How to Build a Digital Supply Chain

Recent technology trends are spurring companies to reconsider their supply chain management structure. As basic steps along the supply chain are increasingly digital, businesses are now taking steps toward establishing a digital supply chain.

Traditional Supply Chain vs. Digital Supply Chain

Traditional supply chain models don’t enable the speed required to meet customer demands. Formerly, supply chains moved in a linear fashion, with each action’s completion triggering the next step in the chain. Now, a digital supply chain can enable a network, with each link in the supply chain communicating and, in some cases, anticipating the next step. Information is delivered in real-time as opposed to in flash reports available at set times. Real-time data also enables full visibility in the supply chain.

In addition, a digital supply chain enables businesses to collect and analyze data about the process and each individual step, allowing for more actionable improvements in the supply chain.

This heightened precision in monitoring and adjusting the supply chain transforms a digital supply chain into a more agile, flexible process than the traditional, fixed supply chain.

Four Steps to a Digital Supply Chain

Transforming into a digital supply chain should entail more than just updating old IT systems. Instead, a business should integrate the digital supply chain into the business strategy. This includes:

1.      Looking Ahead

Businesses must understand where their digital strategy will position them in the next five to ten years, not just assess where they are now. For example, what can businesses change after e-commerce influenced retail distribution? A scenario like this can help supply chain teams identify what the company needs to do differently and what capabilities would those changes demand.

2.     Spotting the Holes

As part of a digital adaptation, business leaders should also uncover any operational gaps in the supply chain. This includes testing equipment and identifying outdated parts that can affect the entire distribution process. Companies should invest in new equipment and IT platforms as soon as they choose to turn around their delivery and distribution capacity. This step can help supply chains avoid costlier investments in the future.

3.     Assessing Options

Rather than adopt the first option that surfaces, a business should examine multiple solutions to close the gap between their current supply chain and the future ideal system. Companies should contemplate what common IT platform can best support their operations and improve logistical data. Food manufacturers, for example, should consider what digital tools they would need to get accurate information on produce stock. Which new systems could help them speed up the restocking process? Can those tools improve planning and manufacturing speed? The right questions will point companies to the right options.

4.     Investing in the Present and Future

Leadership teams need to strike a balance between establishing a long-term and a short-term plan for their supply chain upgrade. Management needs to make sure that the IT capabilities they’re investing in will support cross-functional business processes and existing strategies, Gartner says.

For example, if a product manufacturer wants to ensure it ships products to its customers within a week of an order, the digital tools must enable the supply chain manager to monitor the individual steps from production through shipping to better control them.

Define A Digital Supply Chain Strategy

To define a digital supply chain strategy and implement the step above, business leaders need to answer the following questions:

  • Which supply chain capabilities will be most important to the business in five years?
  • What new models could a digital tool enable?
  • What are the top three digital priorities?

When answering these questions, business leaders should embrace what McKinsey & Company

calls “microsegmentation” in the supply chain. The term means to break the supply chain up into individual segments by capabilities and customer demand to help tailor the supply chain at a much more granular level.

Eliminate Digital Waste, Too

As with traditional supply chains, waste is something that should be eliminated in a digital supply chain as well. In this case, waste can occur with unnecessary notifications that don’t trigger a process, data collected that goes unused, misalignment between supply chain partners, or missed opportunities to use machines.

Big data analytics are enabled with new technologies, and, McKinsey says, poised to reduce forecasting error by 30 to 50%.

Intelligent packaging is another technology that enhances the packaging itself to protect its product and avoid waste. This can be anything from tracking a diamond to ensure it is sourced ethically to inserting moisture detection on perishable food.

Build a Clear Roadmap

Businesses should focus on digital adaptations after they have taken the time to really understand the technologies, what they can enable, what they would mean for the customers, how that impacts profitability, what it will take to implement, and how that will influence the customer’s experience.

Although taking steps to a digital supply chain requires extensive planning and includes all participants in the supply chain, the possibilities make the time and cost well worth it.

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