A supply chain is a broad ecosystem of activities, business processes, people, resources, and information that lead to the completion of a company’s product or service. The strength of a company’s supply chain of vendors and distributors allows that company to bring its offerings to customers and to achieve a competitive advantage.
Conversations about supply chain compliance, resilience, and creating a sustainable supply chain are a rising priority today. These issues encourage organizations to move away from traditional supply chains in favor of digital supply chains instead.
A digital supply chain results from applying advanced electronic and digital technologies to the traditional supply chain management paradigm. These technologies include:
- Cloud computing
- Software as a service (SaaS)
- Big data
- Artificial intelligence
- Machine learning
- Natural language processing (NLP)
- Virtual reality and augmented reality
- Internet of things (IoT)
Digitalization with new technologies and digital initiatives can optimize traditional supply chains, improve control, and build greater resiliency and preparedness for future disruptions.
In a 2019 IBM study, 84 percent of chief supply chain officers said that poor visibility across the supply chain was the biggest challenge for their organization, leading to inefficiencies and waste. Digitalization helps address this problem by establishing improved visibility, transparency, and accountability along the entire supply chain.
In addition, digital transformation garners benefits in automation, speed, collaboration, cost reduction, and connectivity. It also eliminates inefficient business silos, improves business decision-making, and unlocks value for all stakeholders involved in the supply chain.
5 Benefits of a Digital Supply Chain Strategy
The digital revolution (sometimes called the “third industrial revolution”) has transformed modern human society. Supply chain digitization is a part of this era, redefining how global supply chains operate and deliver value.
Electronic technologies, connectivity, data, and advanced analytics are at the heart of digital supply chain management. Together, these elements deliver the following benefits, especially when embraced by every partner along the value chain:
Improved Visibility Into Supply Chain Performance
Compared to traditional supply chains, a digital supply chain provides significantly more visibility into its elements and moving parts. Organizations can get real-time visibility into supplier performance, allowing them to identify gaps that may cause disruptions and then address them.
Digital supply chains are also more customer-centric, so companies can better understand customer needs and take actions to improve customer experiences.
A digital supply chain eliminates the traditional paper-based, manual supply chain processes. It removes manual data entry and the need for stakeholders to request updates via phone calls or emails. All the required information is readily available to whomever needs it to improve their processes and collaborate with other entities.
Digitalization also brings automation to business processes, which improves process efficiency and worker productivity, performance, and profitability. Digital tools like sensors allow real-time tracking of inventory across the entire supply chain. Ultimately, electronic connectivity enables organizations to optimize the supply chain and redefine new business strategies.
Reduce Costs and Accelerate Innovation
A digital supply chain provides up-to-date, holistic information about performance, status, and requirements. This information helps to manage and optimize processes such as raw material flows, operational logistics, inventory levels, forecasting, and resource planning. These are direct benefits to improved cash flow and cost reductions.
Improved information sharing and collaboration create opportunities to identify process bottlenecks, reduce time-to-market, accelerate innovation, and increase the return on innovation.
Data and Advanced Analytics
The digital supply chain is enabled by many data-driven technologies, including big data, machine learning, IoT, and predictive analytics. Organizations can connect and relate data sources to improve inventory management and preventive maintenance. They can leverage data to identify inefficiencies, boost product quality, and enhance customer experiences.
A digital supply chain can also provide advanced analytics that visualize data so users can more easily learn from mistakes, make predictions, and improve decision-making.
Improve Supply Chain Planning
In traditional supply chains, spotting possible issues and predicting their likely effects can be laborious, time-consuming, and unreliable. In a digital supply chain, shared and up-to-date quality and control data enables companies to anticipate issues and respond quickly before the problem escalates.
Moreover, digital supply chain management makes it easier to plan and manage all supply chain workflows, including:
- Inventory management
- Logistics management
Through digital tools and technologies, companies can better coordinate and collaborate with various stakeholders, including third-party service providers, vendors, intermediaries, and customers, to improve the performance of the end-to-end value chain.
How Can I Digitize My Supply Chain?
Digitalization is the key to creating a connected, intelligent, and efficient supply chain ecosystem. Gartner predicts that 50 percent of large international organizations will use AI, advanced analytics, and IoT in supply chain operations by 2023. In addition, it is expected that collaborative robots will supplement more than 30 percent of warehouse workers.
The following best practices can help organizations to transition from a traditional supply chain to a more modern digital supply chain:
Step 1: Assess the Current Supply Chain
Digitalization should always start with assessing the existing supply chain. This assessment includes the strengths, weaknesses, opportunities, and threats to the supply chain. All current issues, risks, and possible complications must be identified and analyzed.
An assessment makes it easier to recognize future issues early, set up preventive frameworks and supply chain solutions, and mitigate potential harm. Use a framework to set actionable goals for specific problems, rather than attempting a Big Bang transformation that could cause confusion and minimize the chances of success.
Step 2: Define the Digital Strategy
Businesses and their supply chain partners must collaborate and communicate to define the goals of the digital supply chain. It’s essential to understand the expected benefits to assure that the new digital system will meet the needs of every stakeholder.
Moreover, the transition from the traditional supply chain to a modern, fully integrated digital supply chain can be a complex endeavor, so it’s vital to develop a clear strategy and implementation roadmap.
Step 3: Conduct Supplier Analysis
Assessing suppliers’ maturity and digital readiness is a critical step in setting up a digital supply chain. One good practice is to check their awareness of potential risks. Ensure that their questions or doubts about digitalization benefits and expectations are fully answered. If a supplier isn’t ready for digitalization, you won’t reap the expected benefits.
Step 4: Invest in Digital Capabilities
Once there’s clarity on digitalization goals, risks, expectations, and potential benefits, invest in relevant digital capabilities. The right capabilities are crucial to digitalization success, whether that’s software for digital logistics or supply chain management, radio frequency identification (RFID) tags or GPS for real-time inventory management, or automated robotics for packaging or payments processing.
Step 5: Get People on Board
A digital supply chain reduces the need for human intervention. While digitalization improves stability, accuracy, quality, and predictability, you still need human problem-solving and decision-making. Successful digitalization depends on a well-informed staff that has received sufficient training to assure that they can handle the new technologies effectively and optimally.
Step 6: Analyze Performance for Continuous Improvement
Once digitized systems and processes are implemented, the performance of the digitized supply chain must be regularly assessed. Productivity, efficiency, ROI, and other metrics like lead times, inventory turns, and perfect order rates must be captured, analyzed, and compared over time.
Such analysis can help assess if the new system is performing as expected and reveal opportunities for digital-led optimization and growth.
Improve Your Supply Chain Security with ZenGRC
Digital supply chains are the way of the future and will deliver considerable advantages in customer satisfaction, efficiency, resilience, and cost savings. The flip side of digitalization, however, is increased cybersecurity risk. You can reduce risks in your digital supply chain by improving your visibility into the risk landscape. And for this, ZenGRC is ideal.
With the ZenGRC integrated risk assessment platform, you can identify and track supply chain risks. It provides a single source of truth repository for storing all necessary vendor documentation. Best of all, ZenGRC tracks compliance with all your frameworks at once to avoid duplicating efforts.
Insightful reporting offers a comprehensive view of control environments and leverage customizable risk calculations to evaluate risks across connections and third parties. Automated alerts help you monitor risks in real-time and remediate them quickly.
Schedule a demo today to learn more about ZenGRC’s intuitive and easy-to-use platform.