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Why are enterprises embracing supply chain digitization?

October 14, 2022 - Team EdgeVerve

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To make up for the lost time and investments and reach the pre-pandemic growth level, companies need to balance operational efficiency and cost with better supply chain resilience through a supply chain digitization model in their business processes.

According to a Gartner survey, just 21% of respondents said that they currently have a very resilient network, which suggests good responsiveness and visibility to quickly shift sourcing, manufacturing, and distribution activities around. It also indicates that boosting resilience will be a precedence for the majority of firms as they recover from the existing crunches. Resilience can be increased by steps such as alternative factories, dual sourcing, and more generous safety stocks.

However, balancing resiliency and efficiency is a tough ask in most cases as enhanced resilience goes hand in hand with supplementary costs. Hence, it is apt for supply chain leaders to embrace digitization in supply chain to develop superior resilience within their networks.

How is a digital supply chain approach different from a traditional one?

With technology advancing and revenue pressures rising, companies are transitioning from traditional supply chains to digital supply chains. However, the benefits of digital supply chain management continue to develop and expand in most industries.

In traditional supply chains, analysis provides insights to make the correct decision based on a responsive approach. This step includes an assessment of the current stock levels in the organization and past production requirements to identify promptly the needs of the incoming supply of components. Also, external data like distributor stock levels and delivery dates have to be curated physically, affecting the costs, and impacting the data relevance.

On the other hand, in a digital supply chain, purchasers can make timely decisions with the assistance of real-time data that provides accurate insights. However, these decisions are taken by utilizing a supply chain management platform such as TradeEdge, which gives an all-inclusive view of the supply chain that can empower businesses to make more timely and accurate procuring decisions.

However, to generate better visibility, faster payment, and cheaper options, the digital supply chain has made the traditional supply chain even more effective due to lateral information sharing and cross-functional involvement.

A traditional supply chain enables firms to know where the shipment has been according to information from the courier. Currently, the authentic location of a shipment is obtainable, at times, through GPS technology.

What is supply chain digitization, and how does supply chain digitization work?

Supply chain digitization is substituting the identified manual or analog processes throughout the e-commerce supply chain by implementing digital solutions. Hence, digitization in supply chain management includes the application of innovative and groundbreaking digital products and services into various supply chain channels to modernize and simplify processes, increase management, and boost visibility.

The digitization of supply chain is a transformational process with an emphasis on integrating digital technology solutions into various supply chain activities. Essentially, digitization enables companies to optimize supply chains by tackling the key challenges and bringing about a supply chain 4.0, which is much faster and more accurate, cost-effective, and adaptable.

Though the particulars fluctuate from business to business, digitization in supply chain works mainly around three core domains which are:

Why is supply chain digitization important?

Most companies are still scrambling to sustain the flow of products, finances, and information in the supply chain, as disruptions can no longer be deemed as isolated events. Not too long ago, logistics ran on a traditional model (paper) that led to uncalled errors, , and thus the industry is moving towards supply chain digitization in the logistics domain as well. Companies that were not keen on automation are beginning to invest in technology solutions, focusing on resilience and agility to sustain unexpected disruptions.

Post-pandemic, businesses have been confronting volatile out-of-stock situations, abandoned trucks, and a visibility dearth within their supply chains. Also, with the modern-day supply chain posing a multitude of new challenges to cope with rising costs and the difficulties caused by new sales and distribution channels, the companies are finding it tough to oversee the operations competently. Subsequently, it is imperative to enhance the demand and distribution visibility, incorporate new channels, and customize the control process over speed and quality of delivery in the first and last miles of the supply chain.

Following this, productivity can be improved by deploying technologies to facilitate collective execution by combining processes across the shipper and vendor firm to provide end-to-end visibility and procure improved control through transactional execution. Thus, with digitization in supply chain, companies can better align their core resources to continue operations without hiccups to steer through the disruptions.

Bigger companies should endorse the idea of digitization while startups must facilitate new business for smaller firms and the messy processes of supply chain through cloud-based solutions. This two-way approach will only fast-track the digitization in supply management that will streamline the process for a collective execution between the parties involved, thus these initiatives leading to cost reduction.

Some common pitfalls supply chain companies can avoid:

Benefits of supply chain digitization

Quicker demand forecast: In order to provide a quicker and more precise customer demand forecast,, predictive analytics utilize the internal data (demand), external data (comprising market trends, weather, etc.), along with machine status data for the spare-parts demand.

More adaptable: Real-time planning enables companies to react flexibly to the shifting supply and demand. Also, real-time production volume data from machines help businesses to react energetically to the moving requirements or constraints.

More precise: Digital operations provide real-time, end-to-end clarity through the supply chain by applying AI and machine learning to automatically detect risks and exceptions that change the supply chain dynamics. With these resources, the systems can deal with a majority of decisions without the intervention of humans.

More efficient: Strategic planning and automation enhance supply chain efficiency. For instance, robots are handle the warehouse process from receiving phase and unloading to the packing and shipping stage.

Automation prospects: Lowering manual tasks curtails the burden of clerical work, thus freeing the staff from repetitive tasks and enabling them to focus on more value-added tasks.  Automation also lessens human error; thus, the revenue lost can be gained by fixing those errors and speeding up the process of invoicing, leading to quicker payments.

Builds cohesive and connected processes: Digitizing the supply chain generates more opportunities for connecting the contrasting systems, thus allowing communication across the entire company, and creating a single source of authentic information.

Using data for decision-making: According to Gartner, 25% of supply chain decisions will be made across intelligent edge ecosystems through 2025. Decisions need to be made quickly, and agility is vital in the transportation and logistics industry. A digitized supply chain enables gathering and analyzing an immense amount of data with less effort and time than analog systems.

What are the current trends of supply chain digitization?

Digital twins: ‘supply chain digital twin’ implies a virtual simulation model of a real supply chain that enables a company to analyze the detailed performance and efficiency of a supply chain and forecast how it will function in the future. Smart digital twin prototypes offer real-time and actionable insights into both planned and accomplished work and sales orders, supply and demand, value chains, product life cycles, and more.

With digital twins, companies can create a distinct picture of their internal and external business operations. Through this, the involved firms can reimagine what the complete supply chain cycle could look like, and thus the technology can improve communication across processes.

Democratization of technology: Technologies like artificial intelligence and machine learning, and big data offer a full range of abilities to all the participants within a supply chain network without exception. Consequently, tech-democratization unravels the potential of the staff, making them a core component of the digitization effort. Thus, the staff can select the workflows that can be automated, thus allowing them to focus on more value-added tasks.

Introduction of multiparty systems: The pandemic compelled companies to redesign their supply chain communications and partnerships model. Hence the role of supply chain collaboration became significant, leading to an increase in sales.

Multiparty systems enable individuals and companies to take advantage of the shared data infrastructure, efficiently work, and share data in a single unified ecosystem. These systems include distributed ledger, blockchain, database, and tokenization. With multiparty systems, supply chains firms can inculcate better resilience and flexibility, get new approaches to serve their customers and the market.

Conclusion

Organizations have recently realized the importance supply chain digitization in business processes and are therefore turning implementing technologies such as artificial intelligence, machine learning (ML), and big data rampantly in the present digitized global marketplace. A prediction by Gartner suggests that over 75% of commercial supply chain management application vendors will provide embedded advanced analytics (AA), artificial intelligence and data science by 2026.

Hence, it is quite apparent now that companies have realized the significance of digitization in supply chain and have subsequently begun to incorporate such solutions that can add value at multiple levels of the supply chain in the future.

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