Avoiding the Pitfalls of Supply Chain Digitization
Nick Ostdick - January 17, 2017
In a recent blog entry, we discussed the importance and benefits of digitization in today’s global automotive supply chain. In an increasingly complex, integrated landscape, supply chain digitization is quickly becoming a must for OEMs and other major players across each touch point in the automotive value chain; is about being smart instead of being reactive in order to be on our way into the digital dimension. Digitization not only helps companies function more efficiently and effectively, but it also provides companies the responsiveness and agility necessary to address and avoid potential breakdowns or bottlenecks in demand planning, production, transportation, and yard or container management.
As digitization across the supply network becomes more of a necessity, it is important to ask: What are the pitfalls in embracing digitization and reengineering a company's supply stream? What should manufacturers be aware of when incorporating an all-digital platform as part of their supply chain management strategy? And how can these pitfalls be avoided in order to foster true end-to-end (E2E) visibility?
These are the important questions planners and managers must ask themselves as they embark on the digitization journey. To better understand the potential challenges in incorporating a digital supply chain, we’ll first look at what we mean by digitization of the supply chain followed by a handful of the potential challenges and pitfalls in the digitization of the automotive supply chain in particular.
What is supply chain digitization?
Before we can discuss the pitfalls of supply chain digitization, we must first understand what digitization means and its importance in the today’s automotive supply landscape.
Supply chain digitization is the movement toward a completely integrated sequence of planning and production solutions that work in tandem to create a more visible supply stream across each touch point of the value chain. The end result is a more responsive, agile, and transparent supply network that can readily adapt to a host of industry-wide unknown variables such as inventory shortages or overages, modifications to orders, and availability of resources. Through this integration and digital transformation of components, companies can experience lower production and operational costs, shortened lead times, and enhanced reporting and data analysis capabilities which can fuel better planning and production programs. To achieve these goals, companies must leverage a pervasive integration strategy that reduces multi-suite applications and incorporates planning and reporting solutions into a single module that’s accessible and shareable across a company’s value chain.
The value proposition of supply chain digitization in large part resides in the breaking down of cross-organization silos and collaboration barriers - two key obstacles OEMs must overcome when dealing with a multitude of partners, suppliers, and production hubs or facilities in disparate parts of the world. The movement toward opening up new and emerging markets - particularly in areas like Mexico and Asia - make it increasingly necessary for companies to incorporate an all-digital platform as they strive to remain competitive in an increasingly crowded marketplace.
Challenges in supply chain digitization
Now that we’ve defined the digitization of the supply chain, we can examine and understand the potential pitfalls manufacturers can experience in deploying a truly digital supply chain.
Holistic integration of supply chain solutions. Perhaps one of the most common pitfalls to avoid, the holistic integration of supply chain solutions is a core driver in digitization. Because the nuances of today’s automotive supply chain are vast and varied, companies often have a number of different planning, production, and reporting/data management solutions deployed simultaneously. Creating a digital supply chain strategy requires a top-to-bottom, soup-to-nuts approach that brings each application under the same umbrella. Successful creation and implementation of such a strategy will help eliminate functional silos and increase communication and collaboration surrounding planning and production benchmarks and goals.
Connecting data sources and outlets. The Internet of Things (IOT) has become a force in supply chain management in recent years as a way of not only connecting systems and solutions, but also fostering more accurate, responsive, and accessible data management and analytics. Via the IOT, digitizing the supply chain connects various methods of collecting, sorting, and evaluating data to help planners and managers create more accurate forecasts of demand for more effective planning strategies. The connection of data sources helps planners and managers create enhanced what-if scenarios and simulations, both of which are critical for driving planning schemes for production programs. Failure to administer and manage these connections means critical data points and actionable data will not be utilized in understanding how effective and responsive a company’s planning and production strategies can be.
Collaboration. Digitizing the supply chain is a critical move toward eliminating communication silos across an organization. This means major players within the supply stream will have a greater capacity to share data, collaborate on important initiatives, and work in conjunction to ensure smooth workflows free of bottlenecks, disruptions, or breakdowns. Because a digitized supply chain is based in part on a central hub of data storage with multiple access points, gone are the days when those within the supply stream had to wait days or weeks to review data sets and communicate the results of said data. Those within the supply stream access data and communicate its importance in real-time, which is a core driver of end-to-end (E2E) visibility. Because a manufacturer deploys integrated planning solutions and manages data sources effectively, some planners and managers believe collaboration will simply fall into place - this could not be further from the truth. Collaboration and coordination between various stages of the supply stream are not by-products of digitization, but rather critical functions that must be created, nurtured, and developed over time.
Importance of digitization
Today’s automotive supply chain is truly in an information age. OEMs and manufacturers rely on the accuracy and availability of data and reporting to create better planning platforms and production programs, but also to more effectively manage inventory, ship and track the movement of parts, and even manage personnel. The point is this: The complete digitization of the supply chain is quickly becoming less of a dream and more of a necessity for companies to remain viable and competitive. The days of a silo-based supply chain are gone. On our way into the digital dimension, the digitization of the supply chain is the next step for companies as they embrace new and developing technologies, smart versus reactive.