Change happens: Adopting a digital supply network

By Brenna Sniderman

Sometimes I avoid change. This is only natural; a lot of people do, at least some of the time. I like things that are comfortable and familiar, things that I understand and know my way around. I may steer clear of change because I worry that new can be risky, and that I might result in being worse off in the end–-a tendency known as loss aversion. Beyond loss aversion, however, change can be particularly challenging because it tends to have a ripple effect–one change necessitates another, then another, until you find yourself having to update everything. Anyone who has ever upgraded just one piece of technology in their office, or even updated just one appliance in their kitchen, can understand this phenomenon.

The same tendencies that apply to the individual can apply on the organizational level as well. As companies become increasingly connected in the age of Industry 4.0 and the Industrial Internet of Things (IIoT), this domino-effect challenge becomes more acute. Updating one machine to connectivity and smart automation will not realize the same value as upgrading everything. Within the context of the digital supply network (DSN), an interconnected, open system that integrates information from many different sources and locations to drive manufacturing and distribution, the change ripples still further outward, to suppliers and other partners, and even customers.

And, in fact, this open connectivity–and, by extension, adoption of connected technologies–is necessary to make a DSN work. The access to data in real-time, across the entire supply network, is what enables the DSN to adapt quickly to changing situations, and better meet the needs of stakeholders. What that means, however, is that those who may feel reluctant to change toward Industry 4.0 may need to adapt if their partners are doing so.

This is particularly true within the Federal government. In Industry 4.0 in government, we explore the ways in which the government functions with respect to DSNs, identifying four main archetypes that government agencies typically fall into. (Figure 1) As public sector agencies typically work with private sector suppliers, they often must manage hybrid systems that incorporate the government’s own processes and those of commercial partners. What this means is that, as commercial companies increasingly adopt Industry 4.0 technologies and smart, connected supply networks, government agencies will likely find themselves needing to develop some approach for how to interact with DSNs even if they choose not to adopt them. This is the ripple effect.

Figure1: Four main federal agency archetypes

While applicable across all four government supply chain archetypes, this need to adapt appears to be particularly acute with two: buyer and seller. As a buyer, the US federal government is the largest purchaser of goods and services in the world. This involves working with a wide variety of private-sector partners, who supply the goods and services agencies need. In many instances, this can include moving those goods and services around the world, at times to remote locations, and having to anticipate what needs will be in difficult-to-reach areas so that they can be supplied accordingly.

As a seller, the government offers goods and services, and given its breadth of functions, it can do so at a significant scale. In its seller role, agencies sell goods and services to customers in much the same way as commercial organizations; for example, Amtrak, our passenger rail service, sells travel options to everyday customers, and thus works to provide a positive customer experience–better times, competitive fares, and comfortable travel conditions, among others. Thus, to stay competitive and to offer the level of service that customers may be accustomed to in the private sector, agencies may want to consider using the same strategy toward its supply network that commercial organizations do. In this scenario, change is driven by the need to remain competitive and provide customized service to engage travelers.

Change can be difficult. And DSNs represent an important change, one in which an interconnected network is necessary to create and capture the most value. Therefore, as scary as it can be, change becomes necessary simply to keep pace with their partners, customers, and other stakeholders. As organizations think through how they want to implement smart, connected technologies and change ripples outward toward the rest of their networks, change may become a necessity.

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