Supply Chain Digital Transformation: Why It Should Matter to Your Organization?

COVID-19 has hit hard upon all aspects of businesses, including supply chains. There has been a significant disruption in the supply chain sector due to the global lockdown, requiring market leaders to revamp their operations strategy and embrace supply chain digital transformation to prevent future disruptions as we enter the new normal after COVID-19.

It is why businesses across industries are adopting advanced technologies – from blockchain and intelligent automation to artificial intelligence and machine learning – which have proven to be the support system for all SMBs across the globe.

Technologies like 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 and business process automation and accelerates innovation in supply chain management. 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.

Let’s take a quick look at some digital supply chain transformation stats:

• In a Mckinsey survey of supply chain executives, 93% reported that they are planning to take steps to make their supply chains more resilient, “including nearshoring and regionalizing their supply chains.” 
• According to insights from Gartner, bringing digital transformation into the supply chain can lead to a 20% increase in revenue and a 50% reduction in process costs.
• Over the next decade, machine consumer demand will become increasingly relevant, creating more than 20% of revenue. 
• CSCOs (Chief Supply Chain Officers) anticipate double-digit growth in machine orders by 2030.
• More than 60% of supply chains are planning to align strategy and build the capability to design machine response strategy over the next three years.
• Considering these supply chain digitalization statistics, CSCOs must revolutionize their operations to keep pace with the increasing acceleration of machine orders and accelerate digital supply chains.

There’s no denying that organizations are willing to digitize their supply chain management to improve agility, efficiency, and visibility. On that note, let’s dive into digital supply chain management’s meaning and understand how it differs from a traditional supply chain.

[Also read  “How to recession proof your business using digital transformation solutions.”]

Supply Chain Digital Transformation Examples:

Walmart’s recent digital supply chain risk management strategy has enabled the industry giant to provide customers with more accurate information about the shipping and delivery of their orders — a long-awaited feature that was initially accessible for items bought directly from the store only.

Furthermore, the automated tracking system ensures that the customers will stay informed about every stage and the status of their order until it is delivered. By experiencing digital transformation in logistics and supply chains, customers will feel more elevated and engaged throughout their buying journey. This gives customers an improved experience and greater satisfaction with their purchases.

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. In such situations, an IT consulting company has a great role to play.

In contrast, with supply chain digital transformation, shared quality and control data can enable companies to anticipate issues and take immediate precautionary measures. Above all, in digital supply chains, machines drive the decisions with human oversight, while in traditional supply chains, humans make 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 benefits of supply chain digital transformation, so let’s dive in!

1. 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 significant benefit for an organization when it centralizes certain specific functions is higher value through better quality and productivity. 
2. Better Decision Making: Once your supply chain is integrated with digital technologies, you will make faster and more informed decisions for each specific function. Also, you can measure performance accurately and efficiently by aggregating transactions and available information at the macro level, making appropriate decisions to avoid distortions from average costing.

For instance, BASF, a German multinational chemical corporation, uses AI and machine learning-based technologies to accurately predict when the product stock is running low and 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 customer service. 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.

3. 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.

4. 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 suppliers and customers. 
5. 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 a 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

Let’s get started with the different supply chain trends you must optimize in 2023 and beyond to improve your organization’s overall productivity and performance.

1. eCommerce Integration: Modern-day technology in supply chain management allows B2B sellers to identify and resolve any inefficiencies within their supply chain models.

Connected systems make it possible for them to offer seamless customer experiences and run efficient operations. Thus, companies are starting to utilize the benefits of interconnected supply chains for their eCommerce operations, enabling a free flow of information across departments.

2. Cloud Computing: The ever-rising demand for cloud computing is also an emerging tech practice that has helped accelerate supply chain digitization. Now, companies store the data on local servers instead of storing it on the cloud for easier and faster accessibility. In straight term, with cloud computing adoption in the supply chain, companies can easily access the needed information and share them with other companies or stakeholders anywhere, anytime.

3. Artificial intelligence: Artificial intelligence (AI) in the supply chain consists of a toolbox of technology options that help companies understand complex content, enhance human performance, and take over routine tasks.

AI and analytics help supply chain leaders solve long-standing data silos and governance challenges. Its capabilities allow for more integration and visibility across networks of previously remote or disparate stakeholders.

4. Internet of Things (IoT): IoT is a network of physical objects connected to the internet. The IoT already plays a significant role in the supply chain, but it will likely continue to grow in importance with increasingly diverse applications. In just a few years, 50% of companies could use other advanced technologies to support supply chain operations.

IoT in manufacturing and supply chains can also be used to improve warehouse management, fleet tracking, inventory control, and even technological and mechanical maintenance. It could even be used to create entirely smart warehouses and fleets, increasing efficiency.

5. Blockchain: Blockchain has been incredibly beneficial for businesses to minimize supply chain disruption and improve customer service. By 2024, global spending on blockchain solutions is projected to reach almost $19 billion. Over the past few years, this technology trend has integrated different business streams, such as carriers, shipping lines, and logistic providers, into a single platform.

Blockchain also allows logistics business operations to process data by cutting out waste efficiently. The transparency offered by blockchain technology helps identify issues even before they occur.

[Further reading: On-demand logistics app development cost and its associated factors]

6. Supply Chain Digital Twins: It is a virtual representation of the supply chain that consists of hundreds of warehouses, inventory, assets, and logistics positions. The digital twin simulates the supply chain’s performance using AI and advanced analytics, including all the complexities that drive risks and vulnerabilities. A digital twin also increases visibility and helps your workforce to take advantage of opportunities, particularly in complex supply chains.

Five Steps To Digitizing Supply Chain

Moving from a traditional supply chain to a digital one is a complex process, but taking the first step is essential if you want to reap the maximum benefits of digitalization in supply chain management and logistics. Here are the steps that will help you prepare for digital transformation in supply chains. 

1. Define a Vision: The first step for implementing digital transformation in the supply chain is to define a clear vision. Make sure that the vision is aligned with your enterprise goals. These goals can be related to your business objectives, such as better and faster decision-making, automated operations, and improved supply chain visibility.

• Assess resources and existing systems: Identify what capabilities you’ll need to achieve your transformation goals and determine the gaps. 
• Legacy systems:  Ensure that your existing systems use technology to support your new goals. Is the technology used by you aligned with your business objectives? Identify digital solutions and legacy systems to help achieve the desired business outcomes. 
• Data collection and analysis: Assess the capabilities of existing systems to generate, collect and analyze data. Check if the data can be accessed easily to draw actionable insights.
• Workforce skills: Determine if your team has the required skills to work with and adapt to the new business model.

2. Unify Data and Processes: Use a unified platform to gain complete, end-to-end supply chain visibility. Utilize enhanced transparency for streamlining core functions, including inventory management, warehouse management, demand forecasting, and logistics. The main objective is to increase visibility for every role and process across the extended supply chain.

Also Read- How much does it cost to build a DAM software like Brandfolder

3. Automate the Planning Process: With automated planning, you can simplify tasks and derive meaning from large volumes of data. Replace routine or recurring tasks with automated processes. But do not automate processes that involve complex situations or require collaboration between planners.

4. Use Data and Analytics: Supply chain leaders need access to real-time data to make informed decisions. It also helps them deal effectively with partners, suppliers, and other related functions. Real-time data also helps identify potential disruptions and increases visibility across the supply chain.

Moreover, you can use AI-powered analytical tools to improve planning processes and draw actionable insights. For instance, using analytics, you can help prevent an out-of-stock situation and adjust inventory accordingly.

5. Align People with Processes: Even if you shift to a digital supply chain, it would be futile if your team members were not aligned with the new techniques and processes.

This shift should integrate technologies with processes, people, and management. Without such integration, teams may not be able to achieve the desired results in the new business model.

[Also Read: Understanding Load Planning Software Features and Cost]

What’s Next?

For businesses re-evaluating their supply chains, now is the best time to start implementing their plans. Digital transformation in the supply chain today is one of the most effective and safest ways to build a resilient business. 

You may like reading: How is AI Transforming the Future of the Automotive Industry? Benefits and Use Cases

If you face any challenges in your digital transformation journey, you can partner with a trusted company (like Appinventiv) to take care of your adoption and migration needs.

How Can Appinventiv Help You Bring Supply Chain Digital Transformation into the New Reality?

We are a trusted brand that offers digital transformation services and solutions to help you get acquainted with changes through the shortest learnability curve. We have helped many companies across the globe digitally transform their business operation.

At Appinventiv, we focus on value. Our proficient team uses various technologies and methodologies to digitize your supply chain. We create a transformation roadmap, making it easier to realize the value of upgrading the operation and process of your supply chain. We first map the critical activities and conduct scenario analysis to figure out the feasible areas for disruption, then develop future contingency plans that build resilience. 

Drawing on a wealth of experience and expertise, Appinventiv specialists leverage new technologies to ensure our systems are secure, agile, robust, and scalable. We have developed a series of technology accelerators and proprietary operating software that can turbo-charge your business and make supply chain digital transformation a reality.

Partner with us now. The world of supply chain digitization awaits you!

FAQs

Q. What is digital transformation in the supply chain?

A. The quickly changing technological landscape and heightened customer expectations are causing organizations to revisit how they do business. This is where supply chain digitization comes in. Integrating the supply chain with digital technologies can lead to greater efficiency, flexibility, and building resilience. 

Simply said, supply chain digital transformation is integrating and utilizing top tech trends into all areas of a business, essentially modifying how companies operate and deliver value to customers. Also, digital supply chain management is not just about technological change; it’s also a cultural change that helps companies to upgrade their status quo, experiment, and learn from failure.

Q. How has digital technology impacted the supply chain?

A. The changing scenario and the demand of machine customers make the CSCOs look for various ways to optimize activities and build on capabilities in different aspects of the supply chain. So, adopting the following technologies in the supply chain transformation process is essential to revolutionize supply chain models and fit well with the needs of today’s companies. 

• More integration
• Blockchain
• AI, AR/VR
• Eco-friendliness
• Circular supply chain
• Elastic logistics

Q. Why digitalization is important in supply chain?

A. Analyzing the ever-growing demand of machine customers and the pressing need for digital solutions to fulfill those demands, we can see that digital transformation in the supply chain is inevitable. It helps companies gain a competitive edge over technological advancements, leaving their rivals far behind.

Moreover, the future of the corporate world lies in the successful adoption and utilization of blockchain, IoT, deep data analytics, and other SCM innovations. Thereby, businesses in the supply chain must delve deep into digital transformation without hesitation.

THE AUTHOR

Saurabh Singh

CEO & Director