Why Digital Supply Networks Matter to Private Companies
Businesses can take advantage of the machine learning capabilities of AI to learn complex patterns, forecast demand and automate some of the decision-making in the supply chain
The production process for organizations that depend on suppliers has long been a linear path between raw materials and finished goods. In the traditional supply chain, companies source raw materials, develop and refine those products in the manufacturing phase, and ultimately deliver finished goods to their customers.
Thanks to the rise of digital supply networks, suppliers, manufacturers, and customers now come together around a dynamic digital core powered by real-time data. Almost every private company operates in a globally connected environment today and the digital supply network (DSN) is a game changer that can drive efficiencies and improve process quality.
The Emergence of DSN
A key factor behind the emergence of the DSN is the increasingly fragmented nature of business. Consider companies that have procurement managers in one location and inventory distributed across multiple sites. These organizations need to know what’s being produced, moved, and stored at a given moment in time. An executive interviewed in Deloitte’s Digital Supply Network Transformation study discussed the challenges of implementing a DSN that has more than 1,500 suppliers, does the bulk of its business with only a fraction of those companies, and argues that a digital network in which all suppliers participated would provide far greater insight into inventory needs.
In our recent private company issues and opportunities report, we touched on this complexity by highlighting how private companies are using emerging technologies such as analytics to manage unpredictability, forecast demand, and handle procurement issues within their supply chains. One retailer that keeps hundreds of discrete products in stock discussed how artificial intelligence (AI) tools can help assess demand, inform pricing strategies, manage production, and enhance employee performance while staying current on supply chain needs.
In retail, smart packaging with sensors that track product conditions in real time can facilitate reordering and predictive planning both for suppliers and the retailers who sell their goods. When smart products are connected to a DSN, there can be new opportunities as they capture data and insights that can be used across the network. It’s not just manufacturers and retailers that can improve their supply chains through digital enhancements, however. Health care companies can activate a DSN to deliver the right medications to the right patients at the right time. For example, providers can use real-time data to project seasonal demand for flu medicine to see where it is located and allow hospitals to distribute to places where it’s needed most
The Power of AI
So how can private companies make the digitization of supply networks into reality? In our 2018 technology survey of mid-sized and private companies, one-quarter of respondents say they plan to take advantage of smart contracts powered by blockchain technology. Meanwhile, one-fifth of respondents see value in enabling the exchange of digital assets as they seek to prevent supply chain fraud. And as the retailer we profiled and other companies have shown, businesses can take advantage of the machine learning capabilities of AI to learn complex patterns, forecast demand and automate some of the decision-making in the supply chain.
Digital supply networks can be a powerful competitive tool for a business. From reducing costs and improving asset efficiency to enabling growth in new markets and reaching new audiences, there’s mounting evidence that DSNs improve the value chain. Private companies can tap into that momentum and gain an edge over the competition if they apply digital capabilities to run their businesses.
Jason Downing is a Vice Chairman of Deloitte LLP and the US Deloitte Private leader, where he oversees the strategic direction of Deloitte’s portfolio of services to private company and mid-market clients. He most recently served as managing partner of Deloitte LLP in the North Texas marketplace and remains active with several North Texas clients and community leadership roles. Jason holds a BBA in Accounting from Stephen F. Austin State University and is a Chairman of the Board for United Way of Metropolitan Dallas.