Terms like “digital supply chain” and “Industry 4.0” are broad, without much indication on their own of what they encompass. Fortunately (for the sake of clarity), when used in discussions of the future of supply chain management (SCM), they typically refer to a specific set of technologies, including but not limited to:
- Assets within the Internet of Things (IoT), such as embedded sensors and networked devices other than conventional PCs, phones/tablets or servers.
- Analytics offering insights on the performance of supply chain-related KPIs such as vehicle dwell time and on-time delivery rate.
- APIs for connecting an organization’s key systems of record to those throughout its partner ecosystem.
- The cloud-based infrastructure, from IaaS hosting to SaaS applications, that ensures the overall scalability and flexibility of complex modern supply chains.
Together, these innovations can transform a supply chain from an unwieldy, unresponsive collection of disparate components into a highly automated, synergistic and cost-effective whole. There are many benefits to supply chain digitization. To understand them, we need to look first at where many of today’s supply chains fall short.
The digital difference in the supply chain: Before and after
In theory, a supply chain will support reliable distribution that minimizes any gaps between supply and demand. In practice, this doesn’t always happen, for a variety of reasons. This gap, between the ideal setup and the reality on the ground, is a defining feature of the pre-digital supply chain, and one that digitization can solve. Think of it as before and after:
Key teams and the processes they oversee are siloed from one another, whether internally (e.g., accounting and sales) or externally (like between a company and its most important partners). There isn’t a single governance process for digital projects. Visibility is very limited, leading to unnecessary duplicate work as well as miscommunication. Forecasting frequently degenerates into guesswork, which results in overstocked inventories or, on the other end of the spectrum, shortages of essential parts and products.
Stakeholders have a complete view of the supply chain, with vital information available to all of the chain’s member organizations as it comes in. Changes in end-user demand can be identified and addressed in real-time, while forecasting is more accurate thanks to advanced analytics, thus helping the fulfilment systems to respond on time. Thanks to readings from IoT devices along with GPS and RFID data, it’s easy to know if a piece of equipment is currently operational and if it will require service in the near future. The focus shifts from an event-based response to a proactive response due to more accurate predictions which are now possible through IOT and artificial intelligence. The supply chain becomes more responsive and agile to respond to the changes in macro and micro parameters
Digital transformation of the supply chain leads to better responsiveness and more streamlined operations. However, while the vast majority of organizations recognize these benefits, many struggle to actually realize them. A 2017 study from The Hackett Group found that while 94 percent of supply chain leaders thought digitization would produce fundamental change, only 44 percent had a corresponding strategy in place. Similarly, a Gartner survey from the same year revealed that more than one-third of supply chain organizations felt their digital projects didn’t align with corporate digital business initiatives. The results of Inspirage’s 2017 research study, The Future of the Integrated Supply Chain, fell right in line with these two studies: 71% of our respondents felt that digital transformation was a key business imperative but only 6% listed digital adoption as a company strength.
Planning for transformation
Ensuring a successful transition to a digital supply chain takes planning. That means defining the experience you want to deliver to customers, identifying the technologies that can deliver it and making the right investments.
Oracle itself has produced some valuable insights on which SCM technologies have become the biggest building blocks of digital supply chains. Product lifecycle management, logistics and ideation/innovation led the way in a 2016 assessment of the cloud-based SCM landscape.
As experts in integrated supply chains, Inspirage can guide even your most ambitious projects toward completion. Our experience and expertise span the diverse Oracle SCM product portfolio. Learn more by contacting our team.