by With mature tools on the market, digital transformation is no longer a first-mover advantage; it has become industry standard.
Digitizing your supply chain is critical for streamlining business processes and remaining competitive — and it’s not as difficult as you might think.
Let’s get into how and why you should optimize, here’s a quick refresher.
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Table of Contents
What is the definition of supply chain digitization?
Supply chain digitization (also known as supply chain digital transformation) is the process of converting analog supply chain processes to digital ones by creating dedicated master data that aggregates information from across your entire supply chain as well as information from some external sources (e.g. internal historical sales data, point-of-sale consumer data, socioeconomic data such as unemployment rates, and external data such as Google trends or competitor prices).
Supply chain digitization is primarily accomplished through the use of software, whether off-the-shelf, custom-made, or a combination of the two, with a focus on automation and business intelligence.
In this post, we’ll look at the benefits of a digitally enabled supply chain and how companies in the transportation and logistics industries can get started on their digitization journeys (or optimize their current systems).
Supply Chains: Traditional vs. Digital
Digital supply chains predict and prescribe actions to take, whereas traditional supply chains plan and react.
Traditional supply chains are largely static and operate on rules based on historical transactional inputs, despite lag times, whereas fully digital supply chains operate in real time, are dynamic, and can adapt to changing circumstances.
Digital supply chains are networks, as opposed to traditional supply chains, which are linear.
Traditional supply chains frequently rely on stand-alone systems, whereas digital supply chains integrate data from IT and OT (operational technology) systems.
Digital supply chains balance profit and service levels rather than optimizing by node, shipment, or order.
In a traditional supply chain, identifying potential issues and predicting their consequences can be time-consuming.
Most businesses must conduct regular supply chain resilience assessments of their most critical suppliers, for example, based on SKUs, and manually list what steps to take to keep production running if any of those links fails.
In contrast, with a digital supply chain, shared quality and control data from the supplier allows companies to anticipate issues and respond proactively without the need for laborious preplanning.
The planning and management of all activities involved in sourcing and procurement, conversion, and logistics management are all part of supply chain management.
This includes working with stakeholders such as suppliers, intermediaries, third-party service providers, and customers to coordinate and collaborate.
Above all, humans make decisions based on machine inputs in traditional supply chains, whereas machines drive decisions with human oversight in digital supply chains.
The benefits of a digital supply chain
Supply chain digitization can have a significant impact on your bottom line and is critical to the success of businesses across many industries.
More than 85% of C-level executives believe that digitization efforts will improve cash flow and decrease Days Sales Outstanding.
The cost of not digitizing, on the other hand, is high — on average, the annual cost of manually entering data into ERP and back-end systems exceeds $1 million, and the annual cost of manually entering invoices from suppliers exceeds $600,000.
The digitization of logistics represents a significant opportunity to transform your company.
The following are some of the benefits of a digital supply chain.
Automation possibilities
Reducing manual tasks reduces the administrative burden on your team, frees them up for other tasks that may have gone unnoticed, and allows everyone to focus on their areas of expertise.
Automating also reduces human error, which means recouping revenue lost while correcting those errors.
Automation also expedites processes; for example, automated invoicing allows you to receive payment more quickly.
Keeping things together and linked
You’ll fall behind if you continue to rely on spreadsheets and email threads to get the information you need.
The significant time and effort expended on those tasks reduces efficiency and increases the possibility of human error.
Digitizing your supply chain opens up possibilities for connecting disparate systems, enabling communication across the organization, and establishing a single source of truth for information.
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Making use of data in decision-making
Decisions in the transportation and logistics industry must be made quickly, and agility is essential.
With a digitized supply chain, you can collect and analyze massive amounts of data with far less effort and in far less time than with analog systems.
You can then use that knowledge to inform your decisions, develop strategies, and prepare for any eventuality.
Incorporating real-time data from your digitized supply chain can result in significant benefits such as improved customer experience, increased sales, and reduced waste.
Risks in the digital supply chain
For all of its promise, the digital supply chain can introduce risk because it leverages new technologies and “turns on” systems on the shop floor that were never meant to be connected to the Internet.
One area of emphasis is the possibility of internet of things (IoT) security issues.
Part of the true promise of IoT is found in the so-called industrial IoT realm, in which assets and machines share data via sensors and software, enabling advancements such as predictive maintenance.
Sensors can measure a machine’s temperature, noise level, and vibratory rate. Increases in any of these factors may indicate an impending failure.
Accurate monitoring enables maintenance teams to address problems before they become critical.
This is an important way to reduce downtime in the manufacturing process.
However, because of the increased connectivity that digitization requires, risk can spread throughout the supply chain network all the way to—or from—the customer.
Bad actors ranging from overzealous competitors to criminals seeking to hold processes hostage may corrupt data or instruct machines to operate in an unsafe manner.
Shipments may be misdirected, and orders may be intercepted.
Of course, upgrading a supply chain necessitates capital expenditures at a time when many businesses would rather invest elsewhere.
Supply chain stakeholders may also require data that differs from what manufacturers require.
For example, the manufacturer may want throughput data at such a low level that it does not assist the retailer in determining whether production is on schedule.
How to make your supply chain management more digital
When it comes to digitizing your supply chain management, you have two choices: build or buy.
Unfortunately, both options have some drawbacks.
It can be difficult to find software that will work seamlessly with your existing systems right out of the box.
Furthermore, ready-made solutions are not tailored to your organization’s specific requirements, and developing custom plugins and integrations to make things work necessitates additional effort from your team (not to mention bug fixing and maintenance).
The main challenge in building software in-house is capacity.
For many businesses, large-scale digitization is too much for their existing development teams, who are preoccupied with other important tasks.
Building custom solutions with IT outsourcing is a better option because it eliminates the need for recruiting and allows your team to focus on keeping day-to-day operations running smoothly.
What to look for in a partner for IT outsourcing
One way to get started is to collaborate with a business process outsourcing (BPO) partner who provides IT development services.
Here are a few key characteristics to look for:
- Business continuity and partner strength in the face of adversity. Your IT outsourcing partner should feel like an extension of your team and instill confidence that they will keep you at the top of their priority list regardless of the challenges that arise. They should provide ongoing support for your digitization efforts while also assisting you in remaining agile.
- Service Level Agreements (SLAs) with a significant impact on your business. You’ll want to see increased visibility, high accuracy rates, robust and reliable data protection, impressive processing speed and service hours, and cost containment pricing in your SLAs as you negotiate them. Your IT outsourcing solution should be tailored to your specific requirements and produce tangible results.
- Using smart technology strategically to streamline client processes. It should go without saying that your IT development partner should be knowledgeable about the appropriate technology and solutions for your company. They should be able to innovate wisely using a variety of skills, such as systems development, database development, and .NET programming.
- A skilled team committed to your success. It is essential to have a partner with at least ten years of industry experience. Don’t be afraid to check out a company’s referrals and industry contacts.
With the right BPO partner on your side, you can digitize your analog processes and create a more efficient supply chain, providing your organization with increased efficiency, agility, and revenue while also allowing your team to focus on the day-to-day operations that keep your business growing.
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7 Steps to creating a digital supply chain
There is no one-size-fits-all approach to digital transformation.
However, the first step is to ask a simple question: How can we use data to solve problems?
Check that you understand the fundamentals
If your current setup isn’t performing well in terms of supply chain performance, figure out what needs to be improved before introducing new technology.
Bring together disparate functions
Don’t think of discrete functions like procurement and manufacturing.
Concentrate on how various stakeholders contribute to the desired business outcome.
Consider conducting a survey to gather information and assess awareness.
Define business objectives that are more than just operational efficiency
Improved demand planning is one example.
A digital supply chain can provide a clearer picture of the link between raw materials and products, as well as answers to questions such as, “How would a missed purchase order from Supplier A affect our product catalog?”
Bring everyone on board
Hopefully, you’ve assembled your tiger team.
You must now broaden your message: Define the supply chain strategy message and ensure that it is communicated to everyone in the organization, from senior management to the shop floor.
To bring together cross-functional teams, use an agile development methodology (one that seeks to achieve bite-sized goal-sized goals for teams working toward a larger goal).
Take inventory of your own data
Examine what supply chain data the company already collects and how that data set can be expanded.
Can, for example, an algorithm be used to accurately predict needs instead of manually calculating safety stock?
Look around you
Begin by considering what information your suppliers can share automatically via IoT and APIs, as well as what you can share with them.
Projects should be prioritized
What is the low-hanging fruit that will result in a quick win?
Perhaps it is the use of predictive analytics for demand planning, more dependable order processing, smarter logistics planning, warehouse automation, or improved end-to-end transparency and real-time response to disruptions.
Conclusion
Digitizing your supply chain is critical for streamlining business processes and remaining competitive.
Digital supply chains are networks, as opposed to traditional supply chains, which are linear.
More than 85% of C-level executives believe that digitization efforts will improve cash flow and decrease Days Sales Outstanding.
Digitizing your supply chain opens up possibilities for connecting disparate systems, enabling communication across the organization and establishing a single source of truth for information.
Digital supply chain management can introduce risk because of increased connectivity that digitization requires.
Bad actors ranging from overzealous competitors to criminals may corrupt data or instruct machines to operate in an unsafe manner.
For many businesses, large-scale digitization is too much for their existing development teams.
The right BPO partner can help you digitize your analog processes and create a more efficient supply chain, providing your organization with increased efficiency and agility.
They should provide ongoing support for your digitization efforts while also assisting you in remaining agile.
A digital supply chain can provide a clearer picture of the link between raw materials and products.
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