5 Steps for Digitizing Your Supply Chain
Brian Hoey - June 13, 2019
Digital supply chains can help manufacturing businesses reduce costs and disruptions in a variety of ways. They make it possible to predict potential breakdowns and bottlenecks far enough in advance that you can take steps to address them, just as they help you to boost operational efficiency through smarter sourcing, inventory management, and capacity management. More than that, going digital makes it easier for your business to integrate with other highly-digitized operations, meaning that especially sophisticated supply chain partners (whether they’re suppliers or logistics providers) will be more excited to partner with your business.
The question is: how do you achieve that level of digitization with your own supply chain? What discrete steps can you take to effect a digital transformation within your business?
1. Align Your Technological and Operational Goals
Now, you might have expected out first step here to be a little more technological—say, adopting a particular piece of IT or adding particular devices into your value stream—and don’t worry, that’s coming too. But first things first, it’s important to make sure that your business is setting operational goals that are conducive to going digital. If you keep establishing short-term, incremental improvements as your priorities (say, a percentage increase in efficiency or volume over a yearlong period), you’re likely to put any technological decision-makers in a position where upending the status quo could interfere with those shorter-term needs. If, conversely, you’re setting loftier, longer-term goals, you might encourage planners to push for that new piece of technology, or operations managers to risk a few immediate disruptions for some truly impactful innovations.
2. Involve Diverse Stakeholders
You may have noticed in the last section that we alluded to several different organizational roles that might have a part to play in your push towards digitization. That was deliberate. Because the supply chain affects so many parts of the typical manufacturing business, going digital will impact a lot of stakeholders in a variety of ways. As you’re making changes to your supply chain management software environment, it’s crucial to keep a variety of voices in the conversation. Otherwise, you might find yourself in a position where your sales team’s new software purchase doesn’t integrate well with your production planner’s existing system, potentially leading to silos and Shadow IT. Since much of the point of digitization is to remove silos and create more open environments for sharing data, it’s critical that you avoid this type of operational disconnect by including as many stakeholders as possible in your digitization push.
3. Leverage IoT Devices
Every digital supply chain is going to be different. That said, there are still a few suggestions we can make with reasonable confidence in the assumption that they will be useful to the vast majority of manufacturers. The first is that you adopt IoT (internet of things) devices, along with related technology like RFID chips and anything else that provides smart tracking and reporting, throughout your value chain. This might start with your factory floor machinery and go on to include your warehouses and distribution centers, depending on where you think real-time data streams would be most helpful. How do these devices help promote a digital supply chain? Well, frankly, getting any real value out of them will require serious digital infrastructure—so in one sense the introduction of this technology might force some IT changes here and there. But, perhaps more crucially, these devices can also provide businesses with a roadmap for further digitization. Let's say, for example, you’re collecting usage information from each of the machines on your factory floor, and you notice that one of the machines is slowing down and it’s negatively affecting your capacity. Most likely, you’ll want to adjust your production plans to either reroute or halt any processes that go through that machine so that you can perform maintenance before it breaks down completely. If you can do that without breaking a sweat: great. If you can’t—either because your production plans are siloized or your production workflows are inscrutable: you have your work cut out for you. You know that you need to create a more open data and planning environment, and you can begin to take steps to get there.
4. Develop Analytics Capabilities
Much of the work that goes into digitization comes down to where you should invest your financial resources. Which supply chain management software should you adopt? Where should you make technological upgrades within your value stream? But you also need to consider where you’re going to expend your intellectual resources—i.e. what are you going to develop your organization’s expertise in? Our recommendation is that you put your focus on developing advanced analytics capabilities as an organization. By doing so, you’ll put yourself in a position to get the most out of all of the data that comes along with having a digital supply chain. After all, what’s the point of going digital if you’re not going to leverage those digital data streams into improved forecasts and potential process improvements via predictive and prescriptive algorithms?
5. Embrace Industry 4.0
At last, we’ve reached the final step towards creating a true digital supply: embracing Industry 4.0. In the section above, we gestured at the strategies you can use to get the most out of the data that your newly-digitized supply chain will provide, but this goes a little bit further than that. Industry 4.0, also known as the fourth industrial revolution, is about more than just maximizing the value of your data. It’s about automating digital workflows and combining human and digital capabilities to create cyber-physical systems. Instead of receiving alerts from your IoT devices when something strange is happening on your factory floor, let the factory correct the issue automatically. If your supplier is going to be late with a shipment, let your advanced planning and scheduling flows automatically reorganize themselves in a way that’s fully visible to planners. At the end of the day, this is the trajectory that the digital supply chain seems to be on; as you digitize, it’s crucial to keep this vision of the future in mind. This way, you can position yourself in advance to take advantage of Industry 4.0 processes as they emerge.