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Supply Chain Digitization: Definitions and Industry Benefits

Posted by [email protected] on Aug. 9, 2022  /  Subscribe 0

As technology advances at work and home for the billions of people on Earth, it is only natural that the supply chain industry must follow suit. 

More and more, supply chains around the world are becoming digitized. If you’re a chief supply chain officer looking for the best way to improve your bottom line and stay competitive, you’ll want to keep reading to learn all about supply chain digitization.

This new technology, which combines artificial intelligence (AI) and software with existing applications used in supply chain management, brings the future into focus.

What is Supply Chain Digitization?

So how does one digitize the supply chain? Through software! 

To digitize your supply chain, one needs to “[establish] master data that aggregates information from across your entire supply chain, as well as information from some external sources” like sales data, competitor pricing, and more, according to DDC FPO. 

It's all about using technology to identify internal or external trends influenced by factors within and outside your control. In a traditional supply chain, all this data analysis will fall on one team or person, and factors like workforce and perspective can limit the data collected and used. 

That’s where advanced analytics come in. Using sophisticated tools and techniques, you can streamline your data examination process to be practically autonomous. This will help you make predictions and learn deeper insights about your business and the market. Some techniques include data mining, cluster analysis, machine learning, multivariate statistics, and complex event processing.

With the right organization and management, a supply chain digital transformation can have a hugely positive impact on your business processes. Before we continue into the benefits of supply chain digitization, it’s crucial to understand that a digital transformation of your supply chain will not be the end-all, be-all of your business’s success. Technology is only one of the four main supply chain enablers, so while you’re focusing on revamping the technological aspect of your supply chain, keep in mind that you’ll need to work on the organizational infrastructure, strategic alliances, and human resources management of your supply chain as well. 

Why Move Towards Supply Chain Digitization?

Getting onboard with the digitization of data isn't a hard decision to make. 

In a digital supply chain, external resources can combine with internal data compilation methodologies to produce a 30,000-foot view of what's happening in the supply chain at any given moment. The result is improvements in production planning, machine learning, customer service, and a variety of other cost-saving and profit-enhancing activities. 

Beyond the advantages, also consider the disadvantages that you avoid by digitizing your supply chain. According to DDC FPO, the average annual cost of manual data entry into back-end systems is over $1 million, while the yearly cost of manual invoice-entry from suppliers is, on average, over $600,000. 

By bringing the right data analysis method into the production, you ensure a smooth and satisfying work product. It's not just about reducing labor costs or improving the service level or customer experience. It's about making the entire supply chain process smoother and easier for everyone involved.

How to Digitize Your Supply Chain

Big data users know that digitization streamlines divergent intelligence into readable and usable information. The data can be generated internally by vendor, shipper, and inventory control reports or externally from sources not traditionally included in supply chain management decision-making processes. Information from political and economic sources can affect your supply chain. Incorporating this type of data into the stream creates a rounder, more-valuable view of what's happening. 

Understanding supply chain digitization and how it applies to your situation is the first step. The second step is to determine how you plan to digitize your supply chain: by building software or buying it. Below, we go into the advantages and disadvantages of either option. 

Building Software

There are two ways to go about building software: building it in-house and outsourcing the work to an Information Technology Business Process Outsourcing (IT BPO) partner. Usually, the biggest barrier to in-house software building is time and capacity. Many companies simply don’t have a large enough development team, or their team has too much to do, to handle a large-scale digital transformation on their own. By outsourcing the work, you and your team can focus on day-to-day operations. 

Buying Software

The primary disadvantage of buying preexisting software is that your options for customization are severely limited. Your supply chain is unique and has its own specific needs depending on many factors, including the kind of data that you collect, the industry you serve, and how you plan to use the data that the software needs to analyze. 

Seamless integration between a purchased software and existing systems is challenging and hard to maintain: there will likely be custom plugins and integrations required to make things run smoothly, and you will either have to assign a member of the team to build these or outsource the work. There are also bugs to be fixed and maintenance to be done for as long as you have the software. 

Ultimately, while it may seem easier at the beginning, buying software may cost you more time and money in the long run—but still not as much as running an analog supply chain. 

Supply Chain is Going Digital

There's no question that digitization is happening in industries across the globe. In fact, many sources are starting to claim that digitization is no longer optional; it’s the only way to keep up with the industry. 

 Becoming a part of the digitally-enhanced crowd doesn't require any special certifications or infrastructure. What it takes is a creative mind that can see what information is important to include in the data stream. Over time, the process of inclusion of data will refine itself as will the tools used to incorporate the data. 

Not seeing the trends and an inability to accurately predict future situations doesn't make you less competitive; it makes you obsolete. The age of analog passed a long time ago, and the age of digital data-driven decision-making is here. Managers, supervisors, C-level executives, and administrators all benefit from advanced knowledge of activities and issues the digitalized data can produce. Turning an organization into a digitally-dynamic enterprise will only result in better performance for the entire team.

Supply Chain Digitization with ASCM

You may be wondering where to go to get the latest and greatest on supply chain digitization processes and protocols.

You’re in luck! For professionals with decades of experience as well as those new to supply chain operations, the answer is the same: the Association of Supply Chain Management (ASCM). This online resource has every aspect of digitization covered. With resources and education to networking and much more, ASCM can bring your company into the digital age painlessly and seamlessly. 

Getting started is easy, and transforming your supply chain into a digital, data-driven company takes less time and effort than you might think. The results of gaining education, associating with professionals already in the field, and the opportunity to go further will enhance your career and supply network. 

When it comes to the onset of digitization in the supply chain industry, know that it isn’t a trend. Digitization is an investment every company needs to make if they want to have a future, especially in the world of the supply chain. Check out the online resources available at ASCM to make your decision and the process of getting onboard quick and easy.

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