Supply Chain Digital Transformation - Benefits and Challenges

Digital transformation January 11, 2023

Supply Chain Digital Transformation Benefits and Challenges

Around 38.8% of U.S. small businesses struggled with supply chain delays due to the COVID-19 pandemic. Despite the pandemic hitting businesses hard worldwide, the global supply chain market is predicted to reach a CAGR of 11.2% from 2020 to 2027. That could mean the market value will increase from $15.85 billion in 2019 to $37.41billion in 2027.

The tremendous potential of the supply chain is expected to keep growing with the help of technology. Digitization enables supply chain management when it comes to improving planning and sourcing. Logistics teams can collaborate and automate better. Digitization helps power growth and reduces risk and costs. Technology can help organizations build a stronger and dynamic supply chain.

How technology can enhance supply chains

Supply chain digitization lags behind when compared to digitization of other industries. Technology has a notable impact on supply chain processes. Adapting to right technology solutions can ensure supply chain operations are run by data driven advantages.

A Gartner survey says that 61% of respondents believe technology can provide a competitive advantage. Cloud services, AI, IoT and digital supply chain twins are some of the main technologies dedicated to transforming the functions of this industry.

Optimize routes and predict demand

In Demand forecasting, an inaccurate forecast can be the most common reason given for a poor performance. Demand forecast being accurate is critical for the success in the supply chain.It is the highest profitable factor in supply chain optimization. However, it can be excruciatingly difficult to achieve without technology. Data Analytics are increasingly being used to improve the demand forecasting. Which creates a chain of reaction in the improvement of the whole supply chain process as operational tasks are strongly linked together.

A poorly made forecast not only costs more when it comes to material but it also means more vehicles being used in the process resulting in major monetary loss.

Technology is imperative to optimize routes in the supply chain. Using AI powered analytics and machine learning algorithms , we now have excellent tools to forecast accurately. These tools not only help find the shortest route to the goal but also provides the one that has all the required factors such as delivery timing and fleet efficiency.

Improve traceability and reduce errors

Blockchain has been serving as a vital technological tool towards responsible sharing of data and stats while maintaining the low risk of errors. Supply chain companies can use blockchain technology to establish complete data visibility by having a single shared ledger for production updates. Implementation of blockchain means transactions made will always be time-stamped and the company can stay up to date with queries on product statuses at all times.

Merging blockchain and IoT, supply chains can start tracking the status, condition, transportation and quality of a product through automation. Companies can practice ethical practices by sharing the tracking and tracing of data with customers with these smart technologies.

Some of the issues blockchain tackles in supply chain management are:

  • Counterfeit goods

  • Compliance Violations

  • Delays

  • Waste

  • Emergency actions in product recalls

  • Ensurance of regulatory compliance in ledger audit trail

Monitor and track inventory in real-time

Brands are optimizing inventory management through automation and innovating the way they track, manage and update their stock keeping unit.

Real time monitoring is when sensor collected data is streamed consistently without taking any time between collection and delivery. It provides immediate access to the data.

Benefits of using real time monitoring by IoT are:

  • Increase in output

  • Improved quality of material

  • Low energy consumption

  • Higher chances of profits

Adapting to real time monitoring can mean better customer service from your company by forming finer communication. Through the immediate information provided by IoT devices, companies can be timely informed of their product or materials location at any given time and hence can inform the customers accurately.

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Challenges and consideration

Supply chain has many bodies involved along with multiple moving processes. As much as technology is helping in resolving most of the challenges in this field, investing in the right technology becomes imperative.

Choosing the wrong solutions for your problem can lead to complications in productivity and risking profitability.

Integration with legacy systems

Many companies are so accustomed to using the legacy systems, it has become ingrained in their operations. Getting rid of a system so deeply rooted into the overall work process of a business can require serious effort. Integration of latest technology and legacy systems are performed keeping in mind if-

  • Current systems provide the support

  • Resources to develop current systems

  • Integrating information from multiple systems

  • Systems are serving your logistics needs

Cybersecurity concerns

While you weigh the pros and cons of complete automation in supply chain management, (pros might be more in number) the one concern that tops the cons list is Cybersecurity issues. Supply chain industry saw a huge surge in cyber attacks in 2022.

According to Cybersaint, Three top risks in supply chain cybersecurity are

  1. Data leaks

  2. Supply chain breaches

  3. Malware attacks

Adapting company culture and employees to new tech

Another challenge that digitization imposes is how the employees of a supply chain company will adjust to a more digital and automated process. They would require adaptation to new which can be a big challenge.

A mere 38% of supply chain executives are ready to use the technology and digital tools provided to them.

Conclusion

Digitization in the supply chain is directly related to more visibility, greater efficiency, improved customer experience, accurate forecasting and better inventory planning.

Businesses are able to access big amounts of data and analyze it in real time with most accuracy. Resulting in positive changes in the supply chain.

The presence of digitization in the supply chain is already strongly imprinted. The businesses that will adapt to it will reap benefits sooner than their competitors and will position themselves higher in the graph of growth.

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mohan
Written By

A technology veteran, investor and serial entrepreneur, Mohan has developed services for clients including Singapore’s leading advertising companies, fans of Bollywood movies and companies that need mobile apps.

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