What is Digital Supply Chain Transformation?
For decades, business leaders have been working to squeeze more efficiency out of their supply chains, yet few have fully availed themselves of the benefits to be gained from supply chain management digital transformation. That’s changing, as technology innovation is growing more affordable and accessible than ever, and as more companies are seeing the proven value of digital supply transformation. In today’s world, especially, agile, resilient supply chains create a distinct competitive advantage.
Digital transformation in logistics and supply chain management is helping innovators to drive growth, manage risk, optimize delivery times, and operate more efficiently. To take full advantage of supply chain digital transformation, though, there must be a clear alignment of organizational objectives, technology, and business processes.
What is digital supply chain transformation?
Innovative businesses today are using digital supply chain transformation to automate, streamline, and accurize their supply chain decisions. They accomplish this using advanced analytics, cloud-based connectivity, Internet of Things (IoT) devices, and robotic process automation (RPA) technology.
Modern cloud-based systems have made it possible to send and receive information quickly and efficiently from virtually anywhere in the world. IoT devices, for example, can monitor a range of different variables to report on the status of a shipment. Suppliers and buyers can gain immediate access to real-time data about the location, temperature, and humidity of a shipping container. They can even receive reports when the container is opened, or when there is a sudden shock that could negatively impact their products.
By collecting and connecting real-time data, your organization can gain access to a wealth of new information about your supply chain. Advanced analytics can use that data to generate meaningful insights about your supply chain. Supply chain managers can use predictive analytics to better understand delivery times and risk. RPA technology can automate operational decisions to free up managers’ time for higher value activities.
Briefly stated, supply chain management digital transformation uses the power of data and connectivity to make your supply chain smarter, more resilient, and more efficient.
What are examples of digital supply chain transformation?
What does all of this look like from a practical perspective? How are small and midsize businesses using digital technology to improve the way their supply chains operate? Here are a few examples that illustrate supply chain digital transformation in the real world:
Supplier Performance Management: Vendor quality and on-time delivery performance can have a substantial impact on your operations. Supplier performance management helps you qualify vendors, define key metrics, monitor ongoing performance, and develop scorecards to assess overall risk. A higher risk rating, for example, indicates that you may need to increase your inventory levels to compensate for potential late deliveries. The cost of maintaining that extra inventory can add up very quickly. With supplier performance management, you can quantify those costs and choose the vendors that best support your business objectives.
Predictive Analytics: There is a multitude of use cases for predictive analytics. Within the context of digital supply chain management, the most prominent examples are increasing the accuracy of demand forecasts, improving on-time delivery, and anticipating vendor performance. Predictive analytics builds upon traditional demand forecasting that includes order history, incoming orders, and limited external factors. Using advanced analytics, companies can incorporate a broader set of variables, including current economic conditions or changes in local infrastructure, for example. This leads to more accurate, detailed forecasts, and better estimates of required safety stock throughout the year. Predictive analytics can also provide better visibility to likely delivery timelines based on an analysis of available resources and other work in progress. This, in turn, supports better scheduling decisions to ensure that orders are delivered on time, every time. Finally, predictive analytics can help you identify potential supply chain bottlenecks and intervene early to solve delivery problems.
Purchasing Automation: Disjointed communication consumes a vast amount of staff time and energy, and it often leads to important details slipping through the cracks. A supplier collaboration portal provides a single platform for managing vendor relationships. Instead of managing endless changes in manual spreadsheets, you can save time, eliminate errors, avoid surprises, and always get the right parts, at the right price, at the right time. Instead of spending time on repetitive tasks and one-off inquiries, staff can focus on making strategic decisions that add value to your organization. Automation also increases accuracy and ensures that everyone is working from a single, up-to-date source of information.
Inventory Management: Optimizing your inventory management is about maintaining a careful balance between too much and too little. It’s about making sure you deliver your products to customers on time, without tying up too much working capital, and without increasing your inventory carrying costs. Effective material planning starts with a clear and accurate picture of what you’ll need when you’ll need it, and in what quantity. Armed with this information, you can also reduce your work in process, which shortens your overall operation cycle. That, in turn, can also lead to significant financial savings.
How can your organization take advantage of digital supply chain transformation?
Many business leaders assume that digital supply chain technologies are out of reach to small and midsize businesses. In fact, digital solutions are more affordable, more accessible, and simpler to implement than most people think. The best ERP software offers integrated supply chain digital transformation capabilities such as predictive analytics, supplier performance management, supplier collaboration portals, and inventory management optimization tools.
To take advantage of digital supply chain transformation, start by assessing your current business processes. Identify the areas which would benefit the most from digital technology that supports automation, advanced analytics, or collaboration. By starting with business objectives and processes, you can identify the technologies that will ultimately serve you in reaching your goals.
How to get started
It helps to begin your supply chain digital transformation journey by learning more about how organizations like yours are using technology to improve efficiencies and gain a competitive advantage. Here are a few resources that may be helpful:
- Your Supply Chain Team should be a Profit Center
- How Industrial Predictive Analytics is Transforming Manufacturing
- Making the Most of ERP with Aligned Business Processes
When you’re ready to take the next steps, we encourage you to reach out to our team of supply chain digital transformation experts to discuss your specific situation and explore how digital technology can make a meaningful difference in your business.