How manufacturers can adopt digital supply chains: PwC

As US manufacturers recover in the wake of debilitating supply-chain issues ushered in by the COVID-19 pandemic, efforts are underway to ramp up adoption of digital technologies to strengthen supply chains to drive growth and efficiencies, according to PwC’s 2023 Digital Trends in Supply Chain Survey. The need to modernize supply chains with digital technologies comes at a pivotal moment, as manufacturers have learned that building in agility and resilience has never been more important to remain competitive, cyber-secure, and sustainable.

Key take-away recommendations from PwC’s 2023 Digital Trends in Supply Chain Survey

Increase investment in legacy — and new — digital technologies
Enhance digital technology skills
Redouble efforts to integrate ESG compliance and reporting capabilities into supply chain systems

Industrials invest in supply chain technology to drive growth, cut costs

Q: Which of the following are your main objectives when investing in technology for your supply chain?

Drive growth

%

Gain competitive advantage

%

Optimize costs

%

Improve customer service

%

Increase resiliency

%

Explore new innovations

%

Respond to government regulations

%

Source: PwC’s 2023 Digital Trends in Supply Chain Survey: IP base 51
Note: The industrial products sector includes respondents from aerospace and defense; automotive; chemicals; engineering and construction; forest, paper and packaging; and industrial manufacturing.

Uneven investment across supply chain technology portfolio

Digital technologies that drive efficiency and visibility have been mainstreamed in manufacturing supply chains. Most manufacturers (53% of respondents) have achieved “full adoption” of cloud-based data platforms, IoT technologies and connected services. About a third (35%) have fully adopted scanning and intelligent data capture (OCR).

However, adoption of digital technologies that help drive predictive insights or cross-enterprise efficiency are in the early stages. Just one in four (24%) manufacturers have applied artificial intelligence to their supply chains, according to our survey. Even fewer have adopted blockchain (18%), robotics/robotic process automation (RPA) (16%) and augmented reality (14%). Given the relatively lean adoption rates of these technologies, manufacturers expect to make investments to increase them. Nearly three-quarters (73%) report that they plan to make investments in AI/ML, robotics/RPA and blockchain over the next two years.

Most manufacturers have fully adopted cloud, IoT, connected devices

Q3: To what extent have the following technologies been adopted by and/or applied within your supply chain operations?

Cloud based common data platform

%

Internet of Things (IoT) / connected devices

%

Scan and intelligent data capture / OCR

%

Artificial intelligence (AI) / machine learning (ML)

%

RFID

%

Blockchain

%

Robotics / RPA

%

Source: PwC’s 2023 Digital Trends in Supply Chain Survey
Number of respondents: 51
Note: The industrial products sector includes respondents from aerospace and defense; automotive; chemicals; engineering and construction; forest, paper and packaging; and industrial manufacturing.

Budget and digital talent shortfalls impede adoption

Despite some success in adopting digital technologies — and plans to invest in areas that are lagging — many manufacturers are encountering systemic obstacles and other challenges in getting the most out of digitizing the supply chain. For example, few tools yield “out of the box” benefits, requiring more time and digital know-how to make an impact, which should be considered in the business case. Nearly half (47%) cite budget constraints as the top challenge of digitizing their supply chains, followed by insufficient capabilities of supply chain hardware and software systems (31%) and a misalignment of supply chain goals and the business’ overall strategic goals (31%).

Constrained budgets top list of challenges of digitizing supply chains

Q2: What are your biggest challenges related to digitizing your supply chain?

Budget constraints

%

Supply chain goals are not aligned with the company's strategic goals

%

Software and hardware systems do not enable the analytical and process capabilities the company requires

%

Do not have the right infrastructure in place to support digitization (such as cloud-based technologies)

%

Difficulty attracting, developing and retaining the "digital native" talent needed to transform our supply chain

%

Lack of clear understanding of the business and technical capabilities needed to successfully digitize

%

Source: PwC’s 2023 Digital Trends in Supply Chain Survey
Number of respondents: 51
Note: The industrial products sector includes respondents from aerospace and defense; automotive; chemicals; engineering and construction; forest, paper and packaging; and industrial manufacturing.

Room for improvement to integrate environmental, social and governance (ESG) into supply chains

Manufacturers face difficulties in tracking ESG in their supply chains. As they navigate into a new era of ESG regulations and compliance — namely the tracking, monitoring and reporting of Scope 1, 2 (and, in some cases, Scope 3) carbon emissions — many are facing challenges to do so on numerous fronts. Chief among these is the lack of digital skills, nearly two of five respondents (39%) said that poses a “major challenge” in integrating ESG into their supply chain. Likewise, nearly a third (27%) cited inadequate availability of data and digital tools and a lack of understanding of ESG regulations among leadership.

Digital skills shortage drags on efforts to integrate ESG into supply chain

Q12: To what extent do the following pose a challenge to integrating ESG into your supply chain?

Employees lack digital skills

%

Inadequate availability of data and digital tools

%

Leadership lacks understanding

%

Lack of financial support

%

Lack of digital ESG or digital supply chain strategy

%

No urgency to address ESG issues

%

Source: PwC’s 2023 Digital Trends in Supply Chain Survey
Number of respondents: 51
Note: The industrial products sector includes respondents from aerospace and defense; automotive; chemicals; engineering and construction; forest, paper and packaging; and industrial manufacturing.

Ramping up tech investment, digital skills to mitigate supply chain risk

Most manufacturers are acutely aware of the myriad supply chain risks that are only becoming more entrenched, persistent and far-reaching. These include cyber-attack vulnerability, tracking greenhouse gas (GHG) emissions, price volatility and uneven availability of materials and finished-product inputs.

Mitigating such rising risks requires investment in hard and soft infrastructure. Most manufacturers are well aware of this new reality. One-third (33%) “strongly agree” that their organization should invest more in technology to identify, track and measure supply chain risk. And just 27% strongly agree that the tech investments they’ve made so far have enabled faster decisions to help reduce risk.

But the need to manage supply chain risk also extends to enhancing digital skills. Only 20% of manufacturing leaders strongly agree that their workforce has the digital skills necessary to identify risk in the supply chain. A quarter of respondents cite the difficulty attracting, developing and retaining the digital native talent needed to transform their supply chain as a top-three biggest challenge related to digitizing their supply chain.

One in three manufacturers agree more investment needed to digitize supply chain

Q14: To what extent do you agree or disagree with the following statements about risk in your supply chain?

Our company should invest more in technology to identify, track and measure supply chain risk

%

Our technology investments have allowed us to make faster decisions to reduce risk

%

Our existing processes and systems adequately manage risk in the supply chain

%

Our workforce has the digital skills necessary to identify risk in the supply chain

%

Source: PwC’s 2023 Digital Trends in Supply Chain Survey
Number of respondents: 51
Note: The industrial products sector includes respondents from aerospace and defense; automotive; chemicals; engineering and construction; forest, paper and packaging; and industrial manufacturing.

Key recommendations

Increase investment in legacy — and new — digital technologies

Assess how your existing digital tech contributes to making your supply chains more efficient, resilient and secure — and put in place plans to continually improve on the impacts of that technology. Areas of improvement can occur on numerous fronts, including a better understanding of demand and supply, visibility of inbound materials and customer shipments, collaboration with suppliers, and enhanced ROI. Increasing your investment in newer technologies (including artificial intelligence/machine learning, blockchain, robotic process automation, augmented reality, etc.) can help yield such impacts. For example, AI can help provide deeper insights on future demand as well as improve machine learning applications that can lead to more effective decision-making.

Enhance digital technology skills

Digital technologies are only as strong as the talent implementing them. Upskill your existing workforce — and attract new talent — to extract the greatest value from what has become a wide portfolio of digital technologies, including GHG emissions tracking, monitoring and reporting capabilities.

Redouble efforts to integrate ESG compliance and reporting into supply chain

As rules and regulations — as well as societal and customer buy-in — surrounding ESG become more stringent and mainstreamed, you can get in front of the curve in order to stay compliant and competitive. For example, manufacturers may increasingly need the technologies and capabilities to integrate GHG emissions data into parts data, customer data, transportation data, as well as include ESG variables into operations optimization algorithms. According to our survey, nearly one in five (18%) respondents agree that a lack of urgency to address ESG issues poses a major challenge to integrating ESG into their supply chains.

Leadership should take the lead on tracking supply chain emissions. Most manufacturers are well aware of the financial and operational benefits of adopting supply chain technology. Yet only 18% of respondents agree that “responding to government regulations” was a top-three objective for digitizing supply chains. And just one in four (27%) agree that a lack of understanding on the part of leadership poses a challenge to integrate ESG into the supply chain. Going forward, it’s likely to become increasingly important for leaders to accelerate efforts to monitor — and report — emissions throughout their supply chains through greater investment in the technologies needed to carry that out.