Digitization in the Making – A reflection post-pandemic frenzy!

Digitization in the Making – A reflection post-pandemic frenzy!

The times of global pandemic will be remembered as the years of mass digitization. That’s what I continue to believe. Few had imagined that the wind could turn that swiftly. But when humans don’t have a choice, they adapt. Before Covid-19, pressures resulted from slowing growth and trade wars and rising consumer expectations. During the pandemic digitization was just the only way things could work.

While we demand more transparency, governments wish to ensure homeland security, supply chain stakeholders seek higher levels of visibility for optimization and automation. Covid-19 has left us little choice but to leverage digital tools to stay operational. The Covid times may be become this century’s biggest game changer & accelerator of digitization, with significant knock-on effects on the way we operate and live.

Suddenly, digital tools, like video conferencing became mainstream, professionally and privately. Working from the kitchen table became kind of the norm. And e-commerce got another booster. But how deep is the change? Beyond working from home & accelerating of e-commerce, what was changed intentionally?

How are organizations and governments capturing this special moment and momentum to drive upgrades, restructurings and reforms? Are we about to see a broader and better use of technology to drive productivity and build more resilient chains or fiercely tackling the challenges our global society is facing, degradation of land, pollution of air & oceans, climate change, and tensions caused by inequality?

This change should not only be about technology but most importantly about new opportunities. It’s about mind shifts, new concepts, new knowledge & new skills. Technology is an enabler of progress and transformation. But technology is a means to an end and not an end-in-itself. It needs to be understood.

Supply chain networks are at the center of our economy, as a supply chain delivering every day the things we need. Supply chain and logistics is often labeled as a digital laggard with a high level of inertia.

What is missing or hurdles in the way? A crisis can be catalyst for change. Hence, What is it that we really changed in 2020 or 2021? What has been the journey so far and what may lie ahead?

With the arrival of the pandemic, automation became a hot topic. Automated production sites, faced less challenges with infections and hence factory closures. But not everything can be automated. Technology and software companies reported increasing demand for their solutions.

Visibility became “king”. Situational awareness empowers decision makers – simply defined as “knowing what is going on around us”, or more technically as “the perception of the elements in the environment within a volume of time and space, the comprehension of their meaning and the projection of their status in the near future”.[1]

But technology also failed us. Algorithms are rarely trained on extreme volatility. Planning tools stopped providing reliable results. Covid-19 made us realize that people with their experience, skills and relations are critical. Because it is people that fill in where machines fall short. Not a real surprise.

In hindsight, 2020 was only the beginning of major supply chain disruptions. 2021 opened with the Suez Canal incident followed by flooding disasters and devastating storms across the globe. Imbalances in ocean transport, port congestion and equipment shortages, with surging freight rates became the new normal. The semicon crisis reflects what is happening with supply networks, that have reached their limits.

Whilst the pandemic, is widely seen as the start of exponential digitization, the revolution is yet to come. What is it that is holding the supply chain and logistics industry back?

Some food for thought

An attendee poll taken at a conference of The European Freight and Logistics Forum hints at some cultural challenges. 52% of the participants voted for “A more open mindset; start up agility” as the most important attribute to move the freight logistics sector forward. During a workshop in the run up to the event attendees prioritized “lack of understanding” and “fear of innovation”. Change at global scale can hardly happen without the support of collaborating governments. On the public sector side, the workshop attendees saw the main hurdle in an “overwhelming bureaucracy” causing “slow action”.

Intensified collaboration across industries and governments can be instrumental to establishing eye-level relations to drive change. Lack of understanding and fear of innovation are linked. Academia is asked to provide research and change curricula to respond to the new demand to reduce the knowledge and skill gap and increase re-skilling. But companies need to invest in training – there may not be enough digital talent accessible for corporates and governments.

Change has always challenged traditional businesses. In times of increased market and environmental pressures, the stakes grow higher. Digitization is about transitioning from competing on markets, to collaborating in ecosystems. The latter creates exactly those opportunities the digital revolution has promised us: better utilization of capacities & access to resources. History shows, change is not natural, as are systems thinking or collaboration, which are essential to capture the benefits of the digital age.

Architecting the next industry

From the challenges facd by businesses and society, indicates we need to transition to more sustainable systems, like the circular economy. A model which replaces our “take-make-waste” model with a repair-reuse-recycle approach. This movement is on its way.

A 2020 Gartner survey[2] finds that 70% of supply chain leaders plan to invest into the circular economy. Digitization is a driver in this transformation. “Already, 35% of companies believe that digital technology will be a key enabler for their circular economy strategies. However few are leveraging new technologies for this purpose, explains Sarah Watt, senior director analyst at Gartner Supply Chain practice. Establishing the circular economy means building closed loop circular supply chains.

Capturing this opportunity requires “an architect of the industry” mindset. Leaders that move away from a “forced-to-catch-up with competition” to a “leader of change” mentality. This mindset change position leaders to set the (digital) standards & turbo-charges their operations to serve customers far better.  Taking this path requires courage, knowledge and lots of energy.

The circular economy will not work without digitization. Building circular products requires deep knowledge about the materials and components & how things are stitched together. As the excess material of one industry is the resource for another. Digital solutions connectivity is crucial between companies & across industries. Interoperability is the key to circularity-based sustainability.

Humanity, wisdom and creativity are fundamental to design & build a world from humans for humans. With machines working with us and for us, with an economy that is preserving instead of gradually destroying the planet. The linear economy has been great to generate value and pull hundreds of millions of people out of poverty but this model is very bad in preserving the value. 91 percent of what we take and make, is wasted. Only 9 percent is reused, refurbished or recycled.

This article is a call for a considerate and wise use of technology. A call for building the circular economy. For a collective action to change course. For lifelong learning to equip ourselves with the knowledge and instruments to build a world that works for us as well as for future generations.

Achieving this goal needs leaders that are driving positive change following a code of global citizenship. Leaders that are open for change and collaboration. Needless to say, that the supply chain and logistics industry plays a key role in this endeavor. The surge in digitization will help us to live up to expectations. But most important, is to remind us that each one of us can and should be a leader of change in our own space, shaping at least a part of the industry and with our collective contributions the world will gradually transform into a more circular and healthier place. 

[1] Endsley MR. Toward a theory of situation awareness in dynamic systems. Human Factors 1995;37(1):32–64

[2] https://www.gartner.com/en/newsroom/press-releases/2020-02-26-gartner-survey-shows-70–of-supply-chain-leaders-plan

Wolfgang Lehmacher, Operating Partner, Industrial Innovation Partners at Anchor Group.

About the Author 

Wolfgang Lehmacher is Operating Partner, Industrial Innovation Partners, Anchor Group. He was Director, Head of Supply Chain and Transport Industries at the World Economic Forum, Partner and Managing Director China and India at strategy firm CVA, President and CEO of GeoPost Intercontinental at France’s La Poste. He was also Head of the Eastern European and Mediterranean Regions and Country General Manager Switzerland at TNT. Wolfgang is Founding Member of the Logistikweisen, an expert committee under the patronage of the German Federal Ministry BMVI, and the think tank NEXST. He is Host of the Supply Chain Innovation Network and Board Member of the Logistics & Supply Chain Management Society. The book author is FT, Forbes, Fortune, BI and Nikkei contributor.

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