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How COOs can lead the way on supply chain digital transformation

Today’s COOs are leading digital transformation initiatives that encompass the supply chain to steer their businesses through volatility.

In brief
  • The COO role has become increasingly key as organizations aim to counter disruption in ways that deliver business benefits and add strategic differentiation.
  • Networked supplier ecosystems and digital tools enhance visibility and efficiency. Predictive analytics help operations leaders stay ahead.
  • The benefits of operating model redesign include improved resiliency, service levels and financial flexibility.

As organizations look to innovate their operating models to align with evolving business landscape, the role of a chief operating officer (COO) has become increasingly critical. Beyond cost reduction, innovation and risk management, COOs help their organizations confront complex supply chains, digital transformation, sustainability goals, geopolitical and cybersecurity risks, regulatory compliance and workforce development. Leading organizations have discovered how to respond to disruption in ways that deliver business benefits and add strategic differentiation.

COOs are responding to the business and operational challenges brought on by these external forces by reassessing every aspect of operational strategy — including what it means to be a COO today.


For instance, it's no longer enough to optimize cost and deliver goods on time. Today, supply chains require a “fit-for-purpose” approach that accounts for trade-offs across multiple attributes such as cost, agility and sustainability. Another area of added scrutiny is to make operating models nimbler and more resilient.


Considering impacts from the COVID-19 pandemic, COOs are asking:


  • “Where should our people be located?”
  •  “Do we have enough IT support to grow the organization?”
  •  “How do we strategically partner with our suppliers to de-risk supply?”
  • “Do we have the right channels, routes to market and supplier base locations to efficiently meet customer expectations?”
  • “What changes or investments do I need to better anticipate such disruptions?”


Leading COOs are leveraging digital tools at their disposal to strategically address all of these concerns and help their organizations come out ahead. For example, offline planning exercises are being replaced with supply chain digital twins  to help organizations understand and manage risks and supply disruptions and respond quickly.


According to EY research, end-to-end visibility is the number one challenge for supply chains. Increased visibility into the entire product lifecycle enables organizations to set and achieve advanced sustainability goals, including diverse sourcing strategies, carbon emissions data collection, and creating a circular business model.


Further, COOs are influencing capital allocations, not just for traditional areas, such as plant and equipment, but also for technology/infrastructure upgrades, either through in-house builds or through acquisitions of companies with advanced digital capabilities.


Disruption defined the beginning of the decade, but leading COOs are now taking charge of redefining their future, considering regionalization of supply chains, focusing on resiliency and value creation through networks.

Top five priorities for today’s COOs

1. Strategic architecture delivers fit-for-purpose operational design.

To keep pace with today’s needs requires an agile process, rather than a rigid, linear one-size-fits-all approach. Developing a strategic architecture starts with examining enterprise strategy and the business priorities and trends that will impact the supply chain and operations. The next step is to design an end-to-end supply chain architecture that is tax-efficient and enabled by a differentiated operating model that uses data and digital tools to drive decisions.

While there are several aspects to consider, many organizations are zeroing in on product portfolio optimization, asset ownership (outsource vs. insource), capability delivery (global vs. regional vs. local), digital transformation (data, analytics, cloud and security) and talent management. Based on EY experience on these types of engagements, a fit-for-purpose operational design can deliver 8% to 15% cost savings through network footprint optimization and 15% to 25% in reduced lead times.

Cost savings up to
Based on EY experience, a fit-for-purpose operational design can deliver potential cost savings of 8% to 15% through network footprint optimization.

2. Resiliency plans offset interruptions.

Visibility and a well-defined roadmap are essential to building resiliency and agility into business operations. A resilient supply chain increases assurance of product availability at the right place and right time. A resilient plan shapes the operating model to anticipate change and makes an organization ready for any unforeseen future pivots. Companies use a variety of stress-testing techniques, supplier risk assessments, omni-capable agile networks, alternate sourcing strategies and scenario planning to avoid bottlenecks and delays. In a recent EY CEO Outlook Pulse Survey, 53% of industrial companies say they have nearshored or re-shored operations in the last 24 months.

3. Cost and cash efficiency drive immediate and long-term benefits.

An efficient operations strategy identifies requisite step changes to operating cost and working capital profile to fund transformation. These strategies not only address cost but also provide margin uplift, reduce value leakage, improve productivity and optimize capex allocations to drive long-term benefits.

An EY article highlights how some companies have experienced more than 10% reduction in cost of goods sold while improving their inventory and service levels. Organizations can also reduce selling, general and administrative costs by up to 25% due to indirect procurement cost initiatives.

4. Operating models embracing sustainability generate long-term value.

Companies are pursuing better utilization of resources in their supply chains. For example, EY research shows 72% of enterprises are reducing the water intensity of their operations and 58% are reducing material waste in production processes. In addition, consumers are now placing higher importance on environmental and social concerns (two of the three components of ESG, with governance being the third). They are looking for dubious practices, such as greenwashing, limited ESG disclosures and bloated ESG metrics. COOs should respond to these changing needs by transparently addressing sustainability metrics, proactively updating ESG disclosures and driving decarbonization across the product lifecycle, including sourcing, product design choices, waste management in manufacturing, and package design.

Looking ahead, COOs should strive to build circularity in their business models through collaboration with employees, customers, suppliers and investors.

5. Digital technologies provide visibility, create new revenue streams and enable a transparent ecosystem.

Digital tools and supply chain disruption have created new expectations for COOs. Advanced technologies such as control towers and supply chain analytics can help COOs gain operational visibility and enhance decision-making across the entire organization. Digital tools not only enable operational efficiencies, but also augment existing products or enable creation of new products or services, thereby creating new revenue streams.

Digital capabilities such as using advanced artificial intelligence (AI) and the latest applications can reduce forecasting errors; improve sourcing and procurement processes; improve tracing within the supply chain; optimize production and scheduling; streamline logistics and distribution activities; enhance product launch activities; and make service and returns more efficient. COOs should embrace digital disruptions and look to align their talent needs accordingly.

How to construct a transformation program

These five steps present the opportunity to improve business operations in many ways. There is even better news for COOs – benefits from the transformation can start with tangible improvements in as soon as three to six months.

Developing a successful transformation program begins with a self-assessment. Review the design, identify opportunities to provide differentiation and stress-test the resiliency of your existing operating model. These steps will help to prioritize plans and identify the appropriate leaders to own programs and initiate change. From there, organizations typically implement pilot programs, often focusing on immediate pain points and then moving on to testing larger sets, monitoring responses, and identifying gaps.

Operational transformation is a continuous process especially considering ongoing threats from cyber criminals, natural disasters, geopolitical events, new regulations, and uncertain economic conditions. By using advanced digital tools, COOs can prepare for and respond to these upending forces at a moment’s notice, turning potential disasters into averted crises. Even better, with a successful operational transformation, your enterprise could be in an optimum position to capitalize on change while competitors struggle with missed deadlines and lost opportunities.

EY-Parthenon contributors to this article include Anand Pandey. Other EY contributors: Sudhanshu Wasan, Rachel Newman and Runjhun Anurag.


Digital technologies enable COOs and their organizations to remain agile in responding to external pressures while setting the stage for additional cost savings and growth. The benefits of digital transformation extend beyond supply chain resilience. Transparency into operations can reveal cost-cutting opportunities, improve sustainability and help organizations find new revenue streams. A successful digital transformation program driven by the COO will help their organization face challenging headwinds and come out ahead.

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