Digital Transformation of the Supply Chain
New trade deals, trade wars, global pandemics, environmental changes and social movements, along with many other situations, impact the global supply chain and remind us how critical it is to operating businesses effectively. Inefficiencies in the supply chain cost retailers more than $1 trillion in lost sales each year, according to a Sourcing Journal report, and a 2017 McKinsey report indicates that the average supply chain had a digitalization level of 43%.
Disconnected and outdated manual processes can’t keep up with supply chains that are increasingly global and complex. The digital transformation in the supply chain should achieve the following:
- Information should be relevant;
- Be available at the precise time; and
- Accessible to the right people.
All three are required to achieve the goal of providing an efficient and resilient supply chain.
But what exactly is the “digital supply chain transformation?”
This term can have different meanings to different companies. However, one thing is certain, all participants in the supply chain have the need to:
- Integrate into a set of tools that can provide seamless communication,
- Clear visibility, and
- Access to data that allows everyone to react immediately to changing situations.
In conclusion, the digital transformation provides the necessary tools for gaining knowledge in order to take effective action.
What are the areas that require our attention in order to achieve this digital transformation?
According to Steve Banker of Forbes:
1. Advancing Beyond Manual Processes:
At a minimum, you should replace the manual processes that exist inside the four walls of the enterprise. Implementing a WMS is the first step, but it would be a limited form of digitalization.
2. Eliminating Information Black Holes
You should fill all the information black holes that exist in the end-to-end supply chains you manage. This means connecting with suppliers, customer, and key supply chain partners up and down multiple tiers of a company’s extended supply chain.
3. The Role of AI and Machine Learning
Whether a company is focused on robotics, filling information data gaps inside the four walls of their enterprise, or getting better digital data to supply the end to end supply chain, AI, and machine learning will have a role to play.
4. The Emergence of Supply Chain Collaboration Networks
For an extended supply chain, digitally connecting to trading partners is critical. A new market known as Supply Chain Collaboration Networks (SCCN) has emerged to facilitate this. This market garners over $3 billion in annual revenues and is growing at a double-digit rate, according to market research from the ARC Advisory Group.
5. The Importance of Supply Chain Control Towers
A supply chain control tower would also represent a high level of digital maturity. Control tower is a term that implies real-time visibility. But visibility to what? Shipments? The integrated business planning process? Finished goods inventory? The status of work on the factory floor? Supply chain risks? Ideally, it is all of these.
6. Real-Time Risk Mitigation and Continuous Planning:
Further, through connectivity to real-time risk and ETA data, and the ability to do continuous planning to mitigate the effects of unexpected events, a collaboration network platform supports a holistic conception of what a control tower should be. Supply chain risk and planning applications are the most important SCCN applications surrounding robust control towers.
Being able to tap into the supply chain plans provides a much richer predictive capability than control towers that only use execution data. Supply chain planning done around real-time events is known as continuous planning.
Continuous planning requires the ability to understand what sorts of unexpected events matter and which don’t. It also means planning must be done at a very granular level. Forms of data aggregation in planning require that assumptions are used. This is far from optimal.
No matter at what step of the digital supply chain transformation you are, working towards this goal will assist you in differentiating your company from other offerings by improving service and building an effective and efficient supply chain.
By: Luis Emilio Fernández de Jáuregui
