For Effective Digitalization, First You Need Standardization
Nicole Wanichko - March 23, 2021
Now more than ever, the supply chain industry is craving more transparency, flexibility, and increased control of data and supply chain processes. One of the most vital steps towards achieving effective digitization is through standardization. Original equipment manufacturers (OEM) have the power to implement standards, but are they prepared to modify their own systems and processes to establish these standards? While effective standardization obviously requires compromise, it is superior to the alternative of a unilateral approach, resulting in additional costs and inefficiencies throughout the entire supply chain.
Translating Standardization to Digitization
Before discussing why standardization is key to digitization, we'll refresh you on the benefits of digitization. The most significant service of digitization is the holistic integration of supply chain solutions. A digital supply chain puts all operations and processes under the same umbrella, allowing them to work together cohesively, increase collaboration, and eliminate silos. With better-connected data, SCMs will become better decision-makers because they will have the correct data and tools to use it. As mentioned, collaboration is an excellent benefit of digitization as all departments across the supply chain will have unified data systems, allowing them to share data and communicate in real-time more efficiently. This will significantly reduce the possibility of breakdowns, bottlenecks, and disruptions within the supply chain. There are countless digital solutions to be implemented into your supply chain, all of which will help you obtain these benefits. Between AI, multi-dimensional monitoring, cloud computing, and machine learning, your supply chain will be more efficient than ever. Overall, each tool will tie together the loose ends in a supply chain, saving you time and money, but it is crucial to standardize for them to work together cohesively.
So, where does standardization fit? While digitization can simplify your supply chain, it is still a highly complex system. Making your supply chain user-friendly is key to achieving effectiveness; after all, if your team members aren't properly running your supply chain, it can't be as effective as possible. Standardization allows you to develop this simplicity. Having an all-in-one system will save you and your employees from managing incompatible systems and interpreting conflicting data. A singular source of data and standard software will provide you with clear and concise data, creating an effective supply chain that allows you to make the best decisions for your organization.
Another excellent benefit of standardization is the agility and flexibility it offers. You may think that flexibility and standardization don’t go hand in hand, especially those who have been in the industry for a while and remember when customization was key. Sometimes customizations are necessary for software to mesh with your organization's needs, but customizations add complications. With non-customized or standard software, new employees are more likely to be already familiar with your systems. This prevents human errors due to misuse and saves you the time of training each new team member. Additionally, standard software is more compatible with necessary updates, allowing you to utilize new features in less time. To sum things up, standardization is key to simplifying digitization, easing your operations while saving you precious and expensive time.
To develop an optimized standardization system, an OEM must first have a common understanding of the data collected. You have to rethink how your supply chain operates. First, ask yourself if you are enabling transparency. A transparent supply chain has end-to-end visibility and allows real-time communication between departments. Is the data you are receiving transparent? Meaning it is comprehensible and enabling you to make clear and educated decisions. If you answered no to either question, then you have some areas to improve upon. Standardization is vital for working across a supply chain because it provides everyone involved with the same systems, thus giving them standard data. This eases communications and allows team members to find the root of problems faster and solve them quickly.
Now, what about transparency and standardization outside of your chain? An excellent method for developing external standardization is to network with other companies and collectively determine platforms and standards to follow. You can then build on this to leverage joint potential through planning and optimization. Rather than relying on purchasing departments to offer value, OEMs are looking at collaboration. In today's supply chain industry, we create value through partnerships, and utilizing standard practices between these partnerships will allow for cohesive and mutually beneficial relationships. But, before you can determine these standards, you need to do your homework. First, consider the expected and required standards in your industry. Ensure that you understand the laws and regulations you must obey for compliance. Now consider the standards that aren’t required but are highly regarded. This can help you pinpoint where you and your partners can make changes to achieve standardization and compliance. This should be viewed as an investment into the future success and potential of your supply chain.
Beyond prepping for digitization, you should have a goal in mind when standardizing your supply chain. What do you want to achieve? Besides improving efficiency and maximizing success, it is essential to consider how you can reduce waste in your supply chain. In terms of waste, you should look to avoid wasting inventory, costs, and capacity. This may mean you have too much stock or materials on hand or are not utilizing the storage capacity your supply chain has. In either case, your organization is wasting expenses and resources that could be used elsewhere. These wastes most frequently occur due to miscommunication and inaccurate forecasts, both of which you can easily avoid through standardization and digitization. Through the use of intelligent data systems, you can improve your forecasts, thus informing you of exactly how much inventory, capacity, and materials you need – minimizing waste and expenses.
Plan & Audit
Once you and your partners know where you can standardize your supply chain with specific goals in mind, it's time to plan. The first step in planning how to standardize is figuring out what needs standardizing. Perform an internal audit on your supply chain to determine what forms of supply chain management systems or software you already have in place. Next, outline which systems work with one another and figure out where there are holes. This outline will give you a good indication of what new standardized system will fill these holes and improve operations, fully integrating your supply chain for optimized efficiency. You should also include industry laws and regulations in your audit to ensure that you continue to meet them when implementing new systems. Once this is clear, put together a list of the materials you need to procure, including the providers you plan to obtain them from. Finally, reach out to the provider you have chosen and make a timeline of when you will implement your new standardized process of operations.
As a result, your move to digitization via standardization will present you with intelligent solutions that will be be able to streamline your supply chain to minimize any excess on-hand stock, as well as help mitigate special costs, give insights into better capacity utilization, which can offer a better forecast to secure capacities. What you're left with is a more efficient supply chain. It comes as no news that supply chains are intricate and complex, making them challenging to manage. Through standardization, you can simplify your supply chain, achieving a user-friendly and cohesive system.
With a better handle on your systems, you will make more precise decisions and have the tools you need to implement digitization into your supply chain. With standardization and digitization, you will have intelligent and accurate data to make your supply chain as efficient as possible.