Disruption is everywhere these days, not least within supply chains and international logistics; closed borders and high demand for products have all played a part. Supply chain risk, visibility, and resilience have become the focus of commercial and business discussions. Thanks to technology, supply chains have proved better prepared for risks. Ultimately, such efforts paid off in the long term for those who had already undergone a digital transformation of their operations.
This article discusses how those involved in supply chain management can capitalize on new technological innovations to help carry out turning raw materials into products and get them into customers' hands as quickly, efficiently, and of as high a quality as possible.
What is a supply chain?
So as we defined in a previous article, a supply chain is an entire cycle of producing and selling goods, from material supply to manufacturing, right up to the last steps of distribution, customer purchase, and after-sales.
There are challenges for supply chains that often center around unforeseen barriers to supply, demand, productivity, and profitability. However, despite these challenges, operating a digital supply chain is more important than ever. The needs placed on supply chains are transforming rapidly, impacted by a number of factors including globalization, evolving carbon emissions regulation, scarcer resources, and competition.
What is a digital supply chain?
When organizations leverage technology to predict and identify actions to take when disruptions occur, this is a digital supply chain, as it functions in real time and can adapt to changing circumstances. This differs from a traditional supply chain that primarily functions based on reaction without the high level operational visibility.
For example, a traditional supply chain typically relies on a system that operates independently of - or is not connected to - distribution networks. Meanwhile, in a digital supply chain, data from IT systems and operating systems are integrated to networks.
A digital supply chain also differs from a traditional supply chain because it concentrates on the visibility of operations using advanced technology. The result of this is capturing data to gain better insights into the procedures of each stakeholder along the chain, allowing each one to make adequate decisions about the sourcing of materials, the demand for products, and all the connections in between.
With this visibility of the organization’s supply chain through technology, it is possible to calculate the real-time performance of suppliers and judge when the delivery of materials should arrive. This type of new digital capabilities has changed the supply chain landscape – driving focus on the function of the supply chain in an organization – and subsequent developments of specific jobs and departments to handle the increasing complexity of supply chains in general.
What is digital supply chain management?
Supply chain management uses logistics and supply chain-related processes, effectively concerning the decisions taken to create the operational framework within which logistics are performed strategically. As where digital supply chain management is about using predictive analytics to optimize inventory allocation and forecast demand through technology.
A report from McKinsey & Co. notes that “companies [are required] to rethink how they design their supply chain. Several technologies have emerged that are altering traditional ways of working. Besides the need to adapt, supply chains also have the opportunity to reach the next horizon of operational effectiveness, to leverage emerging digital supply chain business models, and to transform the company into a digital supply chain.”
Essentially, they mean that information technology must be involved for supply chain management to become digital, from functional requirements and knowledge to ensure high levels of competency and performance. So organizations should therefore use digital resources to gather an overview of supply chain planning, operational logistics, and performance management and identify pain points.