Building Business Value with a Digital Supply Chain
- 16 February 2018
- Written by: bemelmans
- Category: Supply Chain
Supply chain focuses on the movement of materials, finished goods, capital, and other assets from place to place, as well as the production of finished goods. All these were previously executed discretely to finally reach the hands of customer. Nowadays, digitization has proved to be a game changer in bringing transparency in supply chain functions; from the suppliers of raw materials, components, and parts, to the transporters of those supplies and finished goods, and finally to the customers demanding fulfillment. More and more companies are opting for a digital supply chain to remain competitive, reduce costs and improve customer experience.
Many successful companies such as Uber, AirBnb, Netflix, and Alibaba are all service providers that own no actual inventory. Various reputed logistics providers have already embraced these technological changes, with DHL testing the use of augmented reality glasses among its employees and UPS looking to provide 3D printing services from its stores. It is getting obvious that the traditional supply chain has been officially disrupted.
While various large organizations have shifted gradually from traditional supply chain to a digital supply chain, many other industries are still quite unprepared for that. 2016 reports have stated that 90% of CEOs know that the digital economy will have a major impact on their industries, however less than 15% currently have plans to adapt to this economy. A further 71% of companies say their digital maturity levels are still “early” or “developing.” According to the Cisco Systems report “Innovative Manufacturers Recognize the Potential of Industrial IOT and Digitization,” 33 percent of the market is at some stage of adoption, but more than half (52 percent) of companies are not investing in digitization and therefore risk being disrupted. The report also asserts that this digital disruption will affect nearly 40 percent of businesses over the next three-to-five years.
Hence, to enable a successful digital transformation of the existing supply chain, and therefore reaping the full benefits of digital supply chain, the key lies in developing an orderly process for implementing and integrating the many technologies and capabilities required. Here are some essential factors to take into account to ensure an efficient digital supply chain:
- The omnichannel experience
Organizations should focus more on customer experience since omnichannel sales strategies have raised the bar when ordering products and services. It is now possible to order goods from anywhere, on any device, at any time. However, the challenge lies on companies who need to change business processes to ensure the same level of service in designing, producing, planning, and delivering these products on various channels.
- Analyze your Value chain
It is important to analyze your value chain, extending from your supplier’s supplier to your customer’s customer and beyond. In this way, you can identify the potential areas where you can add value to customers or shareholders using data, mobility and digitized services. This can be done by studying your own industry and other industries. Get to know what will be the next disruptive thing and what could potentially break your position or your value chain? Hence, identify scenarios, decide on priorities and frequently revise the action plan.
- Modernize your existing processes
A critical analysis of your current platform is vital. Is your application landscape supporting digitalization well enough? You can start by testing and piloting new solutions stepwise while modernizing your existing application portfolio. For instance: for process manufacturing, immediate benefits can be achieved by integrating sensors and analytics to update the preventive maintenance programs, to monitor the quality of the end product. Discrete manufacturing companies could streamline their production with electronic Kanban and robotics. Industrial Internet technology could optimize the use of machine tools; welding machines etc., not just by alerting on maintenance needs but also by helping people do their work more efficiently.
- Sustainability to mitigate resource scarcity
Sustainability is a contemporary business imperative for addressing the global shortage of resources and talent. It includes innovation and design processes that deliver sustainable products to the market; a product stewardship network that manages global product safety and compliance throughout the product lifecycle; and track-and-trace solutions to ensure visibility from raw materials to finished products and contain the effects of product recalls.
What are the main benefits of a digitally enabled supply chain?
- Improved forecasting
Through digitization, forecasting accuracy can be improved through faster data dissemination and high-end statistical analysis. This leads to readily available reliable data, and therefore the time required to generate a production plan is significantly reduced. Besides, with digitization, orders can be received from multiple channels and be automatically processed based on complete inventory visibility, leaving out the need to touch the orders unless there are exception scenarios to be managed.
- No more production delays
Sometimes, production dates often are missed because supply is constrained, material is delayed on the shop floor or items arrive to the shop floor damaged. Through a digital supply chain, transit information for products can be constantly supplied to planners and, in any given situation, re-planning can be done in real time to avoid production delays.
- Reduced transaction costs
The increase in power and efficiency of technologies has manifested itself in greatly reduced transaction costs for business operations both internally and externally. While the linear flow of designing, creating, and moving physical goods remains unchanged, the underlying data now flow through and around the nodes of the supply chain, dynamically and in real time. New interconnections between processes and sub-processes have transformed supply chains into efficient and predictive networks. When the cost of transactions falls, the ability to transact with more and different partners increases. This creates an opportunity to shift to a world of more networked supply chains, as companies can simply connect with more different partners when and where necessary in order to deliver substantially increased value.
In the evolving corporate world where every company is embracing new technologies, for supply chain entities, the question is not about how increasing technology will help reach new markets, define new strategies, or reach more customers more adequately. Instead, the question focuses on if the technology can be implemented fast enough to prevent a company’s extinction. Therefore it is up to leaders to keep their supply chains agile by making the shift from traditional to digital supply chains in an efficient way.