Digital Transformation - Top 5 Supply Chain Benefits

Digital transformation has become a big buzzword lately, but it is nonetheless key to companies having well functioning supply chains going forward. 

There has been an almost overnight paradigm shift regarding attitudes towards digital transformation. It has gone from being a goal to achieve at some nebulous future date to something that is a matter of survival. Companies of all kinds have come to see the numerous potential benefits of digitizing their practices and are embracing it as a result. The same is true of supply chains. Perhaps even more so.

An article by McKinsey explains as much,

McKinsey research suggests that, on average, companies that aggressively digitize their supply chains can expect to boost annual growth of earnings before interest and taxes by 3.2 percent—the largest increase from digitizing any business area—and annual revenue growth by 2.3 percent.

This article by Morai Logistics covers the top 5 advantages supply chains that digitize their operations are set to experience.

Decision-Making

A critical component of a healthy supply chain is the framework in place that drives its decision-making. Through the technological advancement digital transformation brings with it, that framework evolves as well. Getting access to machine learning in particular means supply chain managers can have very accurate predictions at their disposal. Which in turn can help them be much more precise with their decision-making.

As the earlier mentioned McKinsey article outlines,

Machine-learning systems can provide supply-chain managers with recommendations for how to deal with particular situations, such as changing material planning and scheduling in response to new customer orders.

Automation

In turn, digital transformation also unlocks automation. Which is set to play an enormous role in boosting supply chain productivity and efficiency. It does this in several ways. This includes reducing manual errors, completing laborious tasks faster, and making data collection more reliable and accurate. Automation is central in making tedious, repetitive supply chain work faster and more accurate, while involving less waste.

Customer Experience

Moreover, digitization brings with it a significant improvement to the customer experience companies can give their clients. This is because it enables clients to have end-to-end engagement. They can track their orders throughout the shipment and delivery process. This gives customers the transparency that they’re after and the peace of mind that comes with it.

Integrated Processes

Additionally, supply chains have gotten larger and more complex over the years. This is in large part due to the opportunities and costs globalization has brought with it. As such, it’s more important than ever for the many parts that make up a supply chain not to be silo’d but rather be integrated into one system where they can all be followed. Digital transformation means being able to have a single data management platform where all the disparate parts of a supply chain can be kept track of. This also means less resources and time spent on keeping up that tracking.

Future Growth

Finally, it’s important to keep in mind that digitization isn’t just some checkmark or objective to reach and move on from. It’s a mindset, culture, and infrastructure that allows for continued innovation and access to future technological advancements. It’s a foundation from which all future development can be built upon.

Slack addressed this in a post last year,

 New technologies will continue to shake up customer expectations and processes. A digital business builds resilience by replacing rigid structures and inflexible processes with a workplace culture and infrastructure that can respond and adapt to new demands.

Supply Chain - Digital Transformation

If supply chain companies are going to evolve to meet the demands of the market, digital transformation has to be central to that evolution. 

Now, more than ever, supply chains are being pushed to grow as a result of the needs of customers. And, no matter how well run a supply chain is, by itself it simply can’t meet those needs. Not without the aid of technology. In turn, there’s no greater way to technologically integrate and streamline an operation than digital transformation.

The numbers bear this out. A McKinsey study showed,

That, on average, companies that aggressively digitize their supply chains can expect to boost annual growth of earnings before interest and taxes by 3.2 percent—the largest increase from digitizing any business area—and annual revenue growth by 2.3 percent.

If they digitally integrate properly, supply chains should see improvements in the following areas, just to name a few:

  • Speed
  • Efficiency
  • Decision-making
  • Communication

This week’s article by Morai Logistics underscores the importance of digital transformation for supply chains. Pointing to some of the most relevant areas of improvement digital tools will bring and how.

Speed

There are a multitude of reasons why digitization should improve the speed of a supply chain. Automation by itself should greatly enhance supply chain speed by conducting repetitive tasks like data collection without human error. Additionally, machine learning can greatly help with predictions that are central to supply chains running smoothly. 

These predictions can involve data within a company, such as the health of machinery so that it can be fixed or replaced before it disrupts operations. The predictions can also involve external data such as market demands, so inventory can be stocked accordingly or weather patterns, so the supply chain can adapt to them.    

Efficiency

Efficiency often goes and hand-in-hand with speed, with the added bonus of leading to more profitability due to less waste. Thus, for many of the same reasons speed is improved, efficiency is too—automation and machine learning. However, in addition to those reasons, digital integration drives efficiency also because it can bring with it artificial intelligence (AI) and robotics. 

AI, much in the vein of automation, can handle tasks that would otherwise be mundane, freeing up the workforce for more important matters. Robotics is useful in several domains, particularly warehouse management, as they can deal with the handling of the inventory. 

Decision-making

In order for a supply chain to perform optimally, the decisions that underpin it have to be precise yet flexible, accounting for customer demands and adaptable to any circumstance. The collection of data, the generation of analytics, and the subsequent insights they give can be integral to understanding a supply chain. 

Moreover, the earlier mentioned machine learning can go a long way in making decisions more informed. As they give suggestions to help with inventory management, scheduling, market fluctuations, and so on.

Communication

As a result of the incredible size of modern day supply chains—often stretching from one side of the globe to the other—it’s critical that communication along them is excellent. Any gap can lead to a breakdown in the entire chain. One digital option to overcome this issue is blockchain technology.

Blockchain provides a database with an immutable and transparent digital record of the movement of products along supply chains. Where, in turn, each new piece of data has to be validated by every player in the supply chain. Consequently, there is a continual mutually agreed upon data trail of what is happening each step of the way.