Digitization in supply chain management
Industries nowadays are becoming more transparent with regards to how their management is run and the supply chain is no exception. Customers are also becoming more demanding for efficient delivery processes and are becoming choosy about the mode of accessing products. The advancement of digital technology has really been the driving force for these changes.
How to make a supply chain system more efficient?
It is quite a difficult task for companies to develop an efficient supply chain system. It is quite impossible for companies to develop a supply chain without a clear idea of the process and applications and a certain amount of strategic planning. The company should try to improve its systems based on their current business situation and also on the basis of evolving business ideas. These new and improved ideas should be implemented in all spheres of their business operations including (but not limited to) the below-mentioned avenues-
- Processes– The company need to implement these new and improved methodologies to connects the suppliers and the customers in a better manner. This will help in proper coordination and collaboration between these two important stakeholders.
- Performance management system– The company should necessarily set up some specific rules and regulations to enhance the performance of those who have the responsibility to manage the entire supply chain. All the important performance indicators should be measured timely to ensure better results and make the supply chain system more efficient.
- Developing the organizational skillsets– the company needs to understand various skills that are required to enhance the performance of the entire supply chain. These may include the skills of problem-solving by optimizing or managing the entire supply chain. This may require strong organisational support to promote relevant communication across different organisational user groups or programs. However, for extracting maximum benefits from such activities, the company has to develop its in-house talent and experiences. Then only it can ensure continuous development of new supply chain applications and processes.
- Enhancing stakeholder capabilities– In addition to enhancing the capabilities of their in-house resources, the company also needs to develop the capabilities of its partners and stakeholders. The supply chain just cannot achieve their set objectives of developing a well-oiled system without the help of their partners or the stakeholders such as suppliers, technology providers or even the distributors.
- In leveraging advanced technology– as already discussed, the company has to develop a road map for effective implementation of the new and advanced technologies into the supply chain. A few such operations include the integration of the information layer, analytics capabilities the database and the cloud.
When it comes to the supply chain industry, most of the companies are delivering their products to their customers through a standardised process. The marketing branch of the company places orders and the ordered products are prepared for distribution. At the same time, the respective customers are given the requisite information regarding their product and its shipment. It is necessary for the operation to take place smoothly so that the customers can expect their shipment on time. But, it does not happen as smoothly as desired, all the time and inadequate information is the ‘culprit’ for the same. For example, at times, the necessary data which is necessary for forecasting may remain insufficient. In some of the cases, the manufacturing branch of the company may not get sufficient help from the suppliers or other relative partners due to lack of timely information in critical links of the supply chain and there arises a gap between the operation process and the requirement. The whole supply chain is interrupted this way.
How can digitization help?
There can be many concrete examples of benefits brought about by digitization into a supply chain system. Enhancing productivity and growth of work are two broad benefits of digitizing the supply chain.
Given below are a few of the benefits digitization can bring to the supply chain management-
- In the process of capturing data-
The Internet of Things (IoT) is a boon of modern technology that is capable of making data available in a more transparent manner. Thanks to IoT, manufacturers are now able to gather data with the help of sensors. These data are essential for monitoring important supply chain assets. This results in lower downtime in data capturing and helps the company to manufacture products so as to meet the demands of their customers.
Data captured so efficiently brings transparency to transportation and logistics as well. Barcoded products manufactured by a company can be tracked by both the company and the customers alike. Moreover, internet of things has also enabled new tracker facility that can track not only the location but also can capture data regarding the temperature, orientation, humidity and other such variables that can cause a positive impact on the entire delivery system.
- In analysing data–
Digital concepts such as e-commerce are providing big data and it helps in the improvement of process management, product customization, market trend predictions, quality levels and customer personalization. For example, this new-found process of analysing data can help in providing new data routes for freshly observed patterns which, in turn, can identify more routes with fewer shortcomings.
- In integrating data–
The most significant contribution of digitization to supply chain is perhaps achieving higher levels of clarity at all stages of the process. Data is contained in different ‘blocks’. It is necessary to capture the required data, integrate them and then analyse them effectively in certain specified steps. The method of integration may involve the following steps depending upon conditions-
- systems involved in integrated planning and its execution
- advanced analytics
- logistics visibility
- smart procurement and the warehousing
Advanced features of digitization are employed in all these stages to bring the much-needed transparency into the supply chain.
- In accessing data–
The integrated units of any supply chain management depend on data accessed. These data need be transferred eventually to the end-customers. With the advent of digital technology, the data transferring process has also become quite easier. Now, the customers can keep track of their shipping experiences from their own comfort, thanks to features of digitization.
- In interpreting data–
If real-time data can be obtained, it proves to be very useful for any supply chain management. But, one of the major drawbacks here is the achieving of the desired accuracy level and reliability of data. Digitization has been of tremendous help here as it has offered the facility of correcting the data automatically and even enhancing reliability in supply chain technology.
- Comprehensive integration of solutions involved in the supply chain– as the supply chain is a vast territory, companies nowadays often vary in the planning or reporting of production related data. Digitizing the process of the supply chain is a great approach that removes many hurdles faced in all SCM systems down the line. But it requires a strategic approach for the digitization plan to be executed properly. If such a strategy is executed properly, there can be many benefits for the company and many inherent faults can be eliminated, which, if not eliminated, have the potential to deviate the processes from reaching the organisational goal. Digitization helps in setting certain benchmarks and fixing of organisational goals properly. Such integration helps the works to be accomplished in a proper manner. But, it is very important for the companies to keep a track on such integrated solutions and measure the performance at every stage, in order to avoid eventual failures.
- Helps in better handling of data- The Internet of things has reached its greater heights with time and, in recent times, has become an integral part of supply chain management. Better solutions to perennial supply chain issues have been possible now, thanks to IOT. Now, the supply chain can be digitized involving operations such as collecting of data, sorting and finally evaluating the data. As a result, it helps the managers or the planners of the company to make more effective planning ideas. Effective methods of data connection are also helping the managers or planners to deal with circumstances which used to plague the management a lot in earlier times. The IoT based technologies employed to supply chain involves a lot more detailing, and hence can save the management from critical situations happened earlier due to lack of attention to such details. Now, IoT based data handling methods enables the management to deal with all such issues and complex datasets in a more efficient manner.
- Helps in enhancing collaboration– Digitizing the entire supply chain may not prove to be an easy task at all. Of course, it involves hurdles and complexities while implementing it across the organisational spheres. But, it is more than worth doing so as through digitization, the planners can share the data within themselves and within the supply chain stream to ensure smooth functioning of the operational cycle. Digitization facilitates more interactions and such a collaborative approach can save the organisation from breakdowns or disruptions. A digitized supply chain actually works a kind of central hub that includes a lot of data which can be accessed through multiple nodes. Unlike the traditional system, no one has to wait for days or months to collect or gather the requisite data. Results can be obtained much faster, rather than waiting for months. Thus supply chain digitization can deliver proven benefits for the supply chain companies.
Steps or phases involved in digitizing the supply chain process-
One of the important ideas involved in digitizing a supply chain is to be clear about its sustained benefits and whether the existing SCM processes in the company are capable enough for implementing and integrating changes likely to facilitate by digitization. Therefore, any supply chain company may go through the following five major stages in the process of digitization-
- It should understand the present position of itself– the company should be able to assess its current position and the level of maturity it has attained with time. It should also be able to identify the areas that need further improvement and maturity.
- It should be able to define its strategies properly– The company should be able to set a target for the supply chain management well before the implementation of digitization starts. It should also envisage the possible strategies and planning involved in the process of digitization.
- It should develop a proper road-map – The company should be able to define the necessary steps required for digitization and sketch a detailed road map accordingly.
- It should develop small pilot applications with end to end scope– A company may devise some small pilot applications that can be helpful in digitizing the entire supply chain in due course. These pilots should be able to carry out the necessary steps within its scope, however small they may be. Such a pilot application will help in assessing the capabilities of the company for digitization. But, the company needs to keep in mind that such pilots should be used in integrating the digitization in supply chain only, rather than for fixing other organisational goals.
- The company should do rollouts and monitor their development– After successfully developing pilots, the company should do a few rollouts in certain segments. Then it should monitor the progress of these rollouts and assess which segments are benefitted the most from the digitization. This rollout can even be extended either to some important regions or particular customer segments as desired by the company management.
Assessment of maturity in the supply chain-
Most of the supply chain companies in the present day have successfully implemented certain levels of digitization in their operations. Before extending higher levels of digitization, it is very important for the companies to study its current maturity level in order to devise a specific plan for the next level of supply chain digitization. The maturity of a supply chain can be witnessed in four stages as discussed below-
- Digital novice– It indicates an immediate need for improvement to sustain in the business. Companies at this stage need to proceed further to the next level of supply chain digitization at the earliest.
- Vertical integrator– At this stage of digital maturity, the companies manage to integrate various processes of supply chain digitization into different departments or functions within their spheres of operations.
- Horizontal collaborator– The companies, at this stage of their maturity, have gathered required information that can help their supply chain partners to set up their goals and objectives. Such expertise and control help all stakeholders to carry out their processes easily and to bring the much-needed transparency into the entire supply chain operations.
- Digital champion– At this stage, the company has achieved the greatest level of digital expertise possible in association with its partners and has managed to be more transparent in their operations as well. This has been done by developing some beneficial digital processes and techniques and implementing them seamlessly in the entire supply chain management.
Some examples where digital technology has been helpful
A wide range of ideas of various technologies are mentioned below, which are integral parts of digitization. These have come to immense help to the industries.
- 3D printing – 3D printing is used in widely used in manufacturing these days. The scope of 3D printing in the field of pharmaceutical and healthcare logistics has enforced a dramatic change to the supply chain strategy involved therein. Many production industries like Johnson and Johnson, Invisalign etc have leveraged 3D printing technology into good effect and have excelled to greater heights of late. Other companies are also following suit and the concept is 3D printing is expected to grow even more in a foreseeable future.
- The fast growth of ‘Uberization’– When Uber first came into the market with its unique concept, it was not able to penetrate that much into the existing market share. But, with time, Uber has been able to leverage the technology disruptions to good effect and made distinct changes into their operations, to accommodate modern technology. It helped their operations so much that, in two years, the worldwide market share of Uber rose from 8% to 27 %.
- Internet of Things and machine learning – These technologies are among the most evolving technologies in modern times. These are being leveraged in the SCM industry to fulfil the needs of the digital supply chain for the future. These technologies offer various advantages related to costs, operational efficiency etc to the supply chain companies.
- Advantages of cloud computing– Cloud computing came to prominence after 2016. A cloud provides distinct advantages when a supply chain organisation wants to set a benchmark in its data acceptance level. It is because cloud computing enhances the computing power and application systems of a supply chain. A cloud computing framework also increases the efficiency of the software systems. But, its development requires a lot more time.
Digitization is nothing short of a revolution nowadays. Transforming everything to digital is challenging indeed. There are many avenues of digitization that may find a place in supply chain systems. Advanced robotics, 3D printing, drones, internet of things etc fall under this category. But, it would have been better, if such technologies can be customised to some extent. Also, the capital involved in the maintenance of these technologies is still a concern for the companies.