Key Strategies to implement a Digital Supply Chain

Written by Alvin Tan, MSIPMM

by Alvin Tan, MSIPMM

Key Strategies to implement a Digital Supply Chain

Written by Alvin Tan, MSIPMM

by Alvin Tan, MSIPMM

by Alvin Tan, MSIPMM

Digital framework connects data in supply chain and provides an integrated view throughout the supply chain lifecycle. Explosion of connections, information, innovations and technologies have brought great news for the business and the consumers alike. Many companies are already working to introduce digital technology into their operations. However, simply adding digital technology is not the answer.

A digital supply chain still encompasses all the elements of a traditional supply chain. Materials move from country to country across the value chain toward the consumer. While the factories, people and products which make up global supply chains can only move as quickly as the physical world allows, the digital supply chain allows them to communicate with each other instantaneously. Businesses will require to rethink on the digital processes, focusing on market opportunity and risk. Re-imagine supply chain as a Digital Supply Network (DSN).

The Evolution of the Digital Supply Chain

Supply chain management is not one of the legacy academic subjects existed for hundreds or thousands of year, but rather a young and evolving subject. The diagram below shows the road to Industry 4.0 on the digitization on every aspect of business.

Adapted from Stefan Schrauf and Philipp Berttram.

 

Driving the transformation to the digital supply chain are two tightly intertwined trends. On one hand, new technologies like big data analytics, the cloud, and the Internet of Things are pushing into the market. On the other, more expectations on the part of consumers, and business partners are pulling companies to develop more reliable and responsive supply chains

Digital Applications on the Supply Chain

The cross-functional teams monitor and direct activities across the supply chain, taking advantage of real-time data about demand, inventory, capacity, and other factors to fine-tune the global network in a way that was not possible before.

Advanced analytics help the team get at the root of performance issues, develop strategies to deal with supply chain disruptions, and improve delivery service and speed. Leading companies are using digital supply chain technologies to redesign their operating models and go-to-market approaches in order to generate significant growth in revenues and margins.

The diagram above shows the digital application on a Customer-Centric Supply Chain.

 

The Future Value Chain

The ultimate goal is to greatly reduce the lead time from source to the consumer by treating the value chain as a whole. This requires re-evaluation of the physical layout of the supply chain and improved mechanisms to synchronise production with actual demand. Real-time, flexible and standardised information sharing along the value chain is foundational for this, with consumer-driven demand data as the driver.

Keys Challenges

To lead the transformation of their supply chain management into the digitized age not only will identify the opportunities and challenges facing their own function, but will also consider the digital transformation of the entire company, its products and services, and the way suppliers, customers, and other market partners interact with their company. How supply chain management can contribute to the digitalization of the business model is as important as defining the digital transformation agenda of the supply chain management itself.

Challenge 1 – Creating Customer Centric Supply Chain

To transform the supply chain from “supplier-centric” to “customer-centric”. Traditionally, supply chain has been developed from factory outwards so that company’s business model may be continued without major change.
In today’s competitive global market place, the strategic aim of the supply chains must be on the higher levels of customer responsiveness. Thus the Agility rather than the cost becomes the key driver.

Close coordination and operation integration of the supply chain members must be significantly strengthened to counter balance the increased volatility of the market behaviour.

Challenge 2 – Managing Supply Networks

To take on the whole supply network and manage it as an integrated entity. The competition will wage with the supply chain against supply chain. The survival of the supply chain is the survival of the organisation in it.

One of the key cognitive characteristics of any network is its configurative structure, which specifies how a supply chain is constructed in terms of its flow model. Coordinating the IT system compatibility, software upgrading, maintenance and service could be resource hungry. However the gain in the much coordinated operation and supply chain responsiveness is worth the cost.

The Four Elements of a Customer-Centric Supply Chain

1. Strategy: Customer oriented strategy to be aligned throughout its organization with the suppliers to be able to respond to the customer demand.

2. Shared Value: Customer service and customer value must be enshrined in the core organizational value.

3. Staff: Employees capabilities are the assets of the organization. They are the active force in serving the customer.

4. Skills: Quality of the products, the level of customer satisfaction, relies on the skills of the workforce.

Strategic and Operational Planning

Focus on the capabilities for responsiveness and constantly in anticipation of the unpredictable sudden changes in demand. Agile implies infinite capacity to meet demand, unless there is sufficient safety stock.

There will still be a need for safety stock and you will still need forecast for both strategic and operational planning. The market place to test Agile Supply Chain is presumed to be volatile and fast changing in nature.

The top measure for the fitness of a Supply Chain is responsiveness. The levels of responsiveness a Supply Chain can delivery do make significant difference in terms of winning the market share.

Developing Capability of an Agile Supply Chain

  • Structure Change
    It is about the organisations external connections and how the whole supply chain is networked together. The first consideration is the vertical integration. This will give the supply chain a great deal of flexibility. The second consideration is the outsourcing alternatives, like the suppliers location.
  • Process Change
    Top priority is still the responsiveness. What drive and support Agile supply chain are often the unique combinations of standard or modular process which is the key to containing the cost while delivering the service to unexpected demand.
  • IT Systems
    Agile supply chain are best underpinned by an ERP system. An array of additional applications designed to optimise the agile capabilities including process alignment, joint forecasting and planning.

Agility is Key to Accelerate Digital Transformation

  • Been obsessed with Customer Experience
    Being proactive and anticipating your customers’ needs while thinking of new and better ways to meet them.
  • Be Fast
    Creating new products and services, and improving products quickly in today’s market. That means focusing on both feedback and collaboration to move more quickly through development and design.
  • Focus on Continuous Improvement
    The most successful companies today are ones that are constantly seeking to improve their processes, most specifically the ones that deal with customer.

Conclusion – The Race

Important changes are happening throughout the business world. Organizations can expect dramatic improvements in their process, from automation to collaboration, all enabled by technologies like Supply Chain visibility and big data analytics.

The data will be used to make strong business decisions and information exchange between manufacturers, retailers and their suppliers. Organizations will need to evaluate opportunities within and their Supply Chain.


References:

A.T. Kearney & WHU European Logistics Study (2015), “Digital Supply Chains: Increasing Critical for Competitive Edge”.

Cecere, Lora (2017) “Embracing the Digital Supply Chain”, Supply Chain Insights.

Goyette, Richard (2016) “Combining Lean and Agility to Manage Demand Uncertainty”, Business Forecasting and Analytics Forum, Boston, MA.

Guojun, Ji (2013) “Introduction to Supply Chain Management” University of Washington, GTTL 1.

Lu, D (2011) “Fundamentals of Supply Chain Management”, ISBN: 978-87-7681-
798-5, Bookboon.com

Newman, Daniel (2017) “Agility is the Key to Accelerating Digital Transformation”. Accessed from https://www.forbes.com/sites/danielnewman/2017/04/18/agility-is-the-key-to-accelerating-digital-transformation/#e5a3b4172775

About the Author: Alvin Tan has substantial years of experience in the field of production planning, in particular the semiconductor and micro technology industries.

Alvin is a member of the Singapore Institute of Purchasing and Materials Management (MSIPMM), and is currently completing a course at SIPMM Academy on Graduate Diploma in Supply Chain Management (GDSCM).

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