In 2020, Supply-Chain Digitization Is No Longer Optional

By David Parker, Cloudleaf Chief Evangelist

Without a doubt, uncertainty and unpredictability will continue to increase. Whether you‘re a bio pharma company grappling with temperature excursions, or an automaker relying on critical assembly-line components that only China produces, you’re bound to be affected. The amount of disruption in today’s business climate necessitates the ability to respond in real time, which can only be done if the entire supply chain is visible, and updates are current.

On top of that, B2B companies now expect the same level of visibility and delivery updates that consumers get for ordering something as inexpensive as a pair of shoes online. These major global shifts make supply-chain digitization in 2020 no longer optional. Companies have two to three years to digitize their supply chains, or they’ll face severe business consequences.

Most enterprises have only 20% visibility into their supply chains, as opposed to the 70% to 90% percent needed to address key points of volatility where revenue and costs are at risk.

Until recently, companies have been limited with regard to the kinds of information they’re able to glean about their supply chains. Much of the system relies on passive data loggers that capture location and temperature, but don’t feed it in real time. For supply-chain logistics, finding out when an issue occurs in real time as compared to when it arrives can help firms prevent loss, or deploy just-in-time replenishment if needed.

Even if companies were able to simultaneously collect all kinds of information that could help them anticipate risk, prevent loss, improve efficiency and make customers happy, they would still struggle to integrate it. Most companies today are still siloed. Supply-chain information needs to be collected and shared across operations. Digitization solves this challenge, too.

According to a 2019 IBM global C-suite study, 84% of chief supply chain officers stated that lack of visibility across the supply chain was the biggest challenge they face. This has led to inefficiency and waste, not to mention larger implications for companies’ overall environmental footprint. According to a McKinsey report, as much as 90% of a company’s environmental impact comes through its supply chain. Digitizing the supply chain will save companies significant budget dollars as a result of waste reduction, while reducing their carbon emissions.

Supply Chain of the Future

Supply chains are complex global networks, not just linear transactions. Legacy technology such radio frequency identification (RFID) sends a signal at certain checkpoints along the way, providing extremely limited context and visibility. The ease of use and efficiency of distributed cloud computing technologies make it possible to capture and analyze any kind of data. At the same time, advances in computer storage allow for the transmission of more kinds of data, to target precise and unique impacts customized to the type of supply chain.

These technological changes finally make it possible to deliver on the promise of end-to-end visibility, which comprises four key kinds of data: time stamp; location where it happened; condition (temperature, shock, humidity, and vibration), and contextual data points. This is all captured continuously as materials move through a warehouse, onto a plane, across the ocean, onto a truck, and to delivery.

In industrial manufacturing, shocks that occur within the supply chain, such as the vibration of highly calibrated tooling equipment, can cause huge losses. Capturing incidents as they happen helps a company improve production throughout, increase revenue recognition, and escape charges from the infracting shipping company.

For bio pharmaceutical companies, adding tracking devices that can capture slight temperature fluctuations, especially outside regulatory thresholds, helps to improve response rates and operations overall. One company that transports high-value blood plasma, by adding increased real-time visibility into its supply chain, saved $70 million and spared thousands of liters of blood plasma. For other industries, such as modular construction, the devices are tracking moisture.

Once companies see the return on investment from increased visibility, it’s easier to roll it out into the other aspects of the supply chain.

Gartner predicts that by 2023, at least 50% of large global companies will be using artificial intelligence, advanced analytics and the internet of things in supply-chain operations. That same year, over 30% of warehouse workers will be supplemented, not replaced, by collaborative robots.

Tracking Across Partners

Digitization also solves the information divide that occurs between vendors, by enabling integration of all types of data from vendor tracking systems, such as estimated time of arrival and storage location. All sources can be married together with legacy company data and new inputs coming from supply-chain systems. Digital twin applications use this data to create a rendered version of the actual supply chain that can be compared against in-the-field tracking devices. Using this approach, companies can run simulations and what-if scenarios to improve planning for more predictive outcomes.

Digitization is a win-win proposition, not just a way to avoid risk. The business benefits that companies stand to gain by effectively advancing their supply-chain management is profound. They include revenue growth, significant waste reduction, increased market share as a preferred supplier, recognition of revenue at the earliest opportunity, and ability to offer value-added services to the customer. Advanced technology transforms supply chains into true, data-powered strategic assets and engines for innovation. As a result, companies can become more responsive to market and customer variability, and drive significant value for each business in the connected supply chain.

In short, market pressures to modernize supply chains through digitization come with a big payoff.

This article was originally published at supplychainbrain.com on April 2, 2020.