Digitization has reached almost all aspects of businesses — including supply chains. New technology like embedded sensors, RFID, and GPS have helped companies transform their traditional supply chain structures into flexible, agile, open, and collaborative digital models.
In fact, according to a McKinsey survey, 93% of supply chain executives say they are actively planning to make their supply chains more resilient. And in this day and age, “resilient” means digital. Many companies are seeing the need to become more organized — and they’re doing that by regionalizing their supplies and nearshoring their processes. This type of organization ensures products don’t have to travel long (and expensive) distances.
Either way, there’s no denying that digitizing supply chains will allow these companies to improve their agility, visibility, and efficiency. Digitization allows for organizational flexibility and accelerates innovation.
Now, let’s dive into the meaning of digital supply chain management, understand how it’s different from a traditional supply chain, and explore the benefits of supply chain digitization.
In a traditional supply chain, companies need to source parts and raw materials to make their product. After they understand demand for their product, companies will then find the correct sales channels and use logistics to provide customers with visibility into their orders.
A digital supply chain, in contrast, offers significantly more visibility throughout the process. The integration and application of advanced digital technologies allows customers and stakeholders to monitor supply chain operations — from procurement data and inventory management, to distribution and transportation.
For example, Bluetooth Low Energy (BLE) asset tracking can offer instant updates on location, including when cargo is in transit. The main goal of supply chain digitization is to enable insight for greater efficiency. This, in turn, can cut down on redundancies and greatly increase profits.
Companies with digital supply chains can move their resources, assets, people, and inventory to where they need it at any given time. Digitization helps you reduce costs by giving you the ability to respond proactively to both transportation and manufacturing risks.
The potential payoffs of any fully-realized digital supply chain include saving time, money, and resources. It will allow your company to be less wasteful and more environmentally sustainable.
Traditional supply chains work based on historical transactional inputs, while digital supply chains function in real-time. Digital supply chains are networks, while traditional supply chains are linear. Supply chain networks communicate almost instantaneously, whereas linear supply chains move slowly and inefficiently.
Digital supply chains are also more accurate. Information from operational technology and IT systems are integrated with digital supply chain management, while traditional supply chains rely on standalone systems. When companies go digital, they can more efficiently find potential problems and predict likely risks.
Traditional supply chains rely on humans to make nearly every decision. Digital supply chains, on the other hand, have built-in automated decisions that are monitored by humans. Because of this, digital supply chains are exponentially faster.
Digitization in supply chain management empowers planning, sourcing, and logistics teams to collaborate. It also allows those teams to automate processes and leverage analytics. This type of synergy among teams drives growth, mitigates risk, and optimizes costs. Here are some more supply chain digitization benefits:
A digital operating model gives management more freedom and flexibility. For instance, what degree of centralization is needed to support specialization? How can you minimize process costs when you factor in local labor? How can your processes become more productive? With Digitization, you can answer these questions by analyzing data in multiple ways. And then you can be more flexible when implementing solutions.
Once you integrate your supply chain with digital technologies, you can also make faster and more informed decisions for each function. Digitization helps you measure performance accurately and efficiently by aggregating and organizing transactions. This, in turn, allows you to access information at both the micro and macro levels.
For example, BASF (a German multinational chemical corporation) uses AI and machine learning-based technologies to predict the optimal time to replenish supply when stock is running low. This type of automation leads to increased inventory visibility that supports smarter replenishment planning, more efficient decision-making, and better customer service.
An end-to-end digital platform can improve data accuracy, enhance efficiency, and increase supply chain efficiency by automating many labor-extensive processes. From determining the most appropriate shipping mode, implement smarter scheduling, and more — automation saves time and money.
Alerts can also be generated automatically, especially if purchase orders are in danger of delays or complications. This helps companies take precautionary measures and be prepared to handle customers who may have logistics-related complaints.
All digital transformation processes inevitably lead to innovation. Why? When data becomes available, it’s much easier to see trends and inefficiencies. This improvement over conventional supply chain management helps to strengthen the company’s business model over time and builds stronger relationships with suppliers and customers.
Digital transformation in supply chain management also increases customer engagement throughout their buying journey. For instance, when placing an order, digitization allows your customers to automatically stay updated with their order details. They know their order status all the way up to receiving it — thanks to the supplier’s automated tracking system. Here, digitization ensures that customers feel more secure and in control when buying.
For example, Farmer Connect uses Blockchain technology to connect coffee growers with the consumers they serve. By launching a mobile application, “Thank My Farmer,” they allow coffee lovers to trace the origin of their coffee and directly support the farmers who grow the beans. The app is a win-win for companies, workers, and customers. It connects the purchaser to traders, farmers, brands, and roasters.
If you’re looking to improve your organizations overall productivity and performance, here are some supply chain trends you should try:
Integrating eCommerce helps provide a more seamless customer experience and makes your operation more efficient. Once again, the free flow of information across departments is key. Thus, companies immediately see the benefits of interconnected supply chains for eCommerce operations.
AI in the supply chain helps companies analyze data, enhance performance, and perform routine tasks. AI also helps supply chain leaders solve problems with increased visibility across networks that were previously disparate or remote.
An IoT is a network of physical objects connected to the internet. The IoT already plays an important role in the supply chain, and it will gradually grow in importance with increasingly diverse applications. As a matter of fact, within a few years, up to 50% of companies could be using these advanced technologies to support supply chain operations.
IoT has the ability to improve fleet tracking, warehouse management, inventory control, and even technological and mechanical maintenance. Plus, imagine how “smart” warehouses and fleets might increase the accuracy and efficiency of multiple areas of the supply chain.
Blockchain can be greatly beneficial for businesses to minimize supply chain disruption and improve customer service. In fact, by 2024, global blockchain spending is expected to reach almost 19 billion U.S. dollars.
Blockchain has already helped integrate carriers, logistic providers, and shipping lines into a single platform. The transparency offered by blockchain technology helps to identify issues and cut out waste early in processes.
A digital twin is a model that simulates the supply chain’s performance with AI and advanced analytics, and explores the complexities that show risks and vulnerabilities. Basically, it’s a virtual representation of the supply chain that consists of hundreds of warehouses, assets, inventory, and logistics positions.
Having a digital twin helps increase visibility. It also allows leaders to be more strategic and ready to take advantage of opportunities — especially in complex supply chains.
Transforming your traditional supply chain into a digital one is a complex process. However, it’s absolutely necessary to stay competitive. Here’s how to do it in five steps:
The first step in implementing digital transformation in the supply chain is to define a clear vision and set some clear, attainable goals. These goals can be related to business objectives like faster decision making, improved supply chain visibility, and automated operations. When defining a vision, you need to:
When you unify your processes into one system, you gain end-to-end supply chain visibility. That means you get enhanced transparency to streamline core functions including warehouse management, inventory management, logistics, demand forecasting, and more.
Wherever you can, you should replace recurring or routine tasks with automated processes. Not only does it help you simplify tasks, it also allows you to derive meaning from large volumes of data. Make sure not to automate processes that include complex situations or require collaboration between planners — but look at each part of your business and see what can be automated.
Supply chain leaders need access to real-time data to make more informed decisions. Access to data and analytics helps you deal effectively with partners, suppliers, and your workforce. Real-time data also helps you identify potential disruptions and greatly increases visibility across the supply chain.
You can use AI-powered analytical tools for improving planning processes and drawing actionable insights. For example, using analytics, you can help prevent stock from being depleted completely and adjust your inventory accordingly.
Even if you are looking to shift to a digital supply chain, the switch would be worthless unless your team members are aligned with your new techniques and processes. Always make sure your shift integrates technologies with people, processes, and management. Without full integration, teams won’t be able to achieve your desired results with your new business model.
The quickly evolving technological landscape and increasing customer expectations are causing organizations to revisit how they do business. Adapting new technologies and integrating your supply chain leads to greater flexibility, efficiency and resilience.
For businesses re-evaluating their supply chains, now’s the time for action. Supply chain digital transformation isn’t easy, but it’s definitely worth it. If you have any questions about digitizing your supply chain, get in touch with Cin7 today and we’d be happy to assist you on your digital transformation journey.
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