Digitization – A new era for Aftermarket services

Supply chains are traditionally linear in nature; a series of largely discrete, siloed steps taken through marketing, product development, manufacturing, distribution, and finally into the hands of the customer (Figure1). Digitization will change this approach, bringing down walls and creating a completely integrated ecosystem that is fully transparent to all the players involved. This ecosystem will depend on several key digital technologies, including logistics platforms, analytics, robots, and 3D printing. Digital supply chains (DSCs) can hold extensive information and provide superior collaboration capabilities that result in improved reliability, agility and effectiveness (Figure 2).

A Digital Operating Model supports a more flexible organizational design, as information is no longer location dependent. To realize the full potential of being a global organization, companies must take a closer look into internal alignment committees and procedures, service level agreements, and transfer pricing schemes. For instance, demand forecasting and supply network planning require the integration of information and processes across functions and regional units. If this is systematically done, it unlocks hidden synergies in manufacturing and logistics networks alike.

Physical flows captured by “digital finger prints” create improved visibility of all corporate assets. The utilization of a specific production line, truck or administrative function can be made visible with little extra cost. The major benefit of a fully digital operating model, in terms of visibility, lies within the integration of operational and financial data, which today are often separated up to a profit center level. For instance, customer orders can be evaluated against individual process costs instead of average cost. In some cases, connecting internal data with external facts, such as market share or competitor prices, can lead to meaningful new insights.

Conclusion – Approach to Digital Supply Chain Transformation

It is important that a digital supply chain strategy be an integral part of the overall business model and organizational structure of a company to generate and measure long term value. Transforming the entire organization to a digital operating model clearly has the highest potential, but also bears the highest complexity and risk. A thorough analysis phase will highlight the value creation potential, in the existing supply chain. The identification of business benefits requires top management expertise and inputs, regarding currently perceived pain points and industry best practices. Typical outcomes of an analysis of current pain points are the identification of examples of broken processes, local instead of global optimization, low visibility (for example, on product/customer profitability, or process quality) or sub- critical size of local business units. A synthesis of these pain points will lead directly to the design principles and value potential of a digital supply chain model. Model framework of digital strategy is shown in figure 3, which helps OEMs to capture missing aftermarket revenue, due to low visibility in end-to-end value chain.

Figure 3. Digitization of Supply Chain Framework

At CGN Global, we embrace digitization to reconfigure supply chains and overcome traditional geographic or functional silos. We believe that highly automated end-to-end processes, flexible bundling of activities and improved visibility are the hallmarks of a fully digital supply chain.  It is more about aligning digital initiatives with supply chain goals and adopting a digital operating model to realize the untapped potential of existing resources and capabilities resulting in a higher level of performance.