Rapid advancements in digital technologies and innovations are causing a shift in virtually all areas of business - the supply chain being no different. As more companies are turning to the Internet of Things and robotic automation processes to improve workflow efficiencies, reduce costs and enhance their overall performance, it is presenting the industry with a lot of uncertainties and complexities. Some organizations are adopting these technologies more quickly than others, whereas certain markets are especially lagging behind.
However, when it comes to global supply chains, a recent survey conducted by JDA Software Group, Inc. revealed that digitalization is one of the biggest priorities. The research, which was performed in collaboration with Supply Chain Digest, showed that the majority (or 80 percent) of businesses today are focused on shifting their supply chains toward a technological transformation.
Defining digital supply chains
But what exactly does "digitalization" consist of? Whereas some may assume that it is the gradual process of replacing physical assets and manual processes with digital, electronic ones, this isn't entirely accurate. At least not by JDA's definition, anyway. In the company's announcement, JDA Global Manufacturing Industry Strategy Group Vice President Fred Baumann explained that digitalization is about integrating these two aspects and leveraging them in a way that gives businesses a competitive advantage. Which is to say that it's not investing in and adopting new technologies for the sake of being modern but, rather, because failing to evolve can hurt the performance of an organization.
"For companies challenged by today's fast-paced, hyper-competitive, omni-channel environment, most view supply chain technology as a key enabler of the speed, agility, resilience and customer responsiveness they need to remain competitive, drive greater revenue, profit and efficiencies across their operations," Baumann said.
And while many supply chains may recognize the value of digitalizing their business models, some are doing so more quickly than others - and for different reasons. For example, while nearly 80 percent of survey participants said they are adamantly working toward a digital approach to supply chain management and optimization, less than half said it is a major initiative - though almost 70 percent think it is going to give them a leg up over competitors. But what areas, specifically, are they focusing on?
According to the report, organizations believe the areas where technology can offer the most value include:
- Higher levels of supply chain visibility (almost 60 percent)
- Advanced analytics (52 percent)
- Supplier systems integration (44 percent)
- Internal integration (35 percent)
Although the terms are sometimes used interchangeably, it is important to acknowledge that digital technology is not the same thing as the Internet of Things. As such, the IoT applications are seen as offering benefits that are slightly different than digital technology as a whole. For example, respondents said they expect the IoT to help improve product innovations. But nearly all, or 84 percent, see it as a way for them to enhance the performance of their supply chains, as well as uncover cost-savings opportunities. Furthermore, the top three functions of the supply chain they anticipate these apps to improve include real-time inventory visibility (55 percent), product flows (45 percent) and machine monitoring (40 percent).
"We are truly entering a new supply chain era driven by digitization that will have huge implications for technology strategies and company competitiveness," SCDigest President Dan Gilmore explained. "It makes sense that companies are placing such a high priority on visibility - and are planning to leverage technology to increase that capability."
Preparing for the future
Given the cast array of benefits that the majority of businesses seem to agree the digitalization of their supply chains can provide them with, it's difficult not to consider what is preventing more organizations from initiating this transformation. According to the source, this procrastination or slow adoption can be attributed to a number of reasons, such as a lack of budget and resources, being unclear on the return on investment and limited clarity about how exactly to go about it.
As it has been demonstrated by well-known companies, such as Target Corp., prematurely investing in digital systems and technology, and deploying a new process before everyone has been properly trained and seamless integration has been achieved, can have damaging effects on an organization. Because while the IoT and digitalization of supply chains can provide businesses with process efficiencies, increased savings and improved workflows, they can only do this if the process is executed strategically.
Careful planning must be part of the digitalization process. In a column for Digitalist Magazine, Richard Howells recently pointed out that a "lack of robust preparation and understanding is hindering the transformation process" of supply chains today. Furthermore, the source added, the majority, or 71 percent, of businesses categorize their digital maturity levels as being in the early stages. This is why, Howells argued, there are certain building blocks that supply chain leaders need to use for digitalization success. These components include customer-centricy (presenting customers with the experience they expect), optimized production and delivery, integrated and collaborative networks and sustainability.