The days when supply chain processes were discrete, always reactive, internally focused, and manually supervised are mostly over. Supply chains that are digitized and automated end to end—from the sourcing of raw materials to the delivery of finished products—are becoming the norm.
The resulting improvements in collaboration, data-sharing, and visibility across supply chain processes have enabled participants in the ecosystem to lower costs and adjust to ever-changing conditions in near real time—and even to anticipate potential disruptions. This guide will look into what supply chain digitization involves, and why it’s essential for businesses of all sizes.
What Is Supply Chain Digitization?
Supply chain digitization is the use of technology to automate and optimize supply chain operations, replacing manual processes and analysis with automation and analytics. It covers the progression from manual and siloed methods to a more efficient, connected series of processes that use digital technologies.
There are many moving parts in the typical supply chain, from planning and sourcing through manufacturing, delivery, and returns. In the past, each stage had its own discrete systems, generating data that often wasn’t shared with players further down the chain. Plenty of details and opportunities for improvement fell through the gaps. And that’s without even factoring in ever-changing factors such as material availability and consumer tastes.
With digitization, almost every part of every stage can be measured and monitored, with real-time visibility to improve efficiency. Supply chains become more like an interconnected network of processes (some of them automated) than a chain of individual links.
The data generated by integrated planning, factory floor, logistics, warehousing, inventory, transportation, and other applications helps supply chain participants coordinate the movement of materials, components, and finished goods. Analyzing weather, labor, market, financial, and other data from third-party sources helps them react to supply chain disruptions more quickly. In some cases, AI-based data analytics can help them anticipate such changing conditions.
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Supply Chain Digitization Explained
As supply chain digitization has spread, it has resulted in the development of numerous digital supply chain management solutions, ranging from the highly customized to off-the-shelf options to hybrids.
Before deciding on which systems are best for their business, supply chain managers need to take stock of their current processes. They need to boil down what works and what doesn’t with existing planning, procurement, logistics, demand management, warehousing, and other systems and processes, as well as reassess relationships with suppliers and retailers, then figure out how to improve that status quo.
Say that a company producing transistors currently imports its silicon from a mass producer based abroad, and it tolerates the lack of visibility as the product is being shipped over because of lower rates for buying in bulk. Could switching to another supplier provide that visibility by using a supply chain management application and/or blockchain technology so that all main parties—seller, buyer, transporter—could follow where the silicon is, therefore removing the blind spot?
Supply chain digitization would also allow the transistor manufacturer to keep production running smoothly by giving it real-time visibility into whether it has enough materials on hand and in the right locations. It would also help the manufacturer oversee the flow of its finished product through warehousing, distribution, and into customers’ hands. From the very start, AI-powered analytics can help the manufacturer optimize its demand forecasting, production planning, and shipping routes.
Additionally, by using a human capital management application, the manufacturer could adjust employee levels to ensure that demand is met in a timely manner. Using an ERP financial module, it could ensure that payments are going out and coming in as they should.
Elements of this may sound familiar to supply chain managers in a range of industries—and they may already implement some of them. But true supply chain digitization can bring all these processes (and more) into a single, unified system. By taking the data out of its silos, it’s more readily available to inform decision-making.
