Leveraging supply chain disruptions to accelerate digital transformation

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“Never waste a good crisis” is a phrase worth pondering in the realm of digital transformation for supply chains. Historically, major companies neglected supply chain transformation and digital investments until global disruptions, such as the Covid pandemic, forced a change. Previously, efficient performance satisfied stakeholders, with suppliers delivering on time and in full.

However, recent crises — from the pandemic to geopolitical upheavals like the Suez Canal blockage and the Ukraine conflict — have exposed the fragility of supply chains built on Just In Time (JIT) principles. These disruptions have highlighted the need for resiliency over sheer efficiency.

Amid these challenges, there lies an opportunity: supply chain crises can catalyze buy-in and funding for much-needed transformation initiatives. This article explores critical frameworks that procurement and supply chain teams use to implement transformational projects, ensuring long-term benefits beyond immediate crises.

I’ll explore these topics further at our upcoming LinkedIn Live event on Thursday, Aug. 22, at 10:00 AM PST.

Why digital procurement transformation stalls: Overcoming key bad practices

It’s worth asking why it often takes a crisis to implement transformational change in supply chain and procurement. The reality is that changing the prevailing mindset and culture around digital procurement and supply chain technology in large enterprises has been far from easy. While there are many underlying reasons, let’s focus on three core bad practices that often impede transformation by causing efforts to implement new technologies and processes to be overly cautious, intensely consensus-driven and complacent regarding the speed of progress.

Overcoming Bad Practice 1:
Letting legacy systems and processes be IT’s problem

For decades, the prevailing attitude was that digital transformation was the job of the IT department. If a supplier portal wasn’t functioning, if a P2P system wasn’t correctly matching invoices with the proper Purchase Order or if data was inaccessible or missing, IT was often identified as the bottleneck.

The reality is that IT departments at big companies are overworked and beset by competing priorities from every department clamoring for their own digital ‘stack.’ To put it mildly, procurement and supply chain isn’t always IT’s top priority. The Covid supply chain crisis, however, created a need for better accountability and ownership of systems and processes within the business functions where they are used.

The increased willingness to implement the best tools and rapidly test solutions has led to more user-friendly applications, reducing dependency on highly technical admins and mitigating IT-related risks in supply chains. For instance, the recent CrowdStrike outage highlighted how reliance on single access points can cripple operations across banks, airlines and retailers. This incident is a powerful example for supply chain and procurement executives to advocate for agile, resilient approaches to managing processes, orders and shipments.

Overcoming Bad Practice 2:
Replacing ‘If it ain’t broke, don’t fix it’ with an age limit on software

The crisis of Southwest Airlines illustrated for many procurement and supply chain leaders the high cost of decades of technical debt in software systems. When Southwest’s scheduling software failed, thousands of passengers were left stranded. Southwest repaid passengers $600 million and reported a $1.1 billion loss to revenue, but many believe the reputational cost to Southwest among consumers was significantly higher.

A frank investigation revealed that Southwest’s pilots union had flagged outdated scheduling software as a critical issue, even prioritizing it over their pay increase. Executives, however, perceived the costs of inaction as lower than updating the software, adhering to the ‘if it ain’t broke, don’t fix it’ mindset. This resulted in accumulated technical debt far exceeding the potential costs of improvement. This case illustrates how hidden risks in old software can lead to unexpected failures, prompting procurement and supply chain leaders to advocate for proactive updates rather than relying on outdated systems.

Overcoming Bad Practice 3:
Replacing over-reliance on legacy tech vendors with a resilient approach

Supply chain managers recognize dual sourcing for critical materials and parts as an essential resiliency practice. Relying on a single vendor poses significant risks, creating single points of failure and reducing leverage in pricing negotiations for IT contracts and software licenses. This dependency also fosters complacency among legacy tech vendors, hindering innovation and regular updates.

Many supply chain software systems appear outdated, having been developed long before the advent of modern technology like the iPhone. For instance, while individuals can use sophisticated weather apps to make informed decisions, many 2024 supply chain systems still struggle to incorporate real-time weather data into demand planning and supply management. Newer systems that reduce order cycle times can make real-time data more actionable, especially in extreme weather events, where proactive measures can significantly mitigate risks.

Crises highlight why inaction is riskier than embracing transformation

Humans tend to address familiar issues over unfamiliar ones, making digital transformation in supply chains feel daunting. While the slow pace of change can frustrate leaders, understanding this bias is crucial. Crises like outages, shortages and natural disasters clearly show that caution and consensus are often riskier than decisive, data-driven actions taken quickly.

Preparation is less costly than mitigation and far cheaper than losing business continuity. Recent supply disruptions have highlighted the importance of taking measured risks and avoiding unnecessary delays. Crisis storytelling has become a valuable tool for leaders to demonstrate the need for proactive transformation.

Looking to continue the conversation? Join me and Accenture’s Dr. Rachel Rutkoski for a LinkedIn Live event on Thursday, Aug. 22, at 10:00 AM PST. We will discuss how modern procurement organizations are pivoting toward technology solutions, like Arkestro, to navigate supplier and data disruptions more effectively.