HOW TO START
DIGITIZING YOUR
SUPPLY CHAIN
MANAGEMENT
Prof. Islam ElNakib
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Introduction
◦ New technological innovations are disrupting every major business sector, and every business
process out there. Supply chain management is no exception.
◦ Supply chains are becoming more complex, and yet they are still mostly managed using
“old-school” methods – manually and with the help of internal proprietary tools. That’s
problematic because customers now demand goods and services to be delivered as fast as possible.
Failing to do so results in lost revenues.
◦ In this post, we’ll show how to improve supply chain management using the latest technological
innovations. But before we dig in, let’s start with some essential supply chain definitions first.
What is Supply Chain Management?
What is Supply Chain Management?
◦ Traditional supply chains (as pictured above) are linear with all the processes running from left to right within a given sequence of
product flow. And there is a lot of different business process and activities take place before a raw product gets transformed into an
actual good and reaches the buyer.
◦ Supply Chain Management (SCM) is the process of optimizing that broad range of activities that are needed to plan, control and
execute a product’s flow all through the life-cycle so that the entire process is as streamlined and cost-effective as possible.
◦ In particular, supply chain managers are dealing with various tasks within the next 7 functional areas:
◦ Purchasing
◦ Manufacturing
◦ Inventory Management
◦ Demand Planning
◦ Warehousing
◦ Logistics
◦ Customer Service
What is Supply Chain Management?
◦ At first, these areas may seem to look like independent functions, but high supply chain efficiency can only be reached when
seamless collaboration happens among these. To achieve better levels of interactions, increase transparency in between those
functions and improve service levels, most businesses are now considering digitization.
◦ Just what is digitization in the context of the supply chain management? In short, it assumes using new technologies (cloud
computing, Big Data analytics, machine learning and IoT) to replace the legacy in-house infrastructure and labor-heavy
processes present within each function. The ultimate goal of digitization is to link all the seven functions listed above into one
fully integrated global supply chain.
What is Supply Chain Management?
What is Supply Chain Management?
◦ Digital Supply Chains come with several major benefits:
◦ More transparent – all the operations and supply chain management run online, meaning that managers can instantly review
all aspects of the supply chain. They have a 360-view into who’s doing what, and what products are headed where.
◦ Better communication and collaboration – the information about all-important supply chain events flow freely between all
entrants and is readily available.
◦ Real-time responsiveness – data about any changes in the supply chain gets instantly transmitted to the entire network.
Decisions can be made based on real-time events.
◦ Flexibility – any change in end-customer demands can be immediately addressed by the supplier.
◦ According to a PwC industry study, 72% of surveyed businesses have already begun the digital transformation of supply chain
and expect to finish the digitization process by 2021.
Why Companies are Rushing to Switch to
Digital Supply Chain Management
◦ For one, the efficiency in supply chain management has been on a steady decline as chains grow larger in both length and
depth. A typical mid-to-enterprise grade supply chain can now contain well over a hundred of participants ranging from
suppliers’ suppliers to third-party logistics providers, software vendors, financial organizations and other players. And this
network can span over several geographic locations, making effective and timely communication even more challenging.
◦ Maintaining a proper flow of data becomes problematic without the new technology in supply chain management such as
cloud computing, predictive analytics and forecasting, blockchain and IoT. All of these combined enable businesses to move
the products through the chain faster, with greater efficiencies and a lower cost.
Why Companies are Rushing to Switch to
Digital Supply Chain Management
◦ Secondly, 73% of companies also experience increased pressure from consumers, demanding goods and services to be
delivered faster than ever. The customer demand levels are changing at a break-neck speed and companies are constantly
forced to optimize their supply chain strategy to meet those shifts and remain as competitive as industry leaders in their
category.
◦ Just how effective are we speaking? Amazon is just one of the digital supply chain examples showing what kind of logistics
management efficiencies business can achieve through digital transformation. The e-commerce giant holds a patent for
predictive shipping – products are shipped even before a shopper places the order. Once they do, machine learning algorithms
match that order with a shipment that’s already in the logistics network (being transported to the customer’s locale) and the
particular product is then re-routed to the customer’s door. In short, that’s how Amazon Prime delivery works. But to get to
Amazon’s level, businesses need to undergo the complete digitization in supply chain management.
Why Companies are Rushing to Switch to
Digital Supply Chain Management
Next, there’s the Industry 4.0. – a major technical shift in how products are manufactured in the first place.
And to match advances in the manufacturing sector, Supply Chain 4.0. must emerge
◦ Finally, digital transformations in supply chain management do bring in some tangible benefits. Per the Amber Road
report:
◦ 89% of digital supply chain leaders received perfect orders from international partners leading to on-time delivery.
◦ 68% now have complete visibility into supplier quality and manufacturing process, meaning less costly recalls.
◦ 12.8% gained average annual savings during the sourcing stage.
◦ Ultimately, digitization allows supply chain managers to vastly improve their existing operations, and even forge brand new
value chains by capitalizing on the latest tech
Core Technologies Changing Supply Chain
Management
◦ Cloud computing. Cloud platforms are the backbone of any
digitization process. This technology can help break the
communication boundaries between different participants of
the supply chain and connect them into one unified
ecosystem. Migrating the IT infrastructure supporting all the
supply chain processes to the cloud also gives companies
additional benefits such as reduced TCOs, dynamic resource
provisioning and the ability to “plug” any new entrant or tool
in a matter of days, not months.
Core Technologies Changing Supply Chain
Management
◦ Predictive analytics. As more data will become more freely available thanks to the cloud, businesses can deploy more advanced analytics solutions that
can produce more accurate insights for decision-making. Predictive analytics, powered by data mining and machine learning techniques, can eliminate the
guesswork from your planning and suggest you a better course of action in near real-time. In particular, it can be effectively applied to the following
processes:
◦ Finished inventory optimization
◦ Replenishment planning analytics
◦ Predictive maintenance
◦ Logistics
◦ Procurement analytics
◦ Network planning and optimization
◦ Production and sourcing optimizations
◦ Dynamic demand analytics
Core Technologies Changing Supply Chain
Management
◦ The Internet of Things (IoT) is becoming a popular staple in the manufacturing and logistics industries. Smart
sensors can be attached to various equipment to capture a multitude of data points, ranging from its location to
operational conditions. These sensors can automatically transmit the accumulated data further into your systems for
analysis. For instance, with the help of IoT, you can estimate whether your goods have been transported in the right
conditions. Or, when paired with predictive analytics, estimate when certain equipment is due for maintenance and
order spare parts in advance to avoid costly breakdowns.
◦ In fact, IoT has been among the most popular supply chain trends as of late with the adoption rates expecting to reach
86% over the next five years.
Core Technologies Changing Supply Chain
Management
◦ Robotics and automation are seeing the most use cases in warehousing and manufacturing. The new generation of affordable
collaborative robots is now working side-by-side with humans, helping with the labor-heavy tasks such as picking, sorting,
inspecting, storing, handling, and classifying products. And their industrial counterparts are taking over the factory floors at an
increased pace. Airbus, Adidas and Tesla are just a few examples of companies who already “employ” robots.
◦ Individually and combined, all of these technologies have a strong potential for improving the global supply chain
management. But to realize the most benefits from these, you will need to find the optimal grounds for them within your
business.
How to Build a Business Case for Digitizing
Supply Chain Management
◦ Smart supply chains are powered by smart decision-making. So where does one’s foray into the digital supply chain
management begins? The answer will depend on how digitally mature your current supply chain is and what benefits you’d
like to seek first. And for that, you’ll need to develop a solid business case. Below is your step-by-step guide for this.
How to Build a Business Case for Digitizing
Supply Chain Management
◦ Smart supply chains are powered by smart decision-making. So where does one’s foray into the digital supply chain
management begins? The answer will depend on how digitally mature your current supply chain is and what benefits you’d
like to seek first. And for that, you’ll need to develop a solid business case. Below is your step-by-step guide for this.
How to Build a Business Case for Digitizing
Supply Chain Management
◦ Determine where you are on the maturity scale:
◦ Digital novice companies still have siloed supply chain processes, carried out by individual departments and business
units.
◦ Vertical integrator companies already have solid internal supply chain processes integration, working seamlessly across
departments and functions.
◦ Horizontal collaborators extended their integration to external partners; can effectively collaborate together on shared business
goals and carry out common processes. At this stage, the supply chain is fairly transparent.
◦ Digital champions have achieved full transparency into their operations, have the top level of collaboration and can deploy an
ecosystem-wide analytics solution to optimize the entire supply chain.
Define Your Future Vision
◦ Speak with various stakeholders to determine a core set of benefits you’d like to achieve post-digitization. Try to work out several most promising
use cases and conduct feasibility studies to determine whether the proposed technical scenarios can be executed. Afterward, create specific
implementation steps and expand them into a detailed road map.
◦ Outline How Data Will Be Integrated
◦ To move from level 2 to level 3 maturity levels, you’ll need to create new solutions for storing, warehousing and exchanging data with 3rd parties. At the
very basic level, you’ll have to work out a solid plan covering the following processes:
◦ Data synchronization: How will data from different remote facilities be collected? Where will it be stored? How facilities that do not have consistent
Internet connections will add updated to your system and stay updated on what’s happening in other parts of your business?
◦ Mobile data collection: How will users in field locations or logistics personnel in the warehouse quickly and easily record and transmit data about
inventory levels?
◦ ERP integration: How will managers see what is happening across the supply chain if data remains siloed in individual applications?
◦ Once you create a solid organization-wide data collection processing, you can move on to exploring various supply chain analytics options that can be
deployed to assist you with optimization. The choice these days is plentiful.
◦ Digitization is one of the key enablers for companies to remain successful in the next decade. Case in point: 8 of 10 supply
chain leaders state that digital supply chain will become the dominant model of operations with in the next 5 years. So it’s a
high time to start actively exploring new technological options and building a solid business case for this. After all, the benefits
are fair and square: improved efficiencies reduced operational costs and new value and revenue streams for your business.
