According to Gartner, ‘more than 50% of organizations have not yet actively started to build a roadmap for supply chain digital transformation’. This means that multiple supply chains are too slow to react and continue to develop the fundamental capabilities to stay competitive, to say nothing of developing, testing, deploying, and scaling digital innovations.
At the same time, digitization is among the key priorities for many supply chain leaders. Companies need to digitize their supply chains for driving growth, mitigating risks, and optimizing costs. However, the efficient supply chain digital transformation predicts a strong alignment between a business and its supply chain strategy. If companies want to succeed, they must leverage digital technologies to enhance business performance by creating a supply chain digitization roadmap that provides short-term improvements and a long-term vision.
So what are the steps to accelerate supply chain digital transformation? How can your business benefit from it? And what are the top trends in digitizing the supply chain? Read in our blog post.
There is a need to understand that deploying technology serves as a late-stage step in a long process that begins with discovery and planning and then leads to supply chain digitization.
Here we analyze the four steps to the supply chain digital transformation:
A good approach for companies to start with creating a digital ambition is conducting an initial cross-functional survey. The particular survey must assess the awareness levels of key supply chain stakeholders and their requirements regarding analytics, reporting, and automation.
Also, the survey helps build a base of knowledge that companies can use for defining realistic digital capabilities, relevant strategies to implement, and various applicable technologies which will bring specific, predictable advantages. For instance, if a company intends to cut down its inventory and increase customer fill rates, its survey respondents will likely say that they require improving forecast accuracies, reducing order processing lead times, and creating the dynamic allocation of inventory through the entire distribution network.
After developing a digital target, companies can conduct deep-dive interviews with staff representing all core functions of the supply chain. That helps establish a baseline of the existing digital capabilities. Such a process allows creating a list that includes ongoing and planned digital initiatives covering the planning, manufacturing, sourcing, and distribution value chain.
For all digital elements or capabilities, companies should record:
Evaluating current digital capabilities and limitations creates the fundamental to measure, and finally close, the gap between the company’s existing capability set and the digital target picture.
Next, businesses must explore different technology options to address their specific existing and future requirements, and the efficient approach to do that is to cooperate with an outsourced technology company. A qualified partner can help with critical initial decisions, including the identification and prioritization of desired digital capabilities in terms of immediate requirements, long-term strategic objectives, buy-in throughout the company, or needed investments in facilities. Such decisions are necessary for successful execution.
Besides, an outsourced company can provide its clients with relevant case studies. That allows the last ones to analyze different technology approaches and explore how similarly situated businesses have overcome technology challenges. Ultimately, such success stories can help from a buy-in view as they provide compelling arguments to make and complete the supply chain digitization journey.
Finally, there is a need for companies to analyze the shortlist of potential projects and predict the advantages of each project and the time required for its implementation. Depending on the particular analysis, the organization can divide digital projects into three groups (short, medium, and long-term) and create a clear, pragmatic roadmap to supply chain digitization. After all, Gartner states that ‘organizations with effective supply chain digital transformation roadmaps are +3x as likely to see their digital supply chains succeed’.
Supply chains have usually been connected with technology, and business leaders understand that accelerating supply chain digital transformation can help reach their short-term and long-term goals. Also, there can be other critical factors to drive digitization, including:
Below we detail some key pros of supply chain digital transformation:
It helps resolve issues at the early stages. In most cases, supply chains operate by applying top-down management and communication for merchants and vendors. Multiple distributors intending to expand their product lines depend on reconciliation, monitoring activities, and reporting. Besides, among important things is to communicate defects, delays, and other disruption issues at the early stages of the supply chain cycle.
Implementing digital solutions such as monitoring tools or integrations (like the one between the ERP system and e-Commerce platform) will allow companies to make appropriate decisions quicker. Thus, the advantages are clear because proactive decision-making boosts efficiency, eliminates waste and chargebacks, and makes operations run smoothly.
It provides agility in the case of disruption. In times of unpredictable economic conditions, with the possibility of natural disasters or political uncertainties and pressures, making supply chains flexible is a must. Supply chain digitization allows companies to make effective demand-related decisions and provides alternatives for quick sourcing and capacity.
Applying digital technologies allows increasing data visibility and maintaining a consistent record that can include sales, inventory numbers, back order rates, or other critical performance metrics. For instance, thanks to cloud-based digital systems, companies can simplify recording and recalling information. That makes it easier to implement changes, especially during different lockdowns, tensions, or other risks.
It enables supply chains to scale. Nowadays, resilient supply chains need to have a solid foundation. Along with transparency and productivity, they require the ability to scale and adjust because circumstances change. To stay competitive in the future, companies can integrate supply chains with flexible B2B e-Commerce platforms they can build and grow with. Ultimately, that does not require reinventing the supply chain.
The particular flexibility provides businesses with more freedom when cooperating with new suppliers, especially in new industries or regions. That also helps brands stay responsive to changing demands, launch new stores, or even expand to new geographies.
Today, the rapid increase in emerging technological trends requires businesses to address a critical dilemma: what technology to choose for investing to accelerate supply chain digitization? If companies want to stay proactive and define different disruptive changes at the early phases, they should correspond to the current technological progress that will continue to grow.
Here we analyze some top technology trends and the ways they can impact supply chains:
eCommerce and omnichannel fulfillment are becoming increasingly important, and their growth can affect 3PLs (third-party logistics) in terms of customer support, particularly online. Now, in a modern eCommerce landscape, clients need a high level of supply chain visibility. They want to have information about the available products, the arrival times, and the steps for delivering such products. That makes integration with e-Commerce platforms helpful for 3PLs.
Applying various integration approaches, including APIs (application programming interfaces) or EDI (electronic data interchange), can result in an eCommerce ecosystem that will provide enough scalability to satisfy customer requirements. That enables flowing information between systems to offer the most appropriate experience to end-users. In turn, this encourages them to return, drives business, and even attracts new customers. Read more about must-have eCommerce integration practices.
AI (artificial intelligence) algorithms and ML (machine learning) allow businesses to respond quickly to unpredictable demand fluctuations. For example, applying AI-based forecasting solutions helps supply chain managers with planning processes and finding new ways to cut down operational costs. Also, supply chains implement self-driving AI, along with various smart road technologies, which promotes positive shifts regarding the automation of delivery services.
At the same time, companies can use AI & ML technologies for big data analytics, which allows predicting prices, forecasting demand, generating risk management reports, and optimizing flows or processes. Thanks to AI algorithms, supply chains gain an opportunity to automate process decisions and control operational conditions, while applying the ML-enhance platform provides them with tools to collect and integrate process data in real-time. Ultimately, ML is also critical to define anomalies and offer efficient predictive maintenance solutions.
The key benefits IoT (Internet of Things) can bring to businesses are improved real-time supply chain visibility and the increased efficiency in inventory management. With IoT solutions, supply chains can increase transparency, enhance condition monitoring and fleet management. For instance, implementing IoT sensor technology is a critical practice to track shipments. Besides, connecting IoT-enabled devices on parcels allows tracking the inventory, vehicles, or warehouse equipment.
Companies can use the collected real-time data to service customer demands more effectively and minimize downtime. The improved visibility through the supply chain components means that IoT technologies can help companies with optimizing their assets and ROI. Also, multiple organizations can gain benefits from integrating IoT solutions with fundamental business applications, including business intelligence software. That provides analytics for the information collected by IoT devices and enables supply chain managers to make data-driven decisions.
With blockchain technology, supply chains obtain increased transparency in transactions regarding all logistics processes. Multiple companies use blockchain platforms that provide smart contract systems for simplifying payment processes. Besides, smart contracts not only support B2B payments but also record all transactions. That allows preventing fraud, minimizing currency fluctuation costs, and eliminating costs of converting currencies.
During the next few years, businesses will also apply specific logistics platforms leveraging blockchain technology to maintain effective end-to-end shipping processes. Using them, all stakeholders can track the required shipment locations throughout the entire journey. Also, such logistics platforms can update data regarding the estimated delivery times thanks to encrypted public ledgers. Finally, when the delivery is complete, all necessary photocopies of documents will be available on the platforms, which helps improve the visibility of transited goods.
Digital tweens serve as one of the most attractive technology trends for supply chain digitization. In warehouse management, organizations can use this technology to create accurate 3D models of facilities, experiment with layout changes, and introduce new equipment. In addition, digital tweens in delivery networks are mostly used to provide real-time data and aid autonomous vehicles.
When analyzing digital tweens, there is a need to recognize the rapid growth of the 5G technology. The key 5G’s capabilities allow providing digital tween use cases that rely on the efficient and reliable real-time data transition. Lastly, 5G can amplify the business cases to implement the particular technology.
Gartner states that ‘38% of supply chain leaders are concerned that their supply chains are not very well positioned to handle the challenges of the next two years.’ With the significant increase in competition and frequency of disruptions to current business operating models, digitizing supply chains can drastically improve their performance and ensure they are well equipped for the future. But successful supply chain digital transformation requires a proper vision, leadership, and persistence, along with a roadmap, best practices, and real-world cases.
Are you already digitizing your supply chain? What operations or tasks does it help you deal with? Or how do you benefit from supply chain digital transformation? Share with us in the comments below.
Over the past several years, AgileVision has helped many businesses digitize their supply chains. Are you considering making your supply chain more responsive, agile, and scalable, or need some other device on supply chain digital transformation?