Impact of Digital Transformation on Supply Chain

impact of digization on supply chain

The supply chain has been digitizing for many decades by introducing enterprise resource planning (ERP) systems, the use of manufacturing robots, digital drawing, custom planning systems, and electronic data interchange (EDI). The current wave of digital transformation will usher in entirely new organizational models, more customer-centred work and a more satisfied workforce, unparalleled levels of consumer value, and societal benefit. Simultaneously, it will cause significant disruption to the existing world order. It will require significantly different skill sets, likely put many people out of jobs, and will likely worsen inequality. Additionally, it will drive and consolidate markets and sectors, rendering existing business playbooks obsolete and incapable of competing with the new generation of digitally powered organizations.

Digital transformation is the process of reimagining end-to-end business processes in order to generate value through the use of disruptive digital technologies. Organizations will provide consumers with creative goods and services that are both high-quality and cost-effective through digital transformation. Intelligent resource management can achieve unparalleled levels of performance, and waste can be virtually eliminated from processes.

Why should you care about digital transformation?

1. Expectations

Businesses operate to represent consumers and generate value for stakeholders. A company can not survive in a dynamic global marketplace if it is unable to meet the demands of its customers. Customer expectations are constantly evolving, and they are changing faster than ever before; thus, a successful business must continuously reinvent itself. Blockbuster, Kodak, Nokia, and Xerox are only a few examples of businesses that struggled to reinvent their supply chain during times of transformation. Given that today’s consumers can order groceries for delivery from their homes using a smart screen, change their home’s temperature remotely, and see who is at the door when they are not at home, the bar for communicating with them is higher than ever. Market leaders in the past would have no choice but to disrupt themselves or risk extinction. Organizations that embrace and leverage digital transformation to build consumer value, on the other hand, have been handsomely rewarded by the market. In summary, the first reason you should be concerned is that your customers are affected, and a company cannot exist without customers

2. Efficiency

The digital era has fundamentally altered how executives treat these management principles. Since executives can link them to other digitized operational processes and industries, new technologies enable companies to scale operations much faster and with a much broader reach than conventional ones. Digitally enabled operating models and businesses built around a digital core have the potential to overtake established running processes and organizations. Digital transformation can reduce costs and increase productivity significantly. The digitally connected environment, driven by disruptive technology, will continue to change companies’ cost structures, increasing productivity and profit margins for the winners. Another reason you should worry about these productivity gains is that your existing and emerging rivals are seeking them aggressively and will unforgivingly outpace you.

3. Revenue

Adopting the latest wave of digital technologies has a significant impact on sales growth and having a significant impact on the organization’s profit through cost efficiency. More customers, more goods, more services, or a combination of these, all allowed by higher throughput and superior customer value, will drive top-line growth. Supply chains that are agile and capable of delivering personalized goods and services to a larger customer base multiply the network’s value and, as a result, sales. There are several real-world examples of companies that have increased their revenue by using digital platforms and creating a network impact in terms of size. The most straightforward way to explain the platform effect is to consider how good Amazon has been at bringing customers together in one place. It maximizes their combined value in order to draw large numbers of sellers, resulting in a win-win situation for both buyers and sellers in the network.

Digital Impact on Supply Chain

Although innovations have reshaped industries for decades, it is the convergence of critical technologies such as artificial intelligence, cloud computing, robotics, the Internet of Things, additive manufacturing, and blockchain that is allowing business functions to be automated in ways previously unimaginable. Organizations are supposed to be always on and linked to their customers. Consider three major ways in which supply chains are being impacted by digital transformation.

1. Customer Value Proposition

Customers and the value generated for them should be at the forefront of digital transformation. Customers need an excellent value-adding partnership with a linked partner in the digital age, rather than an “on and off” transactional connection. Customer emotion is critical in determining whether a consumer becomes an outspoken brand advocate, a one-time neutral buyer, or a disgruntled customer. Organizations can use digital technologies to change the customer experience positively, automate processes, use unstructured data surrounding a customer experience, and easily take action to convert a disgruntled supporter into a lifelong patron.

2. Process Management

The rules governing the organization’s design, procurement, manufacturing, logistics, storage, transportation, and delivery processes have been rewritten by digital transformation. With the ability of machines to feel, perceive, act, and develop, all criteria of conventional supply chain management can be influenced positively, and the enterprise can eventually become a data-driven organization.
Predictive strategic sourcing and automated transactional procurement are becoming more prevalent in the digital world. Organizations should analyze vast procurement data to locate strategic suppliers, conduct cost analysis, and manage individual suppliers efficiently for network value enhancement. The blockchain is transforming the way contracts are managed by enabling smart, automated contracts to be created while also lowering associated indirect costs.
Components of smart manufacturing are resulting in dramatic improvements in manufacturing performance, inventory cost reduction, and product movement speed. Additive manufacturing enables greater product customization, and digital twin technology streamlines manufacturing facility management and design while increasing agility and protection. Machine learning predictive algorithms can significantly improve an asset’s availability.

3. Data and Technology

Data plays a critical role in digital transformation in previously unrealized ways. Today, one cannot avoid popular claims regarding data, such as “data is the new oil that powers the digital economy,” “data is gold,” or “data is the twenty-first century’s electricity.” Although these claims sound hyperbolic in light of data’s central position in digital transformation, they are not exaggerations. The majority of digital technologies, from self-driving cars to warehouse robots to algorithmic models that forecast customer behaviour, rely on vast amounts of data. This data is gathered from a variety of sources and analyzed using machine learning algorithms and supercomputers to discover patterns and insights that were previously difficult to detect and act upon.
Along with the data which enables digital transformation, there are many supporting technologies. These technologies allow real-time insights, which in turn drive real-time decisions that have a rapid effect on the supply chain. From artificial intelligence applications that use neural networks to conduct complex machine learning to physical robots that can imitate complex human movements to allow complete automation on a production line, technology is a critical component of digital transformation.

Your End-to-End Supply Chain Partner

Stockarea offers end-to-end supply chain services such as Warehousing, Freight Forwarding, Customs Clearance, and Transportation, acting as your logistics backbone. Let us take care of your complex supply chain so that you can focus on your core business.