What are the Benefits of Supply Chain Digitization?

Digitization brings greater efficiency, an improved customer experience and a fatter bottom line to many areas of business, and this is true of supply chain digitization as well. Yet companies are still holding back, arguably because supply chains operate behind the scenes of most enterprises and rarely gather much attention.

A 2017 McKinsey study found that supply chains have a 43% level of digitization, indicating that most businesses are missing out on the advantages of digital supply chains. But what are these advantages? Let’s take a closer look.

It’s about Efficiency

Supply chains involve multiple parties that need to interact on a frequent basis. Smoothing out these interactions is the predominant goal of a digital supply chain. A digital supply chain can eliminate manual processes, instead connecting enterprise digital systems into a single, fluent communications channel.

In contrast, many companies operate what is effectively a hybrid supply chain model with some elements functioning on a digital level whereas other key data elements could be essentially offline. Even where all data is digital, supply chains frequently operate in silos: requiring manual intervention to shift transaction data between parties. Digitization of supply chains strip out these manual processes.

On-the-ground Benefits of Digitized Supply Chains

With digital supply chains, companies can enjoy the benefits of interconnected supply chain partners. It implies reducing information lag to near real-time levels and eliminating instances of miscommunication or indeed missed communications. This is the result:

  • Lead times are minimized. Wait times are massively reduced by digital supply chains. Whether it is the lead time for procuring raw materials or pinning down productive capacity, orders are simply executed much faster.
  • Just-in-time (JIT) becomes accessible. JIT manufacturing has been a cornerstone of a few vast enterprises for decades, but the technology backing it was inaccessibly expensive. Now, every enterprise can enjoy a digital supply chain that ensures that critical decisions and deliveries are pushed to the last minute. Doing so optimises decision making and saves costs.
  • Supply chains become forward-looking. Instead of operating on a reactive basis, digital supply chains allow companies to predict future requirements as more data is collected, analysed and shared.
  • Eliminate supply chain glitches. Products that are out of stock implies a loss in revenue for a business. A digital supply chain can ensure that your company never runs out of stock, nor orders too much stock – which eventually leads to high discounting.
  • Improved financial management. With lower lead times and a JIT approach a digital supply chain reduces capital requirements and improves cash flow as less money is tied up in keeping excess stock in a warehouse.
  • Supply chain data becomes accessible. A digital supply chain implies that the data points collected throughout day to day supply chain operations are thoroughly recorded. In turn, businesses can use big data methods to broadly optimise business processes.

Clearly a digital supply chain has very real efficiency and cost benefits. But how does an enterprise kick off the process of digitizing a supply chain?

Starting on the Path to Supply Chain Digitization

Supply chain practitioners should first get the attention of C-level staff. As much as supply chains involve the background, mundane bits of a business, C-level staff should be educated about the benefits to focusing on a digital supply chain.

Next, analyse the existing supply chain processes and identify segments that should be prioritised for improvement. This provides the opportunity to demonstrate value through the digitization process, a process which will inevitably take a fair amount of time to complete.

Engaging an experienced digital supply chain partner is essential too. Your technology partner can ensure that supply chain digital transformation is managed in a way that extracts the maximum benefits.

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