Building Trust in the Supply Chain

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Last week while getting routine maintenance for our 4×4 van, the dealership offered to buy it from us for whatever the remaining balance of our auto loan might be. Not as a trade-in on a newer model; they wanted to add it to their used car inventory. We didn’t take them up on the offer. After all, Winter is coming. But it brought home to me the reality of the ongoing supply chain crisis.

A dip into the daily flow of business news also makes it very clear industrial supply chains are in desperate need of some problem-solving changes. It is as if the pieces of the supply chain that need the most transformation are the ones which currently have the least invested in IT. Consider these bits of insight gleaned from researchers:

  • Nearly two-thirds (63%) of companies do not use technology to monitor their supply chain performance. (Zurich Insider)
  • Only 22% of companies are actively working on supply chain network design. (Logistics Bureau)
  • 21% of supply chain professionals say visibility is their biggest organizational challenge. (Statista)

Whether it is design engineering or supply chain management, there are no arbitrary decisions in digital transformation. A company does not invest in the concept of a data lake, for example, because it is the new thing in IT. (A data lake, for the uninitiated, is a central data repository for storing all organizational and engineering data, structured or unstructured.) A company invests in reorganizing data because it solves specific real problems.

“The whole point is to change behaviors, to change cultures,” notes Travis Hessman, Editor in Chief at Industry Week. “Digital transformation is about change management.” Hessman was speaking at a recent web-based roundtable, sponsored by Dassault Systemes, called “Digital Transformation: Where Do We Go From Here?”

The consensus of the panel can be summed up in three key statements:

  1. Start with one initiative.
  2. Find a way to “break things” — as in a lab setting so real data can’t be altered — to deeply understand the problems to be solved.
  3. Keep everyone informed all the time about digital transformation initiatives, specific progress, and specific changes coming to their routines and workflow.

These are wisdom points manufacturers will need to apply to their supply chains as well as to their internal teams. Generally speaking, working on supply chain issues means working on external forces with outside partners. This makes bringing digital transformation to the supply chain a much larger challenge. A social variable becomes the fulcrum: trust.

If a manufacturer does not have dashboard-level insight to a supply chain as it delivers valuable parts, is it because the partners lack the digital sophistication to gather and deliver the data, or because the partners don’t trust anyone else with that knowledge?

A recent study published in the International Journal of Operations and Production Management tackles the concept of trust. The researchers look at the pain point where trust intersects supply chain relationships and ask: can digital transformation provide a replacement for trust?

After interviewing senior managers at 291 manufacturing firms in the US and UK, the report paints a scene of complicated findings. The actual impact of digital transformation is “far more complicated than the initial benefits that it appears to bring within a supply chain.” To the team, this means the technology is only effective when applied in the right context.

That “right context” centers on trust. “Manufacturing firms that aim to adopt new technologies should not consider advanced digital technologies as an alternative to trust.” Trust is a governance mechanism and a social construct, not an algorithm to employ. “Supply chain partners must strive to achieve a balance between trust and the right type of digital technology.”

The stakes are high. Despite being a social element, trust can become the factor which provides for breakthrough innovation. As motivational writer Stephen Covey notes, “Trust is the glue of life. It is the most essential ingredient in effective communications. It is the foundational principle that holds all relationships.”

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Learn how to tackle the challenges of supply chain management:

randall.newton@gmail.com'

Randall Newton

Randall S. Newton is Managing Director of Consilia Vektor, a boutique consulting firm serving the engineering software industry and related technologies. He is a Contributing Editor at Digital Engineering Magazine and AEC Magazine (UK). Mr. Newton has been in the engineering software industry since 1985 as a journalist, business analyst, publisher, programmer, and marketing consultant. His recent research explores the use of blockchain technology for industrial applications, and the rise of new design technologies for additive manufacturing.