What Could Digital Technology Mean for Your Supply Chain?
An increasingly loud buzz signifies the digital transformation’s importance to smart, successful business operations across industries. Yet, for a host of reasons, logistics professionals have adopted digitization at a slower rate than others.
In a 2017 survey, McKinsey & Company analysts measured company digitalization in five business areas: “products and services, marketing and distribution channels, business processes, supply chains, and new entrants acting in ecosystems.” Respondents reported their supply chains as the least digitized dimension with an average 43% digitization rate. Are those investing in supply chain digitalization gaining market advantage? And how much are logistics leaders losing by failing to embrace disruptive digital technologies in their supply chains?
The state of supply chain digitization
Industry experts recognize the need for supply chain agility, flexibility, and scalability in today’s fast-paced market with ever-increasing customer expectations for better, faster services. However, implementing advanced technology across an entire company is easier said than done. Many potential factors can cause logistics decision-makers apprehension, including
- lacking budgets,
- failure to prioritize transformation,
- technology and skills gaps,
- negative management mindsets,
- hesitation to change functioning operational processes, and
- improper initial implementation attempts.
Many supply chain managers are already facing several hurdles demanding their immediate attention, making it more difficult for them to focus on bigger-picture efforts. Many shippers, for example, are juggling driver shortages compounded by ELD regulations and tighter delivery windows. However, in a global marketplace, it is imperative to equip supply chain personnel with the technology necessary for making the smartest, most cost-effective decisions — quickly. In this “need-it-now, do-it-now” environment, keen logistics leaders understand the digital transformation’s importance in not only keeping pace with but also staying ahead of the competition.
What does a digital supply chain look like?
With all the talk about digital disruption, many logistics insiders are still trying to wrap their heads around what “digital technology” entails as well as which tools, methods, and infrastructure could enable such transformation. Incorporating Internet of Things (IoT) technology can be a good start as it connects people and technology via real-time information. Would could future transformation look like in your supply chain? Consider these potential scenarios enabled by digitization:
- Automated machines report real-time production statuses.
- Self-driving trucks provide exact locations and delivery updates.
- Drones make otherwise costly last-mile delivery runs.
- Warehouse robotics do all the picking, heavy lifting, and palletizing with speed and accuracy.
- Report systems provide continuous updates for forecasting and predictive planning.
Take, for example, a supply chain manager who would like to improve product forecasting, scheduling, and tracking to potentially enable same-day in-store deliveries. By implementing a digital system using advanced planning and scheduling as well as automated equipment, he or she could fill orders based on real-time demand. He or she could then collaborate with those on the production side to schedule deliveries, thereby reducing storage costs and waste. Transportation management technology could help him or her understand optimal routes in terms of time, costs, and potential hiccups.
Digitalization delivers for global logistics leaders
That simple example was just the tip of the digitization iceberg. By increasing efficiencies, streamlining operations, and enabling optimal decision-making, embracing digital transformation can offer many benefits. In fact, according to a McKinsey article, “companies that aggressively digitize their supply chains can expect to boost annual growth of earnings before interest and taxes by 3.2 percent—the largest increase from digitizing any business area.”
While upfront costs and operational changes will be inevitable, the reality is that failure to transform could cost more in the long-run.
For digitalization to be effective, though, it’s not only imperative to update technologies but also requires mindset and process changes. Company leaders looking to embrace digitalization as a culture can gain the most benefits and ongoing advantages. According to a SAP study, 96% of company leaders cite digital transformation as a core business goal and 93% of those leaders see technology as critical to their competitive advantages. Savvy logistics influencers are taking note, further examining what disruptive digital technology could mean for their supply chains.
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