Why Your Supply Chain Needs a Digital Transformation

It’s difficult to find a company that hasn’t experienced problems in their supply chains and order fulfilment operations in the last year. Almost half of all companies surveyed struggled in their picking and processing operations during that time, and about 40% had major issues in their inventory management.

COVID-19 was a wake-up call for businesses worldwide. Especially in the retail industry, the epidemic and the resultant lockdowns placed serious strain on supply chains. Most companies found their supply chains were more fragile than expected.

Even before the epidemic, there has been a global shift towards eCommerce. Most retailers thought they had years to iron out all the kinks in their supply chain in preparation for this change. Then Covid hit, and everyone had to scramble to make it work. Many companies had to go through 10 years' of planning and growth in the span of months.

In this article, we'll look at ways that you can use technology to make your supply chain ready to cope with any future disruptions—and thus rise above the competition. It’s called the digitally enabled supply chain and will revolutionise the way you do business. But first, let's look at supply chain management and the different models used to build a supply chain.  

What is Supply Chain Management?

Supply chain management is the overseeing of every process that works together to get goods into the hands of customers—from getting the right raw materials, to the manufacturing process, the storing of goods, the selling of the resultant product, as well as the delivery of products to customers.

Supply chain management is serious business. Running a supply chain takes meticulous planning and careful oversight. You need to make accurate forecasts to plan for customer demand and anticipate changes in customer behaviour. Then you have to communicate these changes to all suppliers and service providers and keep a tight grip on the logistics of delivering the products to customers. All the while, you have to keep track of inventory—without which it would be impossible to deliver goods to customers in a timely fashion.

Supply chain management is similar to operations management, although there are a couple of differences. Both have the same primary objective, which is to increase profits by making a business run more efficiently.

They differ in the scope of their management domain. Supply chain management focuses exclusively on the running of the supply chain, while operations management is tasked with making the whole business more efficient. Both need to balance the needs of disparate stakeholders and find the profitable balance between competing interests.

Different Supply Chain Models

Broadly speaking, there are two different approaches to running and designing a supply chain. In the first approach, the supply chain is designed to be as responsive as possible. There are three sub-categories to this approach:

• Agile Supply Chains. Here the supply chain is designed and managed in such a way that it can instantly react to changes or challenges in the market. At the same time, the supply chain must also run efficiently and stably during normal conditions.
• Custom-Configured Supply Chains. Here the focus is on adapting the supply chain to each business and their individual needs.
• Flexible Supply Chains. Here the supply chain is designed to transition quickly between different setup configurations based on changes in consumer demand.

In the second approach, the chain is designed to run as efficiently as possible. The sub-categories of this group are:

• Efficient Supply Chains. This is the approach for businesses that handle all stages of the order fulfilment process themselves. This is the correct approach in extremely competitive markets.
• Fast Supply Chains. If your products have short life cycles, you need to get orders out to customers as quickly as possible before preparing for the new line.
• Continuous Flow Supply Chains. This is the correct approach if you're in a business where you have to service a continuous high demand.

The correct approach for your business would depend on the particular needs of your business and market sector. Every business and every supply chain is unique and requires an individualised solution. There's no one-size-fits-all approach. You will need to experiment and figure out the combination of technologies and processes that works best for your brand and your business.

The Digitally-Enabled Supply Chain

Technology is having a significant impact on all aspects of the retail supply chain. For example, some businesses are already making use of the revolution in artificial intelligence and automation to process more orders in less time, using the same number of staff. This is causing a major shake-up in supply chains across the globe.

If you don’t want to be left behind by the competition, you have to keep up with technology. At the minimum, your systems need to be able to interface with the technology of the other stakeholders in your supply chain. If your technology doesn't integrate with theirs, how do you expect to function with them as a seamless unit?

This is the essence of the digitally-enabled supply chain. Every part of the supply chain is linked together with integrated technology and functions seamlessly as a unit, whether the link is part of your internal system or on an external network of one of your business partners.

The main benefit of the digitally-enabled supply chain is that it makes real-time visibility into the whole supply chain possible from any one point. When you have access to real-time data from all stakeholders and parts of the chain, you will be able to respond to delays and bottlenecks before they cause major disruption. You will also be able to manage inventory with unheard-of precision and improve your overall business efficiency.

Reliable tracking and shipping authentication means you will markedly reduce the risk of lost or delayed goods—all hallmarks of an efficient and robust supply chain. You will be able to cut back on your mistakes, keep customers happy, and ensure faster and more efficient shipping.

The Benefits of a Digitally-Enabled Supply Chain

The digitally-enabled supply chain opens up a whole spate of possibilities that would have been impossible without it. Here are a couple of key benefits to such a setup:

1. It makes same-day/next-day delivery possible

These days, customers don’t want to wait to get their goods. Especially in the realm of eCommerce, online shoppers expect fast delivery times. Amazon and other American online retailers have taught customers to expect same-day or next-day delivery. This has set the bar incredibly high for other retailers.

This level of service is impossible without automated workflows and strategically placed inventory locations.  It requires your eCommerce platform and order management systems to work in perfect sync. Without tight integration in your technology platforms, your warehouse staff won’t have enough time to pick and pack the products for same-day or next-day delivery.

2. Orders can be fulfilled through multiple channels

Consumers want their goods in more convenient ways than ever before. That is why savvy retailers are starting to offer omni channel fulfilment options. Shipping options like Buy Online, Pick Up In-store (BOPIS) have soared in popularity. Customers have also become used to curb-side delivery or pick-up locations with extended hours.

Once again, American surveys show that almost two-thirds of online shoppers have made use of BOPIS order fulfilment. Their main reasons for using BOPIS was to save on shopping costs, get their goods faster, and also because of convenience. It's impossible to offer BOPIS if your brick-and-mortar and online operations aren’t tightly integrated.

3. Inventory figures are updated in real-time

A digitally-enabled supply chain makes it possible for all stakeholders and even external partners to get real-time inventory data. Everyone knows how much inventory you have in stock, where it’s stored, and how much inventory is on order.

This makes advanced supply chain management possible. You will be able to give accurate product availability numbers to customers at all times. Before a customer clicks on the buy button, they'll know if a product is in stock and available for prompt delivery.

When your inventory numbers are updated in real-time, you will be able to move inventory to stores with higher sales numbers in anticipation of customer demand and avoid product shortages. In short, you will be able to manage your inventory levels in the most profitable way possible.

4. Complete integration with Fulfilment Partners

In this competitive market, many retailers have assigned many of their fulfilment tasks to third party logistics partners (3PLs).

The problem with many of the older order management solutions was that they couldn't be networked with partners' systems—which means that their operations were hidden behind a black box. Once an order was placed, it was difficult to get accurate information when the order would be fulfilled, or at what stage of the fulfilment process the order was currently located.

All this changes in the digitally-enabled supply chain. Modern systems rely on the cloud and web-services to connect different companies and different software platforms with each other. This allows unprecedented data sharing with external partners. Everything works as if it's running within a single organisation.

5. It allows you to give better service at lower cost

The boom in online retail has led to higher shipping and delivery costs. Most retailers report paying more for logistical services like transporting goods, storing them in warehouses, as well as the packing and delivering of goods to customers.

Digitally-enabled supply chains can effectively lower these costs in a number of ways:

• The system will automatically choose the best fulfilment centres with regards to location and cost.
• The system will also choose the most cost-efficient supplier for each order.
• The system will prevent shipping errors, which automatically lowers costs.
• The system will split orders between different fulfilment centres in the most cost-effective way.
• Visibility into the whole supply chain makes accurate customer demand forecasts a real possibility. You will be able to keep the right amount of inventory in stock and lower costs.
• The system ensures a perfect match between shipping information, purchase orders, and payment terms—getting it right every time and thus avoiding shipping errors.

6. It makes your Supply Chain more Resilient

If the Covid pandemic has taught us anything, it’s that you have to expect the unexpected. Anything and everything can go wrong at any time. Disruptions in the  supply chain can come from anywhere—natural disasters, disruptions in transportation, a drop in product quality, international shipping blockages and delays, price jumps, or any number of online threats.

You have to be prepared to adapt to any eventuality. Combined with sensible risk management strategies like not limiting yourself to a single supplier and always building redundancy into your processes, the digitally-enabled supply chain will allow you to weather any storm that comes your way.

Conclusion

Even though the digitally-enabled supply chain will often mean an investment in new technology, the benefits of such a system are immense. For one, it will future-proof your business. You will be ready to face any unforeseen challenge and succeed where most of your competitors are probably going to fail.

Secondly, you will be able to deliver on the high expectations of customers in the current market—and often exceed their expectations. This will set your brand apart and take your business to the next level.

But you will have to adopt a whole new mindset if you want to build a digitally-enabled supply chain. Improving your supply chain will take much more than using the latest software. You have to implement technology in such a way that it works in harmony with your staff members and current systems and software.

This kind of transformation doesn't happen on its own. It takes getting the right information, engaging with the right partners, and above all, the will to change. But with the right combination of technology, infrastructure, and systems, you will be able to meet the high expectations of modern consumers—while also lowering your costs and increasing profits.