when it is needed. The supply chain needs to collect data in real time and then integrate that data into back-end business operations system, so you can act proactively and deliver ongoing value.

Digitizing supply chain means that organizations can take full advantage of the data and information available to them. One of the best examples of transformation that can result is the buildings industry, which is transforming itself to develop smart cities and homes. Smart cities, which integrate multiple information and communications technologies security to manage their assets, will drive a new requirement for building technologies and solutions that create smart buildings. In these buildings, various systems such as heating, cooling, lighting, occupancy sensors and security are connected with other services. So, for example, information about a crisis can be transmitted directly to authorities or hospitals if needed. A smart building is more energy efficient, secure and user-friendly for occupants, building managers and owners. It is also an innovation that can save lives as well as create value for customers.

To serve these connected environments, supply chains have to be reliable, agile and responsive while at the same time cost-effective. The design and layout of the supply chain must meet the expectations of customers. In addition, it should be accomplished according to a vision that connects all activities and functions in the supply chain with each other in a way that enables the realization of business objectives. To determine those objectives, an in-depth knowledge and analysis of the market and customers’ buying behaviour is necessary. Do you want to be cost leader, product leader or service leader? You need to make a strategic choice. A business cannot excel in all three dimensions but has to be world-class in one. The supply chain strategy must support the business objectives and serve customers in better ways. Indeed, a supply chain strategy is a means to those ends.

Companies will need to find ways to achieve supply chain excellence linked to end-to-end capabilities that connect with the chosen value chain or ecosystem strategy. This will help improve efficiency and effectiveness through enhanced people skills, processes, technology, systems, data and insights.

In the future, organizations need to be able to make more deliberate choices and to make smarter decisions on how to serve customers. This means digitalization and supply chain excellence are no longer a choice. They are a must. Ultimately, it is the supply chain that ensures all business objectives are met. The question is whether that is widely recognized. This has not been accomplished entirely yet, but that will undoubtedly change in the coming years, and supply chain digitalization will drive the change. Companies will look at their supply chains as critical enablers of growth, not just for opportunities to reduce costs.

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