Digital supply chain

Advances in digital technology are having a huge impact on the world around us and leading to big changes in customer behaviour. Nowadays customers are involved in social media and digitally responding and covering across a vast interconnected global community. This digital involvement is in a vast manner and covers globally. However many supply chains are not technically or digitally capable to handle this changed scenario. That's because they're structured in a very traditional and sequential way.

Let's take a look at how a typical company with a traditional supply chain would react to a sudden peak in demand. Imagine a celebrity post a picture of a bag on social media like Instagram creating excitement and generating a sudden demand for the product across the world. The bag manufacturers demand forecast was based on a backwards look at previous sales. So when their sales reports show their product has sold out unexpectedly they wake up and go into firefighting mode. The company adjusts its forecast to reflect the new level of demand and then realizes that they don't have the raw materials or the production capacity to make replacements. So they call their suppliers but they don't have the materials available. The bag (bank ?) manufacturer asks them to order new materials and utilizing expedite shipments which lead to additional costs. Finally, when the materials arrive and the products are produced they then have to be transported to the stores. This wasn't planned for in advance which means premium shipping costs. All in all, it has taken the company around four months to replenish their product with an additional incurred cost. Unfortunately, the customer just wasn't going to wait that long and in the meantime, they bought a similar product from a rival manufacturer. In the end, with the unplanned additional costs and the unsold products, the bag manufacturer made a loss out of the whole experience.

But it doesn't have to be like this, traditional supply chains must evolve interconnected smart and highly efficient supply chain ecosystems with layers to address custom solutions and digital operations. Companies who can set up and run customer solutions and digital operations ecosystems empower themselves to proactively manage and efficiently fulfil customer needs across multiple channels quickly identifying changes in demand and organizing their supply chain accordingly. In this way, they can turn their supply chain into a real competitive advantage and use it as an enabler for new digital business models.

Let's look at how a company with a digital supply chain would have reacted to a similar peak demand situation. The company's proactive sensing capability including social media tracking identifies a peak in demand early. The production plan is adjusted automatically thanks to a direct link between demand and manufacturing. At the same time, an updated demand plan is shared with all relevant suppliers who immediately include the new requirements in their material planning and adjust their manufacturing priorities accordingly.

Meanwhile, the customer can track the progress of the order keeping up-to-date on when it's being manufactured and when it will be delivered. And throughout the process, the supply chain transparency solution monitors relevant supply chain data from a variety of internal-external structured and unstructured sources, enabling proactive risk management for the last mile delivery to the customer. The company leverages an established flexible logistics network with a shared infrastructure. The result is that companies that leverage digital supply chain operations with the versatility and agility that's needed in the digital age. That means happy customers and flowing profits. Supply chains are extremely complex organisms and no company has succeeded in building one that's truly digital yet. The companies that get there first will gain a huge advantage in the race to industry 4.0 and will be able to influence the technical standards for the future of their industry.