What is Digital Transformation in Supply Chain?

Digital Transformation in Supply Chain

Sometimes, the most popular things tend to be the most misunderstood. Take the case of
‘Digital Transformation’. Add Supply Chain and it gets even more complicated for many. Digital transformation is a rage in the industry, and understandably so. But what exactly is
it? And what does it mean for Supply Chain Management? Is it merely the introduction of
new equipment and technology?

This blog series will simplify the concept of digital transformation in supply chain aka digital supply chain, its relevance, benefits, and some tips to churn the best out of it. We will also touch upon the larger picture to understand its impact and what’s in store for the future.

Coming back to the questions raised above, there’s actually more happening than a few
clicks here and some new equipment installations there. Digital supply chain assists companies to keep pace with the unpredictive buying patterns of new-age customers and continue to be relevant and useful. In specific terms, it strengthens different teams to collaborate, automate and use insights. It is now a proven tactic to accelerate business, mitigate risks, and optimize costs.

Take the case of shopping. Mobile phones and social media have transformed consumer behaviour where people make specific demands on price, ingredients, delivery options, production methods, etc. Factors they consider valuable, drive their purchase decisions. And they shop whatever, whenever, and wherever they like. In a traditional supply chain setup, companies make offers based on macro factors such as sales volume, climate, and competitive intensity. But today, the market is highly Consumer-Driven and the industry is
forced to think about customizations per consumers’ choices such as organic produce, fresh, environment-friendly, vegan, etc. In an IBM study, over 70 percent of respondents say they are looking for specific attributes that are important to them when choosing a brand. Would it be wise to overlook customers’ preferences? The question begs no answer. These developments clearly point towards the need for a sustainable, futuristic supply chain network instead of a traditional linear process.

The Problem

In the modern world, where everything operates in a network, a traditional supply chain setup relies on stand-alone systems. It involves determining the demand, locating and
acquiring raw materials, creating and manufacturing a product, setting up sales channels and logistics, and then giving customers visibility into their orders. The focus stays on
product production. Issues arising in this process are handled manually. Now that the life- cycle of products is shorter and customers demand a variety of choices, this set-up is no longer cost-effective, efficient, or even sustainable.

And The Solution

A digital supply chain was born to address this. It uses the latest digital technologies across areas like inventory management, order management, procurement data, transportation and distribution. It offers substantially greater insights into how the system functions by integrating and analysing scattered data. The process of utilizing technology to monitor and address business issues and essentially enhance a company’s procedures is known as digital supply chain. When it comes to identifying potential issues and estimating expected risks, traditional supply chains need a lot of time and effort because it cannot make decisions independently. Digital transformation in supply chain enables shared quality and control data to help businesses foresee problems and take prompt, preventative action.

Digital Transformation in supply chain isn’t a siloed phenomenon. Supply chains are among the many facets of business that have been improved by digitization. Companies can now
convert their current traditional supply chain structures into more agile and collaborative
digital ones with the aid of technologies. So now, a warehouse manager can check on the stock online instead of looking for items in the physical storage space. She can quickly check pending orders, inventory levels and shipping progress through GPS, IoT-powered trackers, sensors, and Radio Frequency Identification (RFID) tags to reduce chances of errors. Data can be recorded for reference whenever required and forecast future demand more accurately. Similarly, an order manager handling a broad customer base and a wide inventory can seamlessly navigate through the order management process and fulfil orders
accurately and efficiently. This is because she has product information, availability data, even a customer database with support information. She has support with returns and exchanges. She can track critical KPIs, generate fulfilment reports, receive insights on what is working and what isn’t. All this essentially translates into one thing – avoid being obsolete and, therefore, business death.

A Few Tips

How do you make the most of your digital transformation in supply chain? You should
always start with a ‘digital target’. By assessing the current status vs. target, the planning and execution stays on track. Not every technology out there may be relevant so pick and
choose what suits your business best. Once your business transitions into the digital supply chain set up, you can make faster and more accurate decisions for each individual function.
Aim to combine transactions and readily available macro level data so you can measure
performance precisely and effectively. You can always make the necessary adjustments to prevent distortions brought on by average costs.

Your digital transformation entails considering your company’s future in light of the pressures and trends that affect your competitive environment as well as the evolving expectations of your clients. It is, therefore, ideal if your strategic goals are in sync with your
supply-chain strategy. Although the necessity for such alignment has always been present, what is new is that both the strategic goals and the vision now need to take into consideration the challenges and possibilities that could confront you in a rapidly digitizing market. Needless to mention, you must always keep a close watch on the ROI, make
changes where necessary to prioritize your digital projects into short, medium, and long term and have a result centric roadmap to digital transformation.

Curious to know the technologies which enable Digital Transformation in Supply Chain and how they address specific use cases and improve overall supply chain efficiency? Stay tuned for the next edition where we will talk about technologies used in digital SCM.

Author: Shruti Chanekar

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