Digitization has touched upon all aspects of businesses, including supply chains. Technologies such as embedded sensors, GPS, and RFID have helped companies transform their existing traditional (a mix of paper-based and IT-supported processes) supply chain structures into more agile, flexible, open, and collaborative digital models.
Digital transformation in supply chain management enables organizational flexibility, business process automation and accelerates innovation in supply chain management. In order to take maximum advantage of digitized supply chain models, it is important that companies make it an integral part of the overall business model and organizational structure.
In a Mckinsey survey of supply chain executives, 93 percent reported that they are planning to take steps to make their supply chains more resilient, including nearshoring and regionalizing their supply chains.
There’s no denying that organizations are willing to digitize their supply chain management from the traditional approach to improve agility, efficiency, and visibility. On that note, let’s dive into the meaning of digital supply chain management and understand how it is different from a traditional supply chain.
What is a digital supply chain?
In a typical supply chain, the flow of goods and services involves sourcing and procuring raw materials and parts, designing and making a product, estimating the demand, arranging sales channels and logistics, and then providing customers with visibility into their orders.
A digital supply chain, in contrast, provides significantly more visibility into the workings of the chain. It is the process of integrating and applying advanced digital technologies into supply chain operations, from procurement data, inventory management to transportation and distribution. For instance, Bluetooth Low Energy (BLE) asset tracking can provide instant updates on location, including when cargo is in transit.
The ultimate goal of supply chain digitization is to enable insights for greater efficiency and facilitate greater profits. Companies with digital supply chain transformation can better move their resources, people, assets, and inventory to where they are needed at any given time to reduce costs by responding proactively to transportation and manufacturing risks.
The potential payoffs of a fully-realized digital supply chain include saving in every area, including time, resources, money, and reduced environmental footprint.
Traditional vs digital supply chains
Traditional supply chains function on rules based on historical transactional inputs, while supply chains integrated with digital technologies function in real-time. While digital supply chains are networks, traditional supply chains are linear.
In digital supply chain management, information from IT and operational technology systems are integrated, while traditional supply chains often rely on standalone systems. Traditional supply chains require a lot of legwork when it comes to spotting possible problems and predicting likely risks.
With supply chain digitization, in contrast, shared quality and control data can enable companies to anticipate issues and take immediate precautionary measures. Above all, in digital supply chains, machines are driving the decisions with human oversight, while in traditional supply chains, humans are making decisions based on machine inputs.
Why does digital transformation matter in supply chain management?
Digitization in supply chain management empowers your planning, sourcing, and logistics teams to collaborate, automate and effectively leverage analytics. It has also proven to drive growth, mitigate risk, and optimize costs.
Here are a few other supply chain digitization benefits, so let’s dive in!
Organizational flexibility: With a digital operating model, management has greater freedom to choose the appropriate degree of centralization needed to support specialization or minimize process costs given different local labor costs and productivity levels across locations. A major benefit for an organization when it centralizes certain specific functions is higher value through better quality and productivity.
Better decision making: Once your supply chain is integrated with digital technologies, you will make faster and informed decisions for each specific function. Also, you can measure performance accurately and efficiently by aggregating transactions and available information at the macro level, thereby making appropriate decisions to avoid distortions created by average costing.
For instance, BASF, a German multinational chemical corporation, is using AI and machine learning-based technologies to accurately predict when the product stock is running low and what is the optimal time to replenish supply and minimize disruptions. This has led to increased visibility into inventory levels, which supports smarter replenishment planning, more efficient decision making, and, ultimately, better service to customers. The recent tech development in digital twin technology for businesses has also brought a model-driven decision making approach into the picture for sustainability and feasibility.
Increases automation: An end-to-end digital platform creates efficiency, improves data accuracy, and increases supply chain efficiency by automating many labor-extensive processes and facilitating decision-making at multiple stages in the lifecycle. Automation also determines the most appropriate shipping mode, carrier, and schedule while considering time, speed, priority, and other elements.
For instance, alerts are generated automatically when purchase orders are in danger of delays or complications. This helps companies to take precautionary measures and be better prepared to handle customers.
Accelerates innovation: All digital transformation processes are aimed towards a single goal – innovation. This improvement over the conventional way of supply chain management will help strengthen the company’s business model and, at the same time, help build relationships with not only suppliers but also customers.
End-to-end customer engagement: Digital transformation in supply chain management will increase customer engagement in his journey. For example, after placing an order, a customer will stay updated with his order details until receiving it with the help of the supplier’s automated tracking system. This will ensure that customers have more control, feel more secure, and appreciate their experience when buying that brand.
Farmer Connect is one such company that uses technologies like Blockchain to connect coffee growers with the consumers they serve. They have launched a mobile application ‘Thank My Farmer’ that allows coffee lovers to trace the quality and origin of their coffee, and even support the farmer who grew the beans. The app connects the user to farmers, traders, roasters, and brands.
Top tech trends in supply chain digital transformation
In this section, you will learn about different supply chain trends you must optimize in 2022 and beyond to improve your organization’s overall productivity and performance. So, let’s begin!
