What is Digital Supply Chain: Trends, Benefits, Examples, & Impact of Digitisation

The proliferation of e-commerce across industries and markets has increased competition tremendously. Every penny matters, and companies do their best to squeeze every bit of efficiency from the business process. So, supply chain digitisation is a necessity that we must recognise.

This article explains the digital supply chain and how it seamlessly transforms businesses of every size. Stay with us.

What is a digital supply chain?

A digital supply chain is a computerised, automated, and connected network of any existing analogue supply chain that processes entering, collecting, retrieving, storing, and analysing data. 

Digitisation adds a computational layer over the existing supply chain processes to collect real-time supply chain data and make it available to management information systems (MIS) or enterprise resource planning (ERP) tools. The information thus collected involves every supply chain step, from planning and procurement to payment and delivery. 

Example of digitally transforming an existing analogue supply chain process: 

• Companies can use RFID tags to track stock movements instead of manually entering stocks in physical registers or computer spreadsheets. 
• GPS-tracked transportation fleets can help follow real-time truck and container movement and estimate reliable delivery timelines. 
• Moving supply chain data from on-site computers and servers to cloud-hosted data warehouses for real-time analysis and business intelligence gathering. 
• Blockchain-based tools can help maintain a minimum acceptable quality standard of products and services across the supply chain processes. 

Some of the mature tools for digitally transforming a supply chain can be: 

• IoT  
• Cloud and hybrid storage 
• AI and ML 
• Blockchain 
• RFID system 
• Automated data loggers 

Importance of digital transformation in supply chain

Digitally transforming supply chain processes can help to: 

• Automate data collection, retrieval, storage and analysis. 
• Improve visibility across the process and exercise control. 
• Automate processes and maintain seamless connections between processes. 
• Reduce chances of manual errors and thus improve operational efficiency.  
• Respond to supply chain emergencies and disruptions with the least possible delay. 
• Make data-driven decisions on supply chain management. 
• Leverage machine learning and artificial intelligence modelling for supply chain management.

Digital supply chain trends

The COVID-19 pandemic has shaken the global supply chain to its core and disrupted almost every business. Company executives realised that digitising a supply chain is not an end but a beginning of continuous innovation and adopting new technologies to ensure business resilience. 

This realisation has resulted in new trends in supply chain digitisation. Some of these emerging trends in the field are: 

• Use of AI and ML in supply chain planning and forecasting - Data science and machine learning are taking the centre-stage in supply chain management. Companies are leveraging AI in every step of the supply chain network. 
• Improving visibility and transparency across the processes—A supply chain can be multi-layered depending on industries and the scale of business operations. Companies are adopting new tools to improve visibility beyond the primary suppliers (tier-1), offering improved resilience to sourcing disruptions.  
• Increasing use of low-code and no-code app development - In a digitised supply chain, domain experts often need help with tech issues, like department-specific app development. They have to rely on central IT resources, causing delays in decision-making. Low-code or no-code development tools are solving such bottlenecks. 
• Adoption of carbon-neutral technologies in supply chain processes—Companies are adopting electric vehicles and other greener solutions to comply with emission norms and decouple the supply chain from fluctuating energy prices.

Benefits of digital supply chain

Millions of corporate decision-makers worldwide rely on supply chain digitisation for its benefits to businesses. Some of these benefits are: 

• Seamless visibility across the network of the supply chain 

We can better understand a scenario only by observing it in its totality. Any lack of visibility forces management to rely on assumptions and other sub-optimal practices in decision-making. Digitising a supply chain affords us a broad spectrum and real-time observability. 

• Opportunities to free up domain experts from repetitive tasks 

Digitisation relieves expert human resources from repetitive and administrative tasks through process automation. It helps them invest more attention in detailed analysis and supply chain intelligence gathering. Automation also removes the chances of manual data collection, storage, and retrieval errors. 

• Strong cohesiveness among the supply chain processes 

Supply chain processes operating in silos suffer the risk of hidden inefficiency, causing revenue losses and irreversible customer dissatisfaction. Digitisation helps build cohesiveness among individual processes, from planning and procurement to customer payment processing.  

• Opportunity to remove subjectivities from supply chain decisions

Sometimes, blind spots in an analogue supply chain force managers to make decisions based on subjective opinions. However, domain experts with years of experience may need help making such decisions in fast-changing market realities. Supply chain digital transformation helps make solid data-backed decisions and removes subjectivity.    

How to digitise supply chain management?

Too many off-the-shelf tools and cloud-based SaaS platforms are available to digitalise any analogue supply chain. However, we need to follow specific steps before implementing the digital transformation for effective supply chain digitisation.

1. Evaluation of existing supply chain operations

Digitisation is a means of automating an existing supply chain. Digitisation can hardly work without a clear understanding of the existing processes. So, every digitisation process must start with a comprehensive analysis of the existing supply chain. 

2. Define the company's objectives for supply chain digitisation.

Every company is different, and so are their aims of gaining from digitising the supply chains. So, it is essential to define your company's objectives of supply chain digitisation. It helps to plan the implementation and avoid unnecessary overhead costs in the digitisation process. Besides, defining objectives also helps to track the RoI on digitisation. 

3. Decide how to implement digitisation 

For digitisation, companies can build their systems or procure mature tools and platforms off the shelf. Many of these platforms allow business-specific customisations. On the other hand, creating a digitised supply chain from scratch can be cost-intensive and time-consuming. 

4. Implement digital solutions

Implementing a digitised supply chain can be a lengthy process fraught with various challenges. It might require onboarding domain experts and operations teams. Testing, collecting feedback from on-ground teams, and adjusting the processes are integral to supply chain digital transformation. 

5. Training and capacity development 

While digitising a conventional supply chain, companies often need more support in adopting new practices. It affects the change management process. The primary reason behind such issues is poor technology awareness. So, human resource training and technology capacity building are significant for successful digital transformation. 

6. Incorporating continuous monitoring and feedback mechanism 

One of the most significant advantages of digitisation is the ease of real-time tracking and building quick resilience. So, companies must establish a continuous monitoring mechanism and standard operating procedures for effective feedback processing. Processing within their digitised supply chain. 

Digital supply chain examples

Let us understand the digitisation of an existing conventional supply chain through an example. 

Suppose a hypermarket chain sources products from vendors and stores them in a centrally located warehouse. Store managers track customers' purchase patterns and the seasonal variation in demand and order products from the warehouse to stores. The warehouse manager logs the stock information and regularly conveys it to the head office. Sales data from cash registers are tallied and transferred to accounts. Based on data from the warehouse and the revenue collection, the head office makes procurement and financial decisions. 

Digitisation of this supply chain will involve automation of data collection at every process and storing the collected data on the cloud or in a centralised database. This will help the head office to access and track order-to-cash or procurement-to-pay processes in real time and make on-demand management decisions.

Impact of digitisation on supply chain

• Process automation—A digitised supply chain allows for automating processes and increasing efficiency at every level. This reduces the workforce's burden of administrative and repetitive tasks, optimum use of human resources, and better productivity.  
• Business resilience—The COVID-19 pandemic exposed businesses to the realities of supply chain disruptions. Though avoiding such gigantic disruptions may not be possible, digitisation can improve emergency preparedness. 
• Informed decision-making - Digitisation helps managers and domain experts to substantiate their decisions with seamless data analysis. 
• Environmental compliance—Strict emission norms and global concerns about conventional supply chains' ecological effects influence brand values. Digitisation can help quantify environmental impacts and take remedial steps. 

Challenges of digital supply chain

• Cyber security risks—Supply chain automation is a data-intensive process that requires seamless and secure connectivity across processes. Any data breach or cyber attack can jeopardise a digital supply chain. 
• Change management - While digitally transforming a conventional supply chain, an existing workforce may resist adopting new practices. Companies may require resizing and redistributing the workforce. This may disturb successful change management.  
• High overhead costs—Adopting a digital supply chain may require overhead investments for MSMEs, which can stress their financial health. 
• Lack of cross-border visibility—Companies that are too dependent on cross-border sourcing may lack seamless visibility despite digitisation. 
• Technology risks—Digital technologies evolve fast. If companies' supply chain infrastructure cannot keep pace with them, they may risk obsolescence.