Building a Digital Supply Chain the Right Way
APICS Magazine – 2018
By Shreyas Shukla, Gaurav Goel, Ajai Vasudevan
Every supply chain function, process and system must be involved in the race to unlock the benefits of digitization. As this rapid disruption continues to displace traditional networks, the digital exhaust that is engulfing the sector, coupled with an ongoing data deluge, is affecting all supply chain elements and forcing organization leaders to rethink how they do business.
In order to maximize the value of going digital, it’s essential to understand what a digital supply chain encompasses. Digital supply chains are built upon web-enabled capabilities. They make the most of connectivity, system integration and the data-producing abilities of smart components, typically through the Internet of Things (IOT). IOT defines as “an environment in which objects, animals or people are provided with unique identifiers and the ability to transfer data over a network without requiring human-to-human or human-to-computer interaction.”
IOT enables objects to be sensed and controlled remotely across existing network infrastructure, creating opportunities for more direct integration between the physical world and computer-based systems. Expert believe it could generate enough business value to bring about the fourth industrial revolution, Industry 4.0.
The first step in attaining such a network is to replace outmoded systems and processes with those that can add value at every point in the supply chain. Moreover, a digital perspective by way of analytics can provide a new way of reading customer expectations and competitor movements.
According to the Cisco Systems report “Innovative Manufacturers Recognize the Potential of Industrial IOT and Digitization”, 33 percent of the market is at some stage adoption, but more than half (52 percent) of companies are not investing in digitization and therefore risk being disrupted. The report also asserts that this digital disruption will affect nearly 40 percent of businesses over the next three-to-five years. Achieving digital transformation is not easy, so a truly digitally enabled supply chain must be proactively network- and analytics-driven.
Following are three essential questions to ask before building a digital supply chain.
- What are the drawbacks of a traditional supply chain?
Organization often experience a duplicity of roles and skill sets, which leads to a significant amount of effort being diverted toward information that is regional or local in nature. Technology systems and automation plans frequently are set up with an extremely limited scope. They are designed to meet the requirements of small organizational units already working in silos, thus complicating the landscape even further.
Complexity in the new normal of global organizations and physically disbursed supply parameters is increasing, causing the company to experience
- difficulty getting the right data in a timely fashion
- challenges when using available data to make smart decisions
- the absence of adequate knowledge of technologies and processes
- lack of direction or involvement from leadership
- insufficient support from cross-functional talent
- incomplete knowledge of key industry best practices
- spending that is disproportionate to the amount of time performing maintenance and administrative activities.
- What are the benefits of a digitally enabled supply chain?
Organizations with digitally enabled supply chains can gain advantages in almost all areas of their networks. Digital supply chain currently using a hybrid approach to enjoy significant rewards. Digitization can improve forecasting accuracy through faster data dissemination and high-end statistical analysis. In a digital world, orders can be received from multiple channels and be automatically processed based on complete inventory visibility, leaving out the need to touch the orders unless there are exception scenarios to be managed. Besides that, transit information for products can be constantly supplied to planners and, in any given situation, re-planning can be done in real time to avoid production delays.
Digital supply chains streamline the integration of various supply chain elements and make key data more easily available, which enables the network to move toward advanced-analytics-based decision-making, eventually bringing about more informed strategies. The data also helps supply chain professionals understand customer behavior and preferences and respond.
- How do I build a digital supply chain?
Improving supply chain visibility and intelligence to enable better decision-making is a top priority for manufacturers globally. The steps to achieving digitization are:
- Know what to digitize.
- Reimage processes.
- Assess challenge versus capacity versus cost.
- Form partnerships to facilitate execution.
For digitization to fully enable processes to become collaborative and transparent, initiatives should be designed that encourage stakeholders to be connected and collaborative. Developing a common tool to support the supply chain over subsidiaries and geographies enables better management with users, associates, partners, suppliers, vendors and customers. In this way, digitization can support how professionals view their businesses and functions as a whole while providing the flexibility to identify region- and customer-centric focal points and develop micro strategies in order to be more successful globally.
Implementing digital supply chains can have a significant impact on any company. Decision-making becomes dynamic, new governance models are designed and implemented, and employee roles are enhanced.