Aug 15, 2022

about 5 min read

How digital transformation is shaping the supply chain industry

All facets of business, including supply chains, have been impacted by digitization. Embedded sensor, GPS, and RFID technologies have assisted businesses in transforming their current traditional supply chain structures-which combine paper-based and IT-supported processes-into more adaptable, open, and cooperative digital ones.

Supply chain management innovation is accelerated by digital transformation, which makes organizations more adaptable and automates business processes. Businesses need to integrate digitized supply chain models into their broader business models and organizational structures in order to benefit from them as much as possible.

There is no doubt that firms are ready to switch from the conventional method to digital supply chain management to increase agility, efficiency, and visibility. Let's explore the definition of digital supply chain management and see how it differs from a regular supply chain after that.

Supply chain industry before the digital transformation 

When it comes to the traditional supply chains before the digital rise, they are considered as a largely static entity. Particularly, supply chains in the past are more reactive than the digital ones. They follow guidelines established by previous transactions. Besides, typical standalone systems used in traditional supply chains operate in silos with little to no data sharing. Typically, the traditional supply chains consist of processes where a product evolves from the acquisition of raw materials to manufacture and deliver to the final customer. To be more specific, these key elements are acquisition of raw materials, manufacturing, product distribution & shipping, sale and product consumption. 

However, there are some key disadvantages surrounding the traditional SCM. They are only concerned with production and distribution, not with customer needs. They are also not optimized and lack the "intelligence" to detect problems along the value chain quickly.

Even after a problem has been identified, predicting its consequences and locating a solution can take a significant amount of time and effort. This causes production delays, errors, and increases time-to-market, all of which can harm customer satisfaction and corporate profits. 

In what ways digital transformation is changing the traditional supply chain?

Supply chain management is critical in streamlining supply chains and assisting organizations in meeting their key business objectives. Organizations are transitioning from traditional supply chains to digital supply chains as technology advances and profit pressures increase. Here are the 6 ways in which the traditional supply chain has evolved to digital ones due to digital transformation. 

Increasing connections of the supply chain system

Recent developments in supply chain technology provide businesses with real-time information about the status and location of their assets. For example, Bluetooth low energy and cloud based GPS help businesses to get track of their asset’s location, especially whether the cargo is in transit. Besides, real-time tracking can be used to assess inefficiencies in delivery routes and transportation performance. With minimal human intervention, internet-connected sensors can identify quality or supply chain interruptions and immediately resolve the problem or modify production flows. When done correctly, the entire supply chain ecosystem benefits from enhanced visibility, responsiveness, and resiliency.

Drawing more insights from Demand-driven supply chain management

Forecasting customer’s demand correctly is always a difficult task. With the traditional method, businesses can only give forecasts based on historical demand levels. But those data cannot reflect the topical demand trends. Thus, there is an urgent need for an updated and effective measuring tool. And embedded sensor technologies were born so as to monitor, gather, and report data about the environment, as well as react to commands from a distance. The accuracy of demand forecasting and replenishment can be greatly increased through intelligent analysis of that data. 

Establishing the Digital thread

Digital thread allows businesses to share information with all downstream and upstream data consumers as well as generating an effective feedback loop. In addition to linking data and systems, it requires the union of workflows and people. Moreover, thanks to improved data exchange, the entire product chain will be able to respond to changes in design, manufacture, volume, reworking, and through-life service provisions more quickly. Ultimately, digital thread holds the key for the evolution that switches the supply network to an integrated value chain. As a result, suppliers and customers can benefit from achieving efficiencies and lower costs. 

Increasing stakeholders’ participation and coordination at every stage

The integrated value chain is built on a new level of transparency and information sharing, including bidirectional communication and inter-company visibility into everything from inventory conditions, supply statuses, and shipping delays to future-focused factors predicting demand shifts. To increase efficiencies and improve interoperability, best practices are shared with internal and external stakeholders. End-to-end visibility is largely determined by the ability to access data across business networks, also referred to as a "network of networks." The synthesis of data from all supply chain entities is thought to be more valuable than data input from a single network. This lays the groundwork for synergistic value co-creation, in which savings and opportunities are generated and shared among business partner organizations, resulting in "win/win/win" relationships.

Rising in the number of cyber risks

Traditional obstacles to innovation and collaboration are being dismantled by digital transformation. But doing so also increases the chances of intrusion by bad actors, hence dramatically raising supply chain cyber threats. Most of the time, knowledgeable attackers make use of third-party vulnerabilities to achieve their target. To be more specific, any security holes in a company's supplier network could be used by hackers as entry points. On the other hand, businesses can also serve as entry points for hackers to access their end users and partners in the supply chain. Thus, lost sales and reputational harm happens as an inevitable result, especially if the target organization is judged to have been cyber-negligent. Every supplier ought to go through a cyber risk assessment process. Following that, contractual clauses and unambiguous minimum standards should subsequently be used to address the identified exposures.

Changing in customer shopping habits

Customers today are less patient with late delivery or incorrect orders, which means logistics and distribution must happen at lightning speed. Therefore, several firms are switching from direct retail to centralized distribution and real-time inventory management. Moreover, Covid-19 pandemic has recently increased the number of online transactions. As a result, companies are taking a lead from retailers and developing their own e-commerce capabilities. Some business-to-business (B2B) firms may even choose to switch to direct-to-consumer (DTC) sales and use retailers' tactics to enhance their capacity for providing digital customer support. Besides, businesses can even simulate facilities visits and highlight new product or service offers by using virtual or augmented reality capabilities.

Our last words

Organizations are rethinking how they conduct business as a result of the rapidly evolving technological landscape and raised client expectations. Digital technology can be integrated into the supply chain to increase efficiency, flexibility, and resilience.

The optimum time for companies to start implementing their plans is now as they reevaluate their supply networks. One of the best and safest methods to create a resilient company today is through digital supply chain transformation.

If you are having trouble with your digital transformation, you may work with a trustworthy firm like Golden Owl to handle your adoption requirements. We are a reputable company that provides digital transformation solutions to make it as easy as possible for you to adapt to changes. We have assisted businesses undergoing digital transformation all across the world, making the process simpler for you.

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