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Pearson on Excellence: Digitizing the value chain

October 01, 2013

Every year, more products are being produced by companies whose supply chain operations are intelligently linked with suppliers and business partners. Many of the machines that make those products are guided by advanced data analysis, decision science, and other smart technology. The people who consume those products are probably using digital connections to guide their choices and ultimately make a purchase.

Most companies can see themselves in at least part of the above scenario. But regardless of how intelligent most companies’ operations have become, there’s a lot more race left to be run. Consider some of the following digital innovations being made by businesses around the world.

A mobile phone manufacturer encourages its customers to “print” their own personalized phone cases. The process, of course, is 3-D printing: using a digital model to create solid objects by laying down successive layers of material. The technical advances of 3-D printing have improved this manufacturer’s ability to interact directly with its customers, build brand loyalty, and provide customized services.

However, 3-D printing is poised to enhance supply chain management capabilities in almost any industry: The closer to the point of need that companies can make (i.e., “print”) a product, the more they might reduce transportation costs and lead times. Costs could also be reduced by printing prototypes and on-site, on-demand spare parts.

More than 1,000 discrete categories of “interest-based advertising” allow Google advertisers to reach tightly defined audience segments with tailored messages, specific product offers and promotions, and carefully chosen up- and cross-sell opportunities.

One Google advertiser increased its brand lift by 40 percent. Another noted a 400 percent rise in conversions. Interest-based advertising is an old concept (putting your ad money where your market is) that uses 21st Century technology. Think of it as advanced behavioral marketing: targeting consumers by collecting user information and balancing it against how users behave on the Web sites they visit and the content of pages upon which they land.

Rossignol, a 100-year-old alpine equipment company, is using “gamification” to get closer to customers. The company recognized that skiers and snowboarders love to congregate after hitting the slopes and relive their best runs. Rossignol’s mobile Ski Pursuit app helps customers track their daily and season-long performance and quickly share details on Facebook and Twitter.

That’s the power of gamification: integrating game mechanics in unique and compelling ways in order to increase sales and heighten user engagement, satisfaction, and retention. Gamification has also helped Volkswagen to design a new car model, Citibank to sell credit cards, and LinkedIn to create a database of business models.

For several decades, Kanban has been helping companies acquire goods and equipment as close to the beginning of a production run as possible. This smart way to manufacture has recently been made smarter by “eKanban”—using the Internet to maintain real-time connections with suppliers and thus improve supply chain visibility, reduce transportation volumes, keep inventories low and even reduce working capital.

BMW is a big eKanban fan. Via the Internet, BMW sends Lear Corporation, one of its car seat suppliers, daily delivery schedules, giving the latter 300 minutes to produce and deliver the seats in sequence directly to the assembly line. In its first year of operation, BMW’s eKanban system helped the company save more than $82 million.

Trumpf, a German producer of intelligent machine tools and industrial laser systems, is going beyond efficient manufacturing. It is mining the data provided by machines to create more-networked (smart factory) operations in which information is autonomously exchanged and machines often control each other.

Trumpf also uses a cloud-based platform for remote diagnostics—using internally developed software to monitor inventories and order-processing requirements. In the near future, Trumpf may control individual machines using iPads and deploy laser lenses equipped with RFID chips that signal when they need to be cleaned.

The point of these profiles is to illustrate how even technology leaders can use digital innovations to further optimize their supply chains and their businesses. Making these leaps begins by thinking hard about how digital innovation relates to:

  • Products: The additional value they might deliver to customers and the increased data they might generate.
  • Services: Digitally-driven opportunities to hike sales, loyalty, and support.
  • Organization: The structural impact of digitally optimized communication, reporting, visibility, and analysis.
  • Processes: How technology might enhance flexibility and interactivity.
  • The end-to-end value chain: Business-improvement potential associated with connecting more fully and deeply with external stakeholders.

Digital smarts don’t just benefit a company and its customers. As digital strategies are further refined and applied, the best and the brightest may also generate new career opportunities for employees, higher quality of life within their organizations, and even a smaller carbon footprint.

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