Leverage Digital Supply-chain Game with Transformational Technologies
A successful new-age digital organization is marked by agility, efficiency, innovation, and exceptional customer service. You would agree a digitalized supply chain and logistics management process ensure that these benchmark qualities are met.
Supply Chain 4.0 has led to the adoption of IoT, advanced robotics, and analytics. This is enabling organizations worldwide to benefit from better visibility, optimized networking, and seamless automation to meet the increasing demands for road freight & shipping.
According to McKinsey, the average digitalization level of supply chain companies is only 43%. And, only 2% of these companies include the supply chain as a part of their digital-first strategy. While they do, their annual earnings are expected to be boosted by 3.2%.
But this is rapidly changing since the pandemic phase and has led to a digital-first culture.
What is Catalyzing the Digital SCM Gear Shift?
Over the last three decades, logistics has been streamlining production lines, demand planning analysis, S&OP integration, and operational logistics. And, Industry 4.0 has created a wave of digital disruption and forced companies to rethink how their supply chain is designed.
In my opinion, technological innovation, megatrends, and customer requirements have changed the game. Multi-channeled supply chains are helping businesses achieve superior operational effectiveness to meet the skyrocketing consumer demands. They leverage emerging business models and enable digital transformation.
Growing customer outreach is causing wealth shifts to newer regions. Digitally and environmentally sustainable businesses are implementing digital SCM to reduce their carbon footprint and improve business process transparency.
The changing climate in the labor market and diverse ergonomic requirements are influencing a digital SCM gear shift. Diverse service expectations, customization, personalization, and a granularized approach are on the rise. To meet these requirements, SCM providers are aiming for constant diversification in their SKU portfolio.
According to me, the best way companies can handle the above dynamics is by:
· Rebuilding their digital strategies
· Infusing futuristic elements, and
· Fine-tuning their existing processes for shock-absorption in the supply chain lifecycle.
In this blog, I will discuss the current gaps in SCM digitization and the value drivers that help meet the need for its faster adoption.
What is Causing Technology Gaps in SCM Digitization?
Pertinent technology gaps in operations, production, finance, automation, and more are causing revenue disparities in the Digital Supply Chain.
The reasons include:
- Companies are tailing off advanced implementations after briefly streamlining routine activities, expanding system capabilities, and enhancing analytical practices.
- Technologies are being implemented in inappropriate areas where they don’t deliver significant benefits.
- Business operations are being fixed through digitization without analysis, discovery, or planning of intelligent automation.
- Inaccurate budgeting or premature cost analysis is being done before aligning traditional supply chain processes to innovative digitization.
Ways to Fill Technology Gaps in Digital SCM
Most traditional supply chains work like analog machines trying to fix problems in a fast-moving digital world. These supply chain companies are fragmented and run operations in functional silos. Instead of optimizing the entire value chain, these silos are focused on improving a certain aspect of the supply chain, often at the cost of another part or process. Due to this, traditional supply chains are faced with many challenges that create technology gaps.
Here’s how companies can overcome them:
- Establish a vision for major and minor improvements and speculative changes over time. They must assess the supply chain’s current state, and develop a transformation road map.
- Technology integration evaluation, talent strategy, and organizational structure must be made to support innovation and continual improvement.
- Business Process Management tools must be deployed in the core business system to scale up processes and facilitate expansion.
- Implement Machine-learning systems to help SCM decision-makers with critical and timely recommendations. These systems can be used in material planning, predictive production, task scheduling, volume handling, change management, etc.
- Automation streamlines the supply-chain taskforce’s work and optimizes speed, cost, agility, and accuracy through intelligent information routing to process execution systems.
- Big Data Analytics can enable supply-chain managers to cater to end-to-end customer requirements with better process visibility and control.
- Digital supply chain innovation can be strengthened by reshaping business models for newer market segments and improved vendor-supplier collaboration.
- IoT sensors in the production sites can be connected to a secure distributed network for live updates on temperature, wastage, safety compliance, etc.
Additionally, companies can leverage blockchain technology for real-time visibility into supply chain operations. This will also ensure trust and transparency in transactions across the board. Through blockchain, they can create a real-time ledger of transactions and movements for all the stakeholders in the supply chain network. Interesting, right?
Value Drivers of Digital Supply Chain 4.0
In my view, the key to the successful digitization of the supply chain lies in a comprehensive understanding of the right technologies and applying them effectively across the value chain.
To put it in simple words: owning a smart carrier is one thing and being able to stay on top of its location, movement, state, and contents is another thing. So, if you want to reap maximum benefits and achieve a lasting competitive advantage, it is important to leverage the right combination of people, processes, and data.
Additional core elements of smart supply chain management can then include the following:
Planning
· Big Data Analytics and Intelligent Automation support demand planning, dynamic stock replenishments, upside potential analysis, risk evaluation, and closed-loop planning.
· Thousands of internal and external demand-to-supply variables (e.g., weather, market changes, social media trends, etc.) can be analyzed with Bayesian network and ML approaches.
This helps discover and model complex relationships and derive accuracy and granularity in advance inventory planning. It also helps with dynamic pricing adaptation to optimize profits and minimize inventory overheads.
Technology Implementation
· Better connectivity, advanced analytics, and automation are the key enablers of smart logistics
· Immersive technologies augment production-line processes aligned to location-based instructions
· Advanced Robotics and exoskeletons reduce straining manual interventions and increase warehouse productivity
· Autonomous vehicles significantly reduce transportation and product-handling costs, lead times, and environmental impacts.
Performance Management
· Granular data and KPIs processing are inherent in modern-day operational dashboards
· AI-enabled platforms automate root-cause analysis and orchestrate exception handling in the system
· AI-enabled automation helps trigger counter workflows for replenishment orders or parameter settings change when contingencies occur
Order Management
· In an ever-expanding vendor ecosystem, “touchless” order processing and dynamic rescheduling reduce losses and reorders
· Supply Chain 4.0 enables granular feedback for superior vendor experience
· Cloud Services drive data management agility and workflow resources’ security. They enable rule-based execution and continuous master data updates in dynamic SCM software.
Collaboration
The SCM cloud integrates the company, customers, and suppliers on a unified platform. A collaborative logistics infrastructure streamlines supply chain tasks. This helps with administrative cost optimization in a lean production environment
The end-to-end/multitier connectivity in the value chain closes collaboration gaps through:
- Reliable data exchange networks.
- Responsive communication platforms (implementing digital assistants and chatbots)
- Early-warning systems for pre-emptive action towards disruptions.
Cost Management
· Advanced intelligence supports the bottom-up calculation of “true” service and transport costs
· Dynamic routing, capacity, and insurance planning, and 3-D printing (for material and wastage management) optimally minimize touchpoint costs
Steps Towards Digital SCM Transformation
Digital capabilities define the road to Digital SCM transformation. An IT landscape with a technology “incubator”, an innovation-driven climate, and a convergent culture has to be established. Secondly, legacy modernization, rapid SDLCs, and LEAN implementations must be considered for evolutionary SCM digitization. Other growth-steering parameters like data management, analytics, “digital native” talent, and processes must be given careful thought.
Wrapping up
Companies can sort their supply-chain digitization efforts based on these three levels of urgency:
1. No-Risk
· Definitive operational and monetary benefits
· Technology support available
· Ready-to-deploy solutions
2. First-Mover
- Great potential in value-generation to provide a competitive advantage
- Technology and process limitations need evaluation
- Not possible to implement immediately; requires preparation.
3. Existing Implementation
- Lower risk but the value is uncertain
- Technology and process limitations reduce implementation readiness
- Analysis, first-mover comparison, and tests required to make implementation decisions
With Supply Chain 4.0, companies can manage the physical supply chain’s digital aspects or their digital products’ supply chain aspects.
Either way, a streamlined approach helps achieve a fully modeled network to handle disruptions and champion SCM operations. What are your thoughts on how to leverage emerging digital supply chain-led business models? Let me know in the comments.
About Author:
Saumil Shah, the CIO at Rishabh Software, is a technocrat with a successful track record of helping clients solve complex business problems. Under his strategic presidency, Rishabh has established a prominent market presence across multiple domains like Healthcare, Retail, Manufacturing, FinTech & more. He is an alumnus of IIT-Kanpur & London Business School and has been on the advisory panel of industry-leading bodies like NASCOM and GESIA. When he’s not busy solving business technology challenges, he enjoys playing tennis or football.
