Steve Flagg is the CEO and founder of Supplyframe.
According to my company’s “2024 DSI Digital Maturity Model Survey for Global Manufacturing,” more than half of senior-level procurement, strategic sourcing and supply chain professionals across industries are ready to shift left to make proactive tradeoffs on what electronics components to use and operationalize risk insights during new product introduction (NPI).
Yet, only 16% said their companies have some formalized level of collaboration and alignment between engineering and sourcing teams, and 75% still rely on ad hoc spreadsheets for sourcing.
My company conducted this survey in recognition that the global manufacturing and supply chain arena has seen near-constant disruption and elevated risk in recent years. While things have stabilized somewhat, many organizations remain stuck in “firefighting mode.”
By taking a closer look at the level of digital maturity of leaders in various industries, we hoped to find indications of how well-prepared they are to be resilient when the next major disruption hits.
The Methodology And Findings
To conduct this survey, we created a five-level model for digital maturity.
• Level 1: Organizations are reactive, using spreadsheet and email-based sourcing. Data is relatively static. Operations are predominantly siloed and rely on manual processes from design to source.
• Level 2: Purchasing decisions are more opportunistic and less siloed, but the organization still relies on spreadsheets and email to conduct business.
• Level 3: Processes and data are integrated into a central system, but there is typically still a high degree of manual operations.
• Level 4: Processes in the integrated platform are optimized and may include some basic automated workflow automation.
• Level 5: Organizations are predictive about how and when to strategically source and make informed decisions across teams. They operate as part of a holistic digital thread and with product life cycle management (PLM) solutions via an integrated platform. They are also proactive in their risk mitigation thanks to predictive intelligence.
The survey of 60 senior procurement, strategic sourcing and supply chain executives considered several industries—such as high-tech electronics, automotive and aerospace and defense (A&D)—before mapping the results.
The results didn’t surprise me, but they are concerning. Companies that lack digital maturity put themselves at greater risk from supply chain volatility.
If your organization is not digitally mature, you are more likely to struggle to get needed electronics components to build your products, have to pay more for the components you need, be unable to move fast on new opportunities and have to redesign products—which can cause your company to lose sales and market share.
Here are some additional survey findings and what we can learn from them:
Most companies are still reactive.
The automotive and transportation space has an average digital maturity of just 1.0. This is not unexpected. During the pandemic, supply chain issues impacted multiple automotive supply chain tiers. This industry is now more aware of supply chain risk, but companies still struggle with siloed, complex operations, making it harder to align to make the right tradeoff decisions.
The high-tech and industrial equipment sectors are only slightly more digitally mature. That’s surprising given their reputations as world leaders that produce very high volumes of products, sometimes with short product life cycles. The average digital maturity in both sectors is just 1.3.
A&D has the highest maturity level: 2.1. That’s probably because risk is so important in A&D, which has long product life cycles and manages products on a program basis.
The bottom line: The average digital maturity scores for companies across industries are down at Levels 1 and 2. There’s a lot of room for improvement.
Assurance of supply and lead times are primary concerns.
Regardless of industry, companies recognize that assurance of supply, cost and quality are major risks and critical considerations to NPI success.
A fifth of those surveyed view assurance of supply as their primary challenge, so lead times on key components are a concern that’s on par with whether the product design is meeting quality goals during the design phase.
The bill of material (BOM) validation process is very limited.
A whopping 70% said they manually validate and optimize BOMs without access to real-time intelligence or automated request for quote (RFQ) processes.
This indicates there is ample opportunity to improve BOM validation and optimization. This process requires significant time and research if done manually but is a crucial product development stage during which teams can ensure they can reliably source components at acceptable prices and lead times during the product’s life cycle.
The Takeaways
Based on these findings, here are a few factors that companies should consider as they continue on their journey to digital maturity:
Understand that challenges with just one component can sink you.
Collaboration and a single source of truth across departments can advance BOM optimization. But what typically happens instead is that engineering completes the design and throws it over to sourcing, procurement and supply chain folks to execute what’s in the scope of the design.
Indeed, 43% of surveyed professionals said their sourcing teams are reactive and follow the lead of their engineering departments. That’s a problem because every new product a company designs is essentially creating a new supply chain. Yet there’s no responsibility within engineering to think about risk related to component and supplier choices even though those choices have major downstream implications.
If even one component is unavailable within the right delivery window, it can force a company to redesign a product—a time-consuming and costly proposition that impacts market share and the bottom line.
Consider tapping your supply chain team to lead the way.
Less than a fifth said their companies have formalized collaboration and alignment between engineering and sourcing, so there’s a huge need for organizational change and alignment.
While it varies a bit by industry, supply chain teams are often the most cross-functionally aligned, so they are typically the best keepers of the flame when it comes to cross-functional collaboration. Leverage that to drive enlightenment and alignment across commercial, design, finance, procurement and supply chain teams.
Get everyone on the same page with a single source of truth.
One big barrier to alignment is that different groups have different incentives. Remove that barrier by providing everyone with the same outside intelligence about the market, parts, products, suppliers and, ultimately, risk.
Once they all share the same red-yellow-green view of such factors, no one from any of those teams will want to choose a red-flagged part or supplier.
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