The Benefits of a Supply Chain Digitization
Nick Ostdick - December 27, 2016
Look down at your desk. You probably see a few pens or pencils, some scratch paper, or maybe a calculator. But you also probably see a smartphone, tablet, laptop or desktop, or some other intelligent mobile device, each of which have many different functionalities that allow you to multitask more efficiently and effectively. In terms of today’s global supply chain, the pens and pencils represent a more manual method of supply chain management, whereas your smartphone and tablet are examples of a completely digitized supply chain - a technological development that is quickly becoming more the norm for OEMs, manufacturers, and others within the supply stream.
What is supply chain digitization?
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, companies can experience lower production and operational costs, accelerated 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 eliminates 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.
In addition, given the rise of Big Data, cloud-computing, and other data storage and management platforms, digitizing the supply chain means companies will have greater data gathering, reporting, and analytics capabilities. This means companies can review large amounts of data in real-time to not only create better demand planning strategies, but they can also share this data in-the-moment with other crucial players in the supply network to help avoid bottlenecks or disruptions at a number of stages in the planning and production process.
Benefits of a digital supply chain
Now that we’ve defined the digitization of the supply chain, we can examine and understand the concrete benefits OEMs can experience by leveraging a complete digitization of their supply network. Obviously, the capability to encourage growth and enhanced productivity and profitability are important outcomes, but there are also a number of benefits companies can experience on a more micro or day-to-day scale. Some of these benefits include:
Holistic integration of supply chain solutions. 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. What’s important here is the word holistic in that companies must view planning, production, and data management solutions as part of the same overall endgame rather than as disparate functions.
Connection of 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 also helps planners and managers create enhanced what-if scenarios and simulations, both of which are critical for driving planning schemes for production programs. In addition, the development of advanced analytics and other detailed reporting platforms makes a digitized supply chain even more critical as OEMs require increasingly intricate sets of data to help cut through the complexity of today’s global supply landscape.
Improved collaboration. As we mentioned earlier, 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.
Endgame of suppy chain digitization
It's something of a cliche, but 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: 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 long gone. The digitization of the supply chain is the next step for companies as they embrace new and developing technologies.