The Digital Age Demands a Digital Supply Chain

Evidence we live in a digital age is all around us. Established businesses are losing out to their more agile digital competitors. Data has been declared a resource as valuable as oil. It seems self-evident that the digital age demands a digital supply chain; but supply chains have been slow to adapt. Adeel Najmi (@AdeelNajmi), Senior Vice President for Products at One Network Enterprises, insists part of the problem lies in the historical concept of supply “chains.” He explains, “For over a decade, many companies have attempted to build elaborate networks by connecting supply chain partners and their systems. Unfortunately, most have simply re-implemented the same old business processes that have been designed for the chain paradigm. While connecting partners in this traditional sense may have resulted in modest incremental performance gains, there are huge opportunities yet to be seized. This is because most are still locked into the chain paradigm and are held back from realizing the full benefits of networks.”[1] Najmi is correct; but, realistically, the term “supply chain” is unlikely to disappear from the business lexicon in the near future. We often cling to antiquated terms because everybody knows them. The term supply network simply hasn’t caught on.

Digital Supply Chain Technologies

When pundits discuss the importance of digital transformation, technology finds its way somewhere into the conversation. Steve Rice, writes, “Economic instability, an increase in competition and the globalization of sourcing partners have, for the first time in a long time, compelled manufacturers to seriously consider the viability of — or lack of — existing operational technologies and ultimately embrace a slew of new digital technologies that provide direct visibility into every aspect of their supply chain.”[2] Visibility, of course, is only one aspect of digital supply chain transformation. Technology, processes, and people must all be involved in any transformation effort; but, technology is the sine qua non of digital transformation. Stefan Schrauf and Philipp Berttram, analysts with Strategy&, explain, “If the vision of Industry 4.0 is to be realized, most enterprise processes must become more digitized. A critical element will be the evolution of traditional supply chains toward a connected, smart, and highly efficient supply chain ecosystem.”[3]

The ecosystem to which they refer generally involves data generation (sensors, transactions, etc.), connectivity (e.g., the Internet of Things), and advanced analytics providing insights and action (leveraging cognitive computing capabilities). Analysts from NFI note this digital ecosystem “is revolutionizing the way that companies interact with their consumers and suppliers.”[4] They believe the Internet of Things (IoT) is at the heart of the digital supply chain revolution. “A rising catalyst of this change is the Internet of Things,” they explain. “Although IoT technology is still in its infancy, it has potential to play a much more important role in the future of the supply chain. Even now, applications are being developed to capture data from ‘things’ equipped with sensors, barcode labels, GPS antennae, and other devices, move that data across the internet, and use it to improve supply chain operations. IoT technology has the capacity to improve how inventory, transportation, and warehouse operations are managed, and in addition, help make replenishment decisions, refine delivery routes, and generate better demand forecasts.” Clearly, it’s not IoT connectivity providing all those benefits; rather, cognitive computing is using the data transmitted over the IoT to provide the insights and actions resulting in enhanced value network benefits. Dr. Tim Sandle (@timsandle) observes, “Keeping supply chains in control and competitive is a key consideration for any company that sends physical products nationally or internationally. The application of digital technology presents many advantages.”[5] Sandle highlights five areas where digital supply chain transformation shows great promise. They are:

“First is the use of big data together with advanced analytics to gain insights and to improve decision making. … A second area of data collection relates to the use of sophisticated sensors designed to track and collect information. … A third area where digital technology can be used is with customer engagement. … The fourth area is the use of cloud based technology. Cloud computing solutions for the supply chain can provide business process gains; this works best when a large number of suppliers and customers agree to share data over a cloud. … Fifth and finally, and with a nod towards the future, cognitive computing should leverage considerable advantages. Applications of artificial intelligence could include enabling organizations to shift through large amounts of structured or unstructured data; assess detailed supplier assessments of a single supplier or a group of suppliers; and for assessing and calculating risk. There are also potential gains to be made from using artificial intelligence to find new ways of operating, to provide new insights, and to uncover new opportunities.”

Schrauf and Berttram write, “Driving the transformation to the smart supply chain are two tightly intertwined trends. On one hand, new technologies like big data analytics, the cloud, and the Internet of Things are pushing into the market. On the other, more exacting expectations on the part of consumers, employees, and business partners are pulling companies to develop more reliable and responsive supply chains.” I have often likened the digital supply chain ecosystem to the human body. Processes and sensors (i.e., things that generate data and perform actions) can be likened to organs and appendages. The Internet of Things can be likened to the central nervous system transmitting information to the brain. The brain, in this case, is a cognitive computing platform. Take away any one of those capabilities and the ecosystem simply can’t function as intended.

Summary

Schrauf and Berttram conclude, “With the advent of the digital supply chain, silos will dissolve and every link will have full visibility into the needs and challenges of the others. Supply and demand signals will originate at any point and travel immediately throughout the network. Low levels of a critical raw material, the shutdown of a major plant, a sudden increase in customer demand — all such information will be visible throughout the system, in real time. That in turn will allow all players — and most important, the customer — to plan accordingly.” Lora Cecere (@lcecere), founder of Supply Chain Insights, insists, “The supply chain IS Business, not a department within a business.”[6] Companies recognizing that fact will not hesitate to embrace digital transformation beginning with a digital supply chain.

Footnotes
[1] Adeel Najmi, “The Dead End of ‘Supply Chain’ Thinking,” The Network Effect, 15 September 2016.
[2] Steve Rice, “Will Your Supply Chain Sink or Swim in the Digital Age?Supply Chain 24/7, 21 August 2017.
[3] Stefan Schrauf and Philipp Berttram, “Industry 4.0: How digitization makes the supply chain more efficient, agile, and customer-focused,” Strategy&, 7 September 2017.
[4] NFI Staff, “IoT and the Supply Chain: Looking Forward,” Supply Chain Link, 29 August 2017.
[5] Tim Sandle, “Improving supply chains through digital transformation,” Digital Journal, 14 August 2017.
[6] Lora Cecere, “Sage advice? Only for turkeys.” eft, 1 February 2013.

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