Supply chain leaders, it’s time to shift your thinking.
Despite rising customer demands and tightening budgets, supply chain leaders across all industries report lacking the data insights they need for effective decision-making. Fewer than half are using supply chain data to inform their strategies and 14% aren’t using data at all.
These numbers become more concerning in light of the rise of artificial intelligence (AI). Even as organizations race to adopt AI, smaller players are lagging behind compared to larger enterprises, and nearly every organization is struggling to demonstrate ROI for their AI investments. And AI projects that lack high-quality data and valuable analytics are especially doomed to fail.
How can supply chain leaders close this gap, setting themselves up for better information, bigger innovations and stronger supply chains down the line? Before they deploy people, time and technology on new supply chain initiatives, business leaders must first gain a clearer understanding of their most important stakeholders: their customers. And for that, they must do nothing less than look at their supply chains in an entirely new light: through the lens of customer-centric design thinking.
How does design thinking apply to supply chains? Traditional supply chain management pursues efficiency, cost reduction and predictability via centralized control and relies on stable demand forecasts and supply chain flows. Suppliers are the major focus — and relationships with those suppliers are transactional. Organizations and networks are siloed. And strategy doesn’t stretch much further than KPIs around just-in-time inventory and cost-saving measures.
In contrast, supply chain management driven by design thinking achieves these outcomes by emphasizing innovation, flexibility and transformation — all with a laser focus on understanding and meeting the needs of the customer. With customer-centric design thinking, supply chain leaders can foster creative solutions and test ideas for feasibility, making informed, iterative improvements to their supply chains with significant and lasting results.
Design thinking in supply chain management isn’t new; the darlings of the supply chain world, from Coca-Cola to Walmart, have been using it for a long time, and they’re using it in their current approach to AI, as well. And it’s very evident, based on their margins, revenue growth, customer experience and more, that they’re using it well. Unfortunately, however, many organizations are still catching up.
So, what does good design thinking in supply chains look like, in practice? Here’s how the experts are using it — and how any organization can engage it to improve their results.
How are these industry leaders approaching design thinking to improve their supply chains? First, they foster a customer-centric mindset, using customer feedback to drive innovation.
They break down silos within their organizations and throughout their supply chain networks, striving for inclusivity by bringing various roles and departments into the fold. They directly involve customers in the innovation process through co-creation sessions or advisory boards. They use detailed customer journey maps to visualize the entire customer experience.
They know where they want to go, but they are open to other destinations based on customer realities. They facilitate a culture of openness, letting customer-centric innovation drive the behaviors and the strategy of their supply chain.
They also leverage technology and provide the training and development needed to harness it. They provide their teams with access to the right tools — including visibility providers, analytics, automation and new AI capabilities — and provide the right incentives to use them, aligned to the right KPIs.
And with all these technologies, these leaders provide a safe sandbox for experimentation — in particular, experimentation alongside their best customers. They prototype and test new capabilities together, continuing to build empathy and trust as well as mutual success.
What does this approach look like in practice? Consumer goods giant Kimberly-Clark needed to find a way to manage individual trailer detention fees in their yard; with 35% of their trailers entering detention, they were spending close to $1M in detention fees per month.
Using design thinking, Kimberly-Clark’s supply chain leadership collaborated across multiple personas and functional areas, leading to the deployment of a fully digitized yard orchestration solution that provided proactive alerting for trailers entering detention. Now, the company can set up shipping coordinators to know when a trailer is in need of immediate attention, with alerts that happen every twelve hours. In Kimberly-Clark’s case, design thinking has driven agility and resilience across a critical component of their supply chain.
General Mills has had similar success with human-centered design thinking. By putting their customers at the center, General Mills was able to reduce supply chain disruptions and increase service levels. The company drove better response and decision-making capabilities across its supply chain team and was able to manage and improve response times more effectively.
Organizations should deploy similar thinking in their approaches to AI. A significant challenge lies in the successful execution and deployment of novel AI capabilities, where theoretical solutions meet practical application. In other words, the difficulty lies not in creating AI or machine learning models but in effectively implementing and integrating them into production to drive business decisions. But by finding the right champions on the customer side — especially if these AI initiatives are aimed at providing a better or less expensive service — these initiatives are much more likely to be successful.
What challenges lie in the way? Of course, adopting design thinking in supply chains takes effort. Standing in the way are cultural resistance and knowledge gaps; competing priorities; data and information barriers across organizations and networks; short-term thinking; and plain old risk aversion.
Every organization must also grapple with the perpetual trade-off between short- and medium-term goals versus the long-term need for transformation. In the short to medium term, it’s essential to get products out the door, ensure a steady supply chain, maintain manufacturing efficiency and provide excellent customer service. These fundamentals often conflict with the imperative to innovate and disrupt for long-term success.
Iteration and the willingness to fail fast are central to design thinking, yet not all supply chain leaders are inclined toward high stakes. For example, if on-time-in-full (OTIF) metrics decline due to a failed experiment, severe repercussions could follow including potential job loss. Indeed, the balance between maintaining current operations and pursuing transformative changes has never been easy, at any organization.
Design thinking: Slipping supply chains into drive
But despite the challenges, organizations can no longer afford to drift. On one hand, economic conditions have raised the stakes for every business. On the other, the technology landscape is burgeoning with new possibilities and a wealth of data lies just beyond supply chain leaders’ fingertips, waiting to be harnessed.
It’s time for organizations to slip their supply chains into drive. By adopting a customer-centric design thinking approach, supply chain leaders can unlock a world of opportunity, steering better decisions across their organizations and better outcomes for their customers.
