Why Digitizing the Supply Chain Will Be the Next Global Technology Movement
With the global health crisis continuing to wreak havoc on essentials like microchips, building materials, and food, accelerating a pivot to supply-chain digitization is vital, and there are practical ways to do it.
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As the current global health crisis continues to wreak havoc on the world's supply chain, with constraints impacting everything from semiconductors to plastic, companies need to accelerate a move towards supply chain digitization — need to consider how to leverage new technologies to allow for a faster flow of data from retail sales floors to component manufacturers. According to a 2020 report by Foley and Lardner, 42% of manufacturers plan to strengthen these relationships and increase transparency across their supply chains.
But how to get started?
A digital ecosystem, with transparent data
The first step needed to bring more smarts to a supply chain is to bring together current available industry systems under one roof. For many businesses, this isn't a simple task, but an incredibly important one. Brands like Henkel, a consumer goods company based in Germany, did this when it connected its 33 factories across the globe to one cloud platform, which allowed them to easily track everything from product supply to truck logistics and consumer demand.
It's important to note that, in addition to developing one digital ecosystem to host the digitized version of the supply chain, it's critical for every part of an organization to share necessary data to prevent data silos. When planning, purchasing and production departments work in such silos, information gets delayed or goes uncommunicated, slowing down the process and resulting in partly or completely uninformed decision making. But synchronizing systems from the start opens an array of opportunities for transparency and collaboration; the more departments know each other's updates, the more check points there can be throughout. This leads to faster response times and a more efficient process overall. An added benefit is that it allows businesses to better understand market demand and have the ability to create an industry-wide master production system (MPS).
Another important goal is to match enterprise resource planning (ERP) inventory, storage resource management (SRM) data and suppliers' data, so that departments can have more frequent and real-time access to information across all channels, allowing for better evaluations and informed decision making. Such data synchronization reduces redundancies, improves communication and offers clearer insight into channels. It also gives companies the advantage of better predicting demand and identifying risks, making forecasting and risk assessments more accurate and helping to meet demand without the need to produce excess inventory. According to McKinsey, high-performing organizations are three times more likely than others to say their data and analytics initiatives have contributed at least 20 percent to earnings before interest and taxes. It's clear that businesses hoping to remain competitive must prioritize data synchronization and investments in technologies that help automate the end-to-end workflow.
Including AI and other cutting-edge solutions
The next wave of this global technology movement will inevitably include artificial intelligence and machine learning that can make ongoing improvements over time. These digitization efforts will enable incremental adjustments that happen instantly, breaking the current industry practice of waiting to make changes all at once through a major overhaul. These small changes add up to a major shift in improving a system's performance.
Organizations can start taking advantage of these tools by seeking out areas in the supply chain they can begin automating, such as logistics and distribution, marketing and sales, as well as production planning and scheduling. These newer tools will allow companies to analyze large volumes of data far more efficiently, so team members can manage tasks more effectively and quickly respond to shifting consumer demand. This will allow companies to easily scale as needed and adroitly shift with the consumer landscape.
Even with a focus on tech, relationships matter
Brands are investing more than ever in IT and digitization, but relationships remain significant and critical to success. Digitization isn't a be-all-end-all solution, because ultimately it is people who are making the decisions, and so good communication is vital, especially in a time of crisis (such as the one we're just now hopefully cresting). While technology will help improve systems overall, organizations leaders should leverage the time saved via these tools to continuously seek out new industry partners and otherwise collaborate with those that will further business initiatives.
By leveraging new technologies and investing in IT and digitization, brands at the forefront of this emerging technology movement will discover new suppliers, have better means to evaluate systems, set themselves up for stronger relationships and ultimately reduce costs. Ultimately, a more efficient supply chain will not only offer opportunities for better relationships within the chain itself, but also between companies and consumers as a whole, and make the world more flexible in response to future crises.