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The Digital Supply Chain: Everything You Need to Know

Supply chain and operations executives have been talking about digitizing their supply chains for years, but it was always thought of as a “future” priority. There was no real sense of urgency behind it — that is, until the pandemic came along, upended everything, and accelerated everyone’s supply chain transformation timelines, turning it into a “now” priority.

A healthy and functioning supply chain is critical to your company’s success, and a fully digitized global supply chain comes with many benefits. It leads to better communication and collaboration, enhanced agility, improved quality control, and more. To avoid falling behind your competitors, you need to understand all the different aspects of digitization and create an effective digital strategy for your organization.

This article covers everything you need to know about the digital supply chain. But before we get into the specifics, let’s take a look at what the digital supply chain entails and how it differs from the analog supply chain.

What is the Digital Supply Chain?

A digital supply chain is one that’s built on the application of electronic and digital technologies. Companies that follow this supply chain model have strong networks and collaborative partnerships across the entire supply chain, from the raw material suppliers to the courier of finished goods.

 A digital supply chain can have technologies that monitor inventory levels, cash flow, demand levels, movement of products, and customer interactions with products. This information is then used to plan and enhance increased levels of performance. Some of the technologies that make supply chain digitization effective include GPS tracking, wire sensor networks, smart labels, barcodes, and radio frequency identification.

How is it Different From an Analog Supply Chain?

As its name implies, the analog supply chain typically involves tasks being carried out in some physical, non-electronic fashion. So, let’s assume you own a scooter manufacturing company, and your supply chain follows a fully analog model. That means you’d have to receive scooter orders via the phone, by fax, or physical mail.

What’s worse? You’d have to write down purchase orders by hand while calling carriers on the phone to pick up and deliver goods. Additionally, inventory levels would be audited with physical counts manually entered into systems. You would send invoices via physical mail or fax and make payments with physical cheques.

Due to the advancement in technology, it is doubtful that you’ve built your entire supply chain on an analog model. Many systems are hybrid, meaning that they feature a mix of paper-based and IT-enabled capabilities. But what are the benefits of completely digitizing your supply chain?

The Benefits of a Supply Chain Digital Transformation

We were delighted to have Stephen Rector, a Global Retail Consultant, speak with us on the Suuchi Podcast recently. According to Stephen, “Digitization isn’t a nice to have; it’s a must-have for the future,” and we couldn’t agree more. There are many reasons why you must digitize your supply chain. Let’s talk about some of the essential benefits of digitizing your supply chain processes.

Communication and Collaboration

Digital supply chains enable seamless collaboration and swift communication between you and your suppliers, manufacturers, distributors, and other supply chain participants. As such, delays due to missed calls or lost emails will be non-existent.

Agile (More Flexible)

Digital supply chains feature effective risk assessment programs, intelligent decision support systems and are demand-driven. Hence, they can react to sudden changes in the operating environment in a way that hybrid or analog supply chain management systems can’t.

More Accurate (Improved Quality Control)

Executives have elevated adherence to quality standards up the agenda and are discussing it in every boardroom or Zoom chat. Because the digital supply chain allows you to track the entire production process in real-time and monitor it closely, quality control is ensured.

Optimize Batch Size

Firms must always determine the suitable number of units to manufacture in a production run. Overproduction slows down the turnaround time of your stock, while underproduction means you’d likely not have enough products to meet demand. The data obtained from a digitized supply chain allows you to optimize your batch size, save money, and improve profit margins while reducing dead stock.

Higher Efficiency Rate with Data-based Solutions

Most of the technologies used in a digitized supply chain rely heavily on the data obtained from your supply chain. As such, you’re able to make smarter, more informed decisions that help you improve your supply chain’s efficiency and performance.

Improved Cash Flow

Because the supply chain moves faster in the digital supply chain model, less capital is tied up. This allows you to manage your supply chain more effectively while reducing overhead costs, which is a crucial criterion in project management.

Now, let’s take a look at the steps you need to take to create a digital supply chain strategy.

How Do You Create a Digital Supply Chain Strategy?

Consider Your Starting Position and Assess Technology Options

The first step to creating a digital supply chain is to understand your current situation. This typically involves identifying the glitches or trouble spots in your systems. To identify these glitches, you might have to conduct deep-dive interviews with representatives from all core functions.

Next, you must explore various technology options to address the specific current and future needs. So, let’s say you own a facility that relies on machined and injection molded parts. You’re struggling with creating complex geometries, increasing the speed of the design process, and reducing associated waste.

For this, you might have to consider additive manufacturing, such as 3D printing. It’s what the engineers at GE implemented in a recent aerospace project where they significantly increased the number of 3D printed metal parts in their best-selling leap engines. Statistics show that this helped them reduce their number of subsystems from 40 to 1. More importantly, their number of suppliers went from 50 to 1. Whether you’re producing aircraft engines or metal jewelry, think about the opportunities that exist for your products and industry.

Consider the Risks Involved and Define Your Strategy

After identifying the trouble spots and formulating possible solutions, you will have to communicate with all business entities that your potential changes might affect. Understandably, your business partners will be concerned about the risks of losing you. However, the aim here is to create a mutual understanding and establish a common goal that will benefit both sides.

Still considering the additive manufacturing example, some of your suppliers might point out to you the cons of modifying your product line to include 3D printing capability. They might rightly tell you about the limited material choices you have with 3D printing or the need for extensive post-processing, which can significantly slow down production.

Having a clear discussion about these issues will give you insights into what is more likely to work for you and your business partners. It will also provide the basis for how you should set the foundation. That way, you can determine upfront the essential systems that need to be in place for this change to be a success.

Conduct Proper Research

The incentive to maximize profits prompts most businesses to make quick decisions that yield only short-term benefits. As a rule, you must take proactive measures and steps to benefit your business in the long-run. By taking a soup-to-nuts approach and seeing the bigger picture, you prevent issues like interruptions, delays, and product recalls.

So let’s say you’re a smartphone manufacturer looking to digitize your supply chain. To maximize profit, you might consider outsourcing and rely on networks that supply integrated circuits, transistors, and other computer chips.

Before proceeding, you must conduct thorough research and ensure that the chips you get from suppliers are genuine and traceable, even up to sub-suppliers. Additionally, you need to answer all questions about mutual obligations and expectations between you and your suppliers. That way, you’re able to prevent counterfeit products from reaching end consumers.

Prioritize Projects and Implement a Supply Chain Management Software

The final step to digitizing your supply chain is often the most challenging one. It typically involves prioritizing potential projects and technologies and assessing how long it would take to implement them. After prioritization, these projects should be brought into action in phases, employing all the various insights acquired.

Next, implement a Supply Chain Management (SCM) software solution. This tool will help your organization to operate more nimbly by executing supply chain transactions, managing suppliers and products, and more.

 

5 Trends in Supply Chain Management

The modern supply chain is complex, yet it continues to advance at a rapid pace. Here are 5 key trends changing supply chain management today.

#1 Internet of Things (IoT)

Inventory is one of the most valuable resources for any business. Yet, many retailers and companies are still unable to track their inventory or see stock movement in real-time. A 2017 survey by Wasp Barcode Technologies on over 1100 U.S small businesses shows that 43% don’t track their inventory or use a manual process.

IoT describes a system of interconnected objects that can collect and transfer data over a wireless network without human intervention. IoT is becoming more popular, and it is allowing companies to monitor inventory and keep track of deliveries in real-time. A typical example of a business harnessing the power of IoT is Walmart with its shelf-scanning robots.

#2 Artificial Intelligence (AI)

AI describes the ability of computers to accomplish jobs commonly associated with intelligent beings. It is growing beyond its earlier perceived capabilities and helping supply chains be more productive by making operational processes more straightforward and faster.

A typical example would be using AI-powered chatbots to communicate with customers instead of having physical sales representatives. These AI-powered chatbots are available 24/7, study customers’ emotions, and respond to routine questions regarding orders, prices, shipment status, and stock availability.

Using AI means you’re able to save money on customer service costs while speeding up response times. A recent study from Chatbots Magazine shows that businesses can reduce customer service costs by up to 30% by deploying an AI-powered bot. Additionally, research by Gartner shows that AI augmentation will increase worker productivity and create $2.9 trillion of business value by the end of 2021.

#3 Blockchain

You probably have heard about blockchain technology and wonder: does blockchain really apply to the supply chain, and does it solve supply chain problems? Not to worry, it’s a question asked by many other supply chain executives and professionals. 

Blockchain is an internet-based technology prized for its ability to hold transactional records while ensuring security, transparency, and decentralization. This technology is best known for supporting transactions in bitcoin — a digital cryptocurrency. So, what are the advantages of using a blockchain-based system for currency?

Cryptocurrency offers more security than the traditional banking model since the transactions and ledgers are encrypted. Additionally, it eliminates the two-to-three day clearing period typical in the standard banking model. Companies can see similar benefits by applying blockchain to the supply chain industry. 

Walmart takes center stage in the implementation of blockchain technology. Walmart has been partnering with IBM since 2016 to create a blockchain-based food traceability system that they can apply across their food supply chain. OriginTrain is also testing a blockchain-based technology to prevent wine fraud.

#4 Growth in Circular Supply Chain

There’s a shift from the linear supply chain to a circular supply chain where manufacturers and sellers of products take discarded materials and remake them for resale. Although the linear supply chain model is still very much in vogue, Gartner predicts that circular economies replace linear economies by 2029.

As of now, many countries, states, and international bodies are taking the circular economy approach. The UK Waste Policy requires all UK-based companies to recycle or treat their waste products. Additionally, California recycled content laws require manufacturers to recycle 15% of all plastic containers.

A circular economy lets you save money, capture more value from your resources, exceed government regulations, and increase your supply chain’s security and price stability.

#5 Cloud-based Supply Chain Software

A recent study shows that 64% of organizations have no system for monitoring their supply chain performance. Companies looking to gain an advantage over these competitors rely on cloud-based SCM software for supplier management, order management, and supply chain analytics.

Cloud-based SCM solutions ensure your business’s growth and stability, real-time visibility of activities, and an increase in your team’s responsiveness and agility.

By now, you already understand the importance of digitizing, tracking, unifying, and communicating with all value chain participants. The Suuchi GRID is a cloud-based SCM software that will help you eliminate siloed workflows and make data-backed decisions for your supply chain. Request a demo today.

Also, do you want to know how next-generation supply chain solutions can improve ROI for your business? Then, read our free white paper: How a New Generation of Supply Chain Technology Leads to a Better ROI.

Suuchi Ramesh spent the first ten years of her career in technology and predictive data analytics with hyper-growth unicorns. After identifying the supply chain as one of the few legacy industries to embrace digitization, she started Suuchi Inc. in 2016. Suuchi Inc. is a next-generation supply chain technology platform that digitizes the end-to-end value chain for companies of all sizes. In just four years, the company has partnered with over 200 businesses to spearhead a digital revolution of the manual processes that stunt scalability and profitability through its proprietary software, the Suuchi GRID. The GRID provides customers access to a transparent supply chain and real-time analytics to make smarter, data-backed decisions. Learn more about Suuchi.