Article written by Adam Robinson
The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.
Meta-description: C-suite executives often use supply chain resilience, agility and flexibility interchangeably, but what do they mean and have to do with digital transformation?
How often do you really think about digital transformation? Digital transformation is everywhere – even in the palm of your hand. But, its true applications continue to fall short of what companies promised and how they claim to save money at the cost of more time managing another system. That’s The Dark Con of Lite Digital Transformation – saving money at the expense of soaring labor costs and headaches. In reality, digital transformation applied the right way can provide a protective, recoverable effect for supply chains of all sizes, and while it’s easy to blanket the whole industry as disrupted after COVID-19, let’s take another look.
As reported by Deloitte in its 2017 “global extended enterprise risk management survey, 74% of surveyed organizations have faced a disruptive event with third parties in the last three years. As many as one in five have experienced a complete third-party failure or an incident with major consequences. Social media has accelerated the velocity of information to warp speed. This means that issues with certain suppliers can go from minuscule to calamitous in no time.”
Clearly, major disruptors happen to many more companies than what is reported, so let’s take a look into what digital transformation is supposed to be and how it builds true supply chain resilience.
Digital transformation contributes to faster management
Digital transformation of supply chains enables resilience through faster management. Instead of relying on an assumption, increased visibility and transparency into operations allows leaders and managers to make real-time decisions that affect order status and help to prevent disruption. As reported by Supply Chain Digital, “Supply chain visibility is an effective way to gain real-time information about business operations such as order statuses. Using the right kind of visibility tool for your operations could have a considerable impact on the velocity of a supply chain, a result of having immediate access to information required. [This is] A capability which is extremely important for those looking to complete multiple same-day delivery orders.”
Faster decision making is essential. Period.
Supply chain resilience hinges on timely intervention
Supply chain resilience also relies on the ability to intervene when things go wrong. Unfortunately, lacking digitization within the supply chain leads to losses and greater risk for disruption. Furthermore, the rate of lacking digitization is more severe than meets the eye. As reported by McKinsey & Company, “the average supply chain has a digitization level of 43%, the lowest of five business areas that were examined. A mere 2% of the surveyed executives said the supply chain is the focus of their digital strategies. Are their priorities misplaced? Perhaps. The same McKinsey research suggests that, on average, companies that aggressively digitize their supply chains can expect to boost annual growth of earnings before interest and taxes by 3.2% – the largest increase from digitizing any business area – and annual revenue growth by 2.3%.”
Digitized communications and automated alerts enable management by exception
Digitized communications and automated alerts are not just nice-to-have functions. With the talent shortage appearing to make a severe comeback amid the COVID-19 disruption, everyone wants a better way to communicate and know what’s happening. And, they do not want to interact with people in person if possible. Fortunately, digitized communications and automated alerts handle the bulk of collaboration and status requests, and when an issue arises that falls outside of those capabilities, users can intervene appropriately – managing by exception.
Improved collaboration through auto-populated shipment, order and inventory tags hastens workflows
Improved collaboration efforts through auto-populated data further streamline workflows and reduce the risk of errors when entering and sharing data. Take the average shipment. A single device could be physically touched dozens of times in shipping, and with each touchpoint, systems of record may require more information. Every data entry becomes a possible source of corruption. However, digitized collaborative resources that auto-populate and share data eliminate this risk. And, those same benefits can be scaled to allow for digital document management capabilities too. Remember that physical document management is responsible for 15% of total logistics costs, so any improvement that eliminates the costs of managing physical documents will effectively pay for itself. Any other gains are icing on the proverbial cake.
Real-time, end-to-end transparency and visibility borders on pre-cognitive capabilities, enabling true management by exception
Real-time, end-to-end transparency and visibility improvements within a unified, fully digitized supply chain allow for true management by exception when automation is not possible. In today’s age, virtually any process can be automated and transformed into a virtual activity. Even with robotics, the need for physical, human intervention declines. Chatbots are rising in popularity, and they can even drive the need to review the information and physically interact down to infinitesimal levels. It all relies on sensors and the use of real-time information to make sense of data and apply its insights to the right process. Companies across the world are consolidating their efforts to share and apply data to enable true exception management and supply chain resilience.
Clearly, the opportunities to save money are present, and with a resilient supply chain, users gain the ability to intervene before problems materialize – creating a precognition-like effect that ensures long-term supply chain resilience and stability.
What’s the future of digitization in the supply chain look like?
A single pane of glass strategy in supply chain management enables a flexible workforce – more attuned to maximizing human capital, talent and technology to gain efficiency, visibility and a more resilient, strategic value chain. Meanwhile, the flexible workforce contributes to an agile organizational structure – ebbing to meet the needs of today regardless of their origin, and that agility enables resilience. Even when the best economies look the brightest, a single event can shake the industry to its core– disrupting everything. How your company endures the event depends on your ability to apply both the agile systems and processes, the flexible workers, and the technologies in place to achieve a pre-disruption level of efficiency and profitability. This is the “Supply Chain Success Triad,” and companies like Turvo are making it a reality.
Original Source: https://www.freightwaves.com/news/commentary-how-digital-transformation-builds-supply-chain-resilience