The Power of the Digital Supply Chain: Breaking Things Down
In today’s world — where 56% of organizations say they experienced at least moderate disruption to their supply chains from the COVID-19 pandemic1 — there’s a pressing need for supply chains to be more resilient, allowing organizations to adapt to market disruptions as quickly as possible.
Even before the pandemic, the digitization of supply chains was rapidly evolving, and now more than ever there’s an urge to become the disruptor. Companies want to position themselves to support new business models, or to dramatically reimagine old ones on demand. They no longer want time- and resource-draining manual processes — instead, they want to be able to spot potential problems before they happen, or respond correctly (and quickly) if they do.
In a study by The Hackett Group, respondents rated analytics and information management as “the most important service delivery model (SDM) component on their transformation agenda, supporting continued evolution of the digital supply chain.” But at least 45% of respondents indicated that past efforts in this area failed to meet expectations.
It’s then no wonder that the digital supply chain has become so important in such a short time — and that it’s more important than ever for organizations to truly focus on and invest in it. Overall, the digital supply chain allows you to make your business faster, more flexible, more accurate, and more efficient in one fell swoop.
What is the digital supply chain
The digital supply chain involves the application of key technologies as a means to provide greater visibility, and enable smarter decision making and capabilities, including:
- Big data accumulated through internal and external sources
- Digital twins
- Artificial intelligence (AI) / Machine Learning (ML)
- Ability to visualize the information rendered and make decisions in a timely manner
Where traditional supply chains are more reactive, digital supply chains predict and prescribe actions to take.
For example, the supply chain digital twin — thought of as a flight simulator for supply chains — lets companies run what-if scenarios based on a digital replica of the supply chain and build proactive strategies before supply chain disruptions happen. This glimpse into potential futures combines advanced analytics, ML, and AI together to create a robust framework for unexpected impacts.
With the combination of these key technologies and strategies, businesses can now forecast, plan, and automatically control certain processes that could only be performed manually in the past — allowing supply chains to be more resilient, agile, and efficient.
According to The Hackett Group, nearly 70% of businesses name improving distribution and network efficiencies as their most important priority. This includes the ability to make more intelligent decisions around new product attributes, product portfolios, product pricing and distribution, network design, product flow paths, capacity, inventory placement, and transportation modes. The digital supply chain twin is key to making those interconnected tradeoffs in order to deliver in an environment of ever changing customer needs at new levels of speed and scale.
With the digital supply chain, companies now have a holistic view of what's going on at every step of their process. In addition to helping them maintain a constant flow of final products, it also lets them easily see where potential bottlenecks are, letting them put a stop to them as quickly as possible.
Harnessing the digital supply chain to your advantage
If products aren't getting into the hands of customers as quickly as they need to be, or if bottlenecks are developing, you also have the actionable information necessary to know why it's happening, letting you put a stop to it as quickly as possible.
And this is even on the heels of significant staffing issues. Even before the pandemic, The Hackett Group’s study found that human capital was ranked as the second-highest priority to support supply chain transformation, but that staffing and operating budgets were expected to decline through 2020. They also found that “improving distribution/logistic costs and sales and operations planning (S&OP) capabilities, along with reducing supply chain risks” topped the respondent priority list.
The answer to this? The digital supply chain. Not only does it streamline and automate processes, support smaller and leaner teams, and help manage headcount, it also reduces risks with its proactive analytics and planning, and lets organizations stay ahead of potential disruptions before they even happen. And that’s not all.
Another key benefit — and a significant driver of — the digital supply chain is cloud computing. Cloud computing is poised to integrate all supply chain technologies together, allowing them to form something far more valuable as a whole than any of them could be individually.
In the not-too-distant future, all data will reside inside the cloud. This is no longer a matter of "if," but "when," especially considering that data volumes generated by supply chain professionals are exploding. Cloud computing enables companies to process large amounts of data at high speeds, analyze that data to generate critical business insights, and provide overall greater agility, flexibility, and scale.
Leveraging the Digital Supply Chain for the Future
In the end, perhaps the most important benefit the digital supply chain offers is not just how it allows organizations to better meet the challenges of today, but also how it prepares them to address the challenges of the future.
While supply chains are getting larger, more globally focused, and more complicated, the COVID-19 pandemic perfectly illustrated that they're also incredibly fragile. Taking advantage of the digital supply chain and its latest advances makes it easier to adopt the new technologies that protect and strengthen your business, laying a solid foundation for both current and future competitive advantage.
1 "Report - CEO Retailer Survey #2," RetailNext, 07 Apr 2020.