Digital Supply Chain: Definition, Important, and Risks

Digital Supply Chain

What is a digital supply chain? What are the benefits and drawbacks of having one? This article will discuss digital supply chain management and the risks and benefits that it brings. We’ll then discuss the steps you can take in order to build a digital supply chain that is secure and profitable for your business.

Supply chains were a topic of great interest to mainstream media outlets after the outbreak of the pandemic. People around the globe began to understand how crucial the global supply chain was to their day-to-day lives. Retailers suddenly ran out of essential supplies.

The COVID-19 Pandemic highlighted how vulnerable traditional supply chain systems are to disruptions. Recent data has shown that companies who had made investments to strengthen their supply chain were more successful in the face of the crisis. These businesses had, notably, invested in supply chain risk management. This refers to the technologies that support electronic supply chains and their processes.

What is a Digital Supply Chain?

It is helpful to start by looking at traditional supply chains in order to better understand the digital supply chain. Items travel in a linear fashion in traditional supply chains. Every link in the supply chain depends on the success or failure of the previous link.

This linear model may seem simple enough. Success is determined by the quality of each step in this process is performed. Most of the time, an error occurs at one stage of the chain that can take several days to find the error. This model is very risky because a single mistake could lead to unhappy customers and missed deadlines.

A digital supply chain is a collection of processes that make use of advanced digital technologies to help businesses make better decisions about their supplies, their demand, and all the relationships between them.

Digital supply chains operate more like networks than traditional supply chains that function in a linear fashion. Digital supply chains offer real-time visibility into each step of the chain, which is a significant improvement over traditional supply chains. This transparency into supplier performance, customer needs, and business relationships allows businesses to build stronger relationships with suppliers and protects your company from disruptions when they happen.

Digital supply chains integrate internal systems and data with external information both structured and unstructured. A digital supply chain uses new technologies to monitor, analyze, and collect data. It can be used to make predictions and suggest actions in real-time.

It can be difficult to integrate legacy supply chain management technology. This will require mining data from business processes and retooling your equipment using sensors, monitors, and other devices so you can audit manufacturing and logistics processes.

The configuration of your equipment is only one part of digitizing the supply chain. Once the sensors and monitors are in place, typically using Internet of Things technology (IoT), advanced analytics will be required to analyze all of that data and make predictions about future outcomes. As you add more suppliers, parts, and distributors to your database, the complexity of these data will increase.

Digital twin technology is a great tool to help you with this. A digital twin is a virtual copy of a product or process. This allows businesses to create a digital copy from their supply chain and then use that copy to simulate possible scenarios. This technology makes predictions and offers recommendations to businesses on how to respond to changing circumstances using machine learning algorithms.

Digitalizing your supply chain can transform your business and make it more responsive. It will also allow you to plan ahead and take preventative actions in case of disruptions. Let’s now take a closer look at some of the benefits that a digital supply chain can offer.

Also read: 5 Machine Learning Techniques Leading to Smart Manufacturing

Why are Digital Supply Chains Important?

A digital supply chain functions in real-time can be dynamic, and adapts to changing conditions, unlike a traditional supply chain. Digital supply chains combine information from both information technology (IT), and operational technology(OT) systems to maximize profit and service levels. They allow companies to anticipate problems and respond quickly without much planning.

Digital Supply Chains are faster

Digital supply chains can deliver products in a matter of hours using new methods for product distribution. Digital supply chains can provide more accurate forecasts of customer demand by using advanced forecasting methods such as predictive analysis. Digital supply chains provide weekly, sometimes daily forecasting of fast-moving products as opposed to monthly forecasting.

Amazon’s predictive shipping model is one example of this advantage. It will ship products to customers before they place an order. Once an order has been placed, it will match with a shipment already in transit and then be rerouted to the customer’s destination.

Digital Supply Chains are more flexible

Businesses can respond more quickly to changes in demand or supply situations by having real-time supply chain planning. Digital supply chains reduce planning cycles and make it easier to adapt to changes or constraints by making the planning process more continuous.

Digital Supply Chains are more granular

As the demand for more individualized products rises, There is a strong push for micro-segmentation as well as mass customization. Digital supply chains enable businesses to manage customers in more specific clusters and allow customers to choose the products that best suit their needs. Consider drone delivery and how it can personalize the customer experience at every stage of the supply chain.

Digital Supply Chains are more accurate

Digital supply chains offer real-time transparency across the entire supply chain. This information includes both top-level KPIs and granular process data. It provides a basis for sharing information with all stakeholders and seniority at each level of the supply chain.

Digital Supply Chains are more efficient

Automation of both planning and physical tasks can increase efficiency in the supply chain. In a digital supply chain, robots manage the material throughout the entire warehouse process. This includes receiving and unloading materials, storing them, picking and packing, and shipping.

All of this said, a digital supply chain leverages new technologies and connects systems that were never intended to be connected to the Internet. This can pose new risks to your business.

Risks of Digital Supply Chains

One concern when assessing the risks associated with the digital supply chain is the security concerns associated with the Internet of Things. Supply chain security should be a top priority in your supply chain risk management program.

IoT sensors monitor machine temperature, location, and energy consumption. Any increase in any one of these factors can lead to a malfunction, failure, or other issues. Maintenance teams can fix potential problems before they become serious.

This level of monitoring and increased connectivity can lead to risk propagating throughout your supply chain network, all the way to (or from!) your customers. Digital supply chains give malicious actors more chances to disrupt or corrupt machine processes at every step of the supply chain.

However, upgrading your supply chains will expose your business to financial risk as it will require significant capital investments. It is up to you to decide if the financial risks associated with a digital supply chain are worth it. For most companies, the benefits outweigh any risks.

Also read: Top 10 Supply Chain Risks and How to Manage Them

Create a Digital Supply Chain

Remember this question when your company is ready to transition to a digital supply chain: How can we solve problems with the data that we create?

There are several factors to be aware of before you start creating your digital supply chain.

Business drivers. Before digitizing your supply chain, recognize the driving forces behind this decision. What are the top goals that you would like to accomplish, and how can a digital supply chain help you achieve these goals?

  • Fear of technology. Traditional supply chain models often employ an “if it isn’t broken, don’t repair it” mentality. Some decision-makers might be hesitant about digitizing their supply chains. This is because it will undoubtedly introduce new technology to your day to-to-day business operations. Your competitors may be looking to digitize their supply chains online.
  • Measures of success. Identify the tangible goals that you want to reach. Perhaps you want to reduce time-to-market cycles or increase the ability to monitor suppliers for potential incidents that could raise the risk.
  • Team members. Appoint team members to digitize your supply chain, based on their strengths. It is important to have employees or consultants who are experienced in IoT and big data, Blockchain, security, integration, and automation. Sponsor or developing a cross-departmental group is also a good idea. This will give you insight into the supply chain and help guide your technology specialists.

Let’s now take a look at what you need to do when building a digital supply chain that is secure and profitable for your business.

Begin with the basics

First, you need to identify any problems in your supply chain. Before you invest in new technology, it is important to identify any existing problems with your supply chain.

Start by identifying the most difficult links in your supply chain to digitize. Your existing supply chain will need to continue to work while you transition to a digital model. It’s crucial that you have a plan in place that ensures that your business can continue to operate during this time.

Assimilate Different Functions

Instead of viewing manufacturing and procurement as separate functions, think about how you will reach desired business outcomes with different stakeholders. You might consider using a survey to gather information and assess awareness.

You can digitize your supply chain holistically to ensure that there are no weak points. Consider how everything can be brought together to achieve the business goals you will set forth in the next step.

Define your business objectives

Think beyond operational efficiency. Think about the goals that you want to achieve for your business and how your digital supply chains can help you get there. Keep track of your goals to ensure you have the information you need to verify that you are meeting them.

Make it inclusive

Once you have appointed a team to improve your supply chain, it is time to bring everyone on board. This will include creating a supply chain message for your company and making sure it is communicated to everyone. This is a great opportunity to explore the technology which will allow you to bring together cross-functional groups.

Also read: Top 10 Inventory Management Software

Inventory your data

Take a look at the supply chain information that your company already has and determine how it can be improved to help you achieve your business goals.

Look outward

Consider what information your suppliers are able to share with you using IoT or APIs. Also, what information you can share?

Prioritize projects

Start with simple goals. This could include predictive analytics for demand planning, reliable order processing, smarter logistic planning, warehouse automation, better end–to–end transparency, and immediate response to disruptions.

Choose tools to help

You can automate the process of moving to a digital supply system by choosing the right tool so that you can concentrate on the bigger picture. These tools are designed to track and manage your supply chain and make it easier to take inventory, ship orders, order supplies and monitor the status of your stock.

Software that manages supply chain risks can provide incredible benefits to your company. The artificial intelligence and advanced analytics of many programs can help you make more accurate predictions.

Written by
Denis Bitson

Denis Bitson is content editor of The Next Trends. He is passionate about sharing his technical knowledge through engaging blogs and articles. Enthusiastic about exploring the latest gadgets and indulging in video games.

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