How is Digital Transformation Impacting Supply Chains?

A supply chain in any business is the design that involves all processes of producing a particular product or service and delivering it to the consumers. It includes the handling of raw materials, warehouses, production, finished goods, transportation, and distribution plus retailers.  

A supply chain management consulting enables companies to efficiently manage and maintain the flow of goods. Therefore, evolution can be spotted in the traditional methods of handling the supply chain as more and more corporations are simply shifting towards supply chain digitization

During the Covid-19 pandemic, the need for digital transformation became even more apparent when enterprises faced several supply chain disruptions and challenges. Therefore, the demand for digital transformation in logistics and supply chains is ever-increasing globally. 

What is digital transformation in the supply chain?  

Digital transformation includes the use of analytics, AI tools, automation of processes, and integrated connectivity between the supplier and the customer through IoT (internet of things). 

Companies rely on various digital software and IoT devices to achieve real-time insights and visibility into the several stages of the supply chain. All in all, digital transformation promises the efficiency, responsiveness, flexibility, resiliency, and transparency organizations need for avoiding unprecedented supply chain issues.  

McKinsey&Company describes digital transformation as “the application of the Internet of Things, the use of advanced robotics, and the application of advanced analytics of big data in supply chain management: place sensors in everything, create networks everywhere, automate anything, and analyze everything to significantly improve performance and customer satisfaction.” [1]  

The supply chain digital transformation 2021 is also famously known as “Supply Chain 4.0”, which includes the revolutionary methods of digitization.

In a nutshell, if enterprises successfully utilize the full potential of digitization, it can prove to be a breakthrough for them, gaining leverage over unfavorable circumstances.

So, how can these new solutions help to improve the processes of the supply chain? 

Demand Forecast

Machine learning and artificial intelligence play a significant role in demand forecasting. Previously, companies used to use conventional ways of predicting customer demand but those methods might not reflect the current needs of consumers. However, the use of analytics has changed the game. 

The sensor technologies can collect the latest data from the environment and provide insight into the customer behavior, which helps you analyze the ongoing data to come up with better decision-making. Hence, making the overall demand forecasting more reliable.

Integrated networking between partners of supply chain

The integrated networking or collaboration, thanks to the public cloud applications that allow multitier connectivity between companies, customers, and suppliers helps in lowering the inventory costs. 

According to research done by the ARC Advisory Group, the collaborative scheme helps companies generate $3 billion-plus profits annually while this number is growing rapidly.

Many applications like Descartes, TrueCommerce, InforNexus, and BluJay Solutions offer several services, providing a space to help supply chain partners build effective communication between them. This practice not only saves admin costs but allows all parties to participate in effective supply chain planning and smoothen all processes overall.

Change in Customer Behaviour

With the overall advancement in technology, a massive change in customer behavior can be seen. This change calls for the reevaluation of the distribution practices. In recent times, customers exhibit zero tolerance for facing delays in their parcel delivery or receiving incorrect orders. 

Therefore, enterprises cannot take the aspects of logistics and distribution lightly. All processes from warehousing to shipment should be done at a quick speed to meet the criteria set by the customers. Here, the intervention of AI tools helps companies to automate information that eliminates the chances of errors.

Also, during the pandemic situation consumers shifted to online platforms for shopping rather than visiting physical stores. This change encouraged many ventures to shift from business-to-business (B2B) to Business-to-customer (B2C), selling products directly to consumers through online websites. 

By setting up virtual stores and digital order forms, organizations could meet the demands of customers more efficiently and responsively. Moreover, the automation tools allow businesses to improve their customer service, accumulate relevant customer data, and outreach consumers through emails.

Digital Transformation Risks

Up until now, we discussed the positive impacts of digital transformation in the supply chain and how it is allowing organizations to efficiently deal with supply chain disruptions. However, there are some risks as well. With all the data handled through digital tools and collaborative networking in line, cyber crimes have also increased over time. 

With the interference of hackers, companies can lose their confidential data. You can read about the biggest firms losing not only investments but public trust here.

Therefore, enterprises should take preventive measures by addressing the issues and organizing legal contracts with the third-parties to eliminate security gaps. 

Final Thoughts

We can conclude that companies are benefiting from the digital transformation in the supply chain. However, supply chain digital transformation challenges still remain for enterprises to overcome. Organizations need managers who are well-versed in technology.

If the supply chain managers and members cannot configure digital tools, companies won’t be able to go beyond the traditional supply chain operational methods. Companies would either need to hire experts in technology or train existing supply chain managers and staff to deal with the digital transformation occurring rapidly in supply chain management. 

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