Blog: Why Supply Chain Digitalization is What is Needed Now
Though many regions across the globe are seeing some improvements, there are many areas that are getting much worse. With a long way to go in the current health crisis, an unclear future lies ahead for businesses across industries. Organizations have suffered everything from location closures and layoffs to consumer spending decreases and dramatic supply and demand fluctuations. Specifically supply chains have carried much of the burden imposed on businesses by COVID-19. As Harvard Business Journal puts it, “The pandemic has exposed one of the major weaknesses of many supply chains: the inability to react to sudden, large-scale disruptions.” Disrupted by the pandemic, businesses are left to manage a reduced and quickly fluctuating supply, plan around a reshaped supplier landscape, facilitate safe workplace conditions to protect workers, meet contractual obligations, and modify new workflow logistics accordingly.
Looking into the Past
In the aftermath of world crises, inventory cycles become disrupted. The 2008 recession, for example, exposed the existing limitations within ‘just in time’ inventory management as inventory piled up, impacting businesses for the long term. It’s not just financial crises that impact supply chains, but natural disasters as well. The auto industry’s supply chain was left in complete disarray by the devastating tsunami that hit Japan in March 2011. As certain auto parts were only produced in and delivered from Japan, auto production was drastically altered. Even more recently, at the beginning of this pandemic, the world witnessed supply chain flaws first hand in the efforts to get PPE to frontline workers and ventilators to hospitals. With little planning and coordinating, demand could not be quickly met.
When a crisis comes knocking, small gaps in businesses’ supply chains widen. From inventory pile-ups and shortages to supplier availability and accessibility, not unlike the recession and the tsunami, the current world health crisis has dramatically interrupted supply chains, though in a familiar way, at a scale not yet fully seen before.
Smaller Firms Feel the Burden
For larger firms, though supply chain issues are painful, bouncing back by re-managing and changing resources and distributors is much easier than for small to medium sized businesses. Smaller firms lack the financial luxury and size flexibility to shift their supply chain workflows when unforeseen circumstances arise. Because supply chains move to adjust slowly, demand will likely continue to outpace supply, causing suppliers to drive prices higher. Small to midsize businesses are at risk of falling under competitors as supplier prices rise.
Digitalization of Supply Chain
While many businesses have already worked towards what might have been thought of as a somewhat seamless approach to supply chain workflows, this pandemic has unveiled just how vulnerable businesses are. In innovating to adapt and prepare, it is important to swiftly recover while strategizing for what is ahead. The challenge is to think about how to set up procurement strategies in order to react quickly and proactively in mitigating the fluctuations caused by external events and circumstances. Just as we’ve seen lately with the rapid adoption of various technologies in the workplace and at home, video conferencing for example, supply chains also will rely on technical advancements and adoption going forward.
The future of supply chain begins with digitalization, and the process has already begun. Digitalization that was expected to span over years and years, has taken place in just a few short months as businesses have started adapting to the current environment. It is still important to note that even with digitalization, the demand caused by COVID-19 has been so unprecedented and historic that the supply chain model would still have been fractured regardless. This is because historical data used to forecast supply chain trends could not have predicted the current health crisis. However, in cases of natural disasters, steadily climbing since the 1980’s, digitalization can allow businesses the ability to react to events more quickly. Additionally in the aftermath of external events, as well as in day-to-day operations, digitalization offers businesses the ability to increase efficiencies, manage risks, and remain agile.
Three Examples of Supply Chain Digitalization
Artificial Intelligence (AI)
Artificial Intelligence, such as machine learning, provides better visibility and access to both product supply and product knowledge. By providing a more holistic view of supplier information, supply chains are enabled to be more efficient and workflows more strategic as supplier discovery and onboarding is accelerated.
Just as AI offers more visibility, cloud integration adds this advantage as well by providing an unclouded (no pun intended) view into the supply chain. This gives businesses more improved access to data, allowing for better informed decision-making and providing opportunities to save costs. With a single system, cloud-based shipping can help your business to better manage your carriers, manage protocols to meet current standards, compare carrier rates, and track shipping from start to finish. As many shipping carriers already rely on cloud infrastructures, utilizing a ‘as a Service’ cloud model can help you better integrate your shipping processes while allowing scalability in the future as your business continues to grow and maneuver through the pandemic.
Internet of Things (IoT)
Internet of Things is a wide-net concept, but in short is a network of any internet connected devices with the ability to collect and share data. Often this technology is utilized to keep organizations holistically connected while fostering visibility. These devices can provide real-time asset tracking, inventory monitoring, system alerts, and relevant insights throughout the supply chain cycle, from warehouse to shipment.
Moving Forward in Your Supply Chain Digitalization
Your business has most likely started to settle into the new normal, and now is the time to continue learning about ways you can innovate and digitalize your supply chain processes. If you have not incorporated AI or cloud, or fully explored IoT solutions for your organization, now is the time to consider a change to stay ahead of the curve. If you are incorporating these digitalized solutions, are they set up and utilized in a way that maximizes your supply chain?
Your IT department should work towards incorporating new solutions that mitigate against disruptions and risks. A forward-thinking approach to technology can help prevent your failure to adapt to new advancements, which might leave your business in the same state as your old technology—obsolete.