Three problems a digitally-enabled supply chain solves

A digital focus can cure numerous issues ailing your supply chain, including demand dilemmas, warehouse woes and delivery difficulties

8May

Undoubtedly, organizations that offer their customers products or services list supply chain efficiency as a core competency. Whether directly through a sales channel or indirectly through services channels, having the right amount of a product in the right place at the right time positively affects the customer experience.

In both B2B and B2C settings, customer satisfaction helps ensure repeat business for most enterprises, regardless of industry. While this might seem obvious on the surface, customer satisfaction has become an increasingly more difficult proposition in our ever-connected global economy. Transformative disruptions consistently force enterprises to re-evaluate their accepted norms, even when constantly trying to exceed higher expectations.

Modern professionals of all generations lead fast-paced, tech-savvy lifestyles and are accustomed to instant feedback via a multitude of social media channels. With one click, they have instant access to a wide array of products from a variety of global vendors at rock-bottom prices.

This more convenient customer experience, however, has made customer satisfaction increasingly more complex for companies – a digitized supply chain is the key to simplifying it.

A logistics logjam

Many supply chain experts wonder what digital enablement will look like. It involves being digitally savvy and tuned in to any and every business variable that influences the customer experience. Supply chain experts who continue to adhere to the status quo are facing a new digitally-driven, tech-disrupted reality.

It is not that supply chain leaders are opposed to new technological innovations. But change does not come easy – nor does it come cheap. These inherent challenges are why it is so essential for supply chain experts to embrace and leverage all digital transformations. A failure to do so would mean starting an enterprise down a path toward obscurity and away from relevance – a survey by the Material Handling Institute indicated that 80% of industry leaders believed digital supply chains would be the primary model by 2024.

For products to connect with customers, they must engage them at each touchpoint along the supply chain. While components such as manufacturing, distribution, warehousing and transportation each play a critical role in digital enablement, they are creatively complementing one another.

When this happens, the supply chain's bigger picture comes into focus. Efficiencies, scalabilities and cost-effectiveness (or lack thereof) come together like puzzle pieces, becoming either the image on the box or a distorted and disconnected abstract. The better aligned those supply chain variables are, the more streamlined the operation will be.

Where digital can do the most good

Ultimately, an interconnected digital supply chain creates the best possible customer experience. The product is available for purchase, the order is easily filled and the product arrives on time at a competitive cost.

Digital adoption can solve myriad issues in your supply chain. Here are the three main ones.

The "demand" problem

If demand is unknown, there is uncertainty regarding how much inventory should be kept. If there is too little inventory, orders will go unfilled, leading to delayed delivery, a loss of revenue and poor customer experience. If there is a surplus, more capital than necessary is likely to be used and extraneous warehouse space will be wasted. Worse, certain products may deteriorate, become obsolete or go out of fashion.

To deal with the unpredictability of demand, use real-time, end-to-end visibility across the entire supply chain. From consuming products at their point of use to continuously fulfilling orders, a digital supply chain is non-negotiable.

For example, consider taking a more insightful and innovative approach to managing inventory demand. The closer one comes to live point-of-consumption data, the more accurate the forecast for a product’s demand will be. Real-time trending data coming from the point of consumption – captured by smart panels functioning in the Internet of Things (IoT) that track consumption or point-of-sale terminals – will be a much better indicator of true demand than basing your understanding on past demand patterns.

Narrowing the gap between forecasted and actual use will ultimately allow companies to purchase and store less safety stock. In turn, this will tie up less capital, use less warehouse space, and decrease the amount of product that is handled or wasted. Moreover, IoT-based devices can directly reduce waste by monitoring expiration dates on perishables.

The "warehouse" problem

Assuming an enterprise has enough inventory to meet its typical sales demands, logistics is the next area where a digitally-enabled supply chain makes a difference. If a warehouse does not have an efficient and logical workflow, then inbound and outbound orders cannot be processed on time.

For inbound orders that come from distributors, this will likely result in a backlog of inventory waiting to be stored in the warehouse. If that is not done quickly and efficiently, then the warehouse workers' ability to pick items is compromised. In turn, this impacts outbound orders set to go from the warehouse to the customers. The net result is a delay in filling orders, which will result in either hefty fines or poor customer experiences.

Warehouse automation can minimize these inefficiencies and visual feedback cues from handheld devices can help avoid error-prone warehousing tasks. At the same time, these data points help us understand how to optimize all warehouse activities.

The "delivery" problem

After supply chain leaders figure out proper demand, inventory and warehouse-management practices, they must work through logistical challenges. Warehouse workers have filled and packed all the outbound orders waiting to be shipped – supply chain leaders must now transport the materials to their intended destinations as quickly as possible. Delivery can either leverage a third-party transport or use the enterprise's own fleet, though either option brings its own set of challenges, such as balancing transportation costs against timeliness and coping with rush orders and unscheduled drops. According to a study by A. T. Kearney, 22% of respondents reported a "clear" or "very strong" effect in reducing next-day deliveries to same-day deliveries after implementing digital supply chain management, and 25% reported a reduction in overseas delivery times. Linked to this was the 43% who reported a reduction in order-to-stock and an increase in just-in-time supply sourcing – though this carries its own risks for businesses in the event of unforeseen circumstances.

The "Amazon Effect" has sparked this focus on convenient delivery options. While it has mainly touched B2C circles, the Amazon model is equally applicable in a B2B setting. For example, imagine a fleet of trucks and drivers that make daily pickups and deliveries on mostly set routes in bounded geographic areas. That process involves a mix of mostly planned and some unscheduled pickups and deliveries. One of the key business objectives is to ensure a certain service level agreement (SLA) among the business stakeholders. But minimizing cost in terms of time, fuel, equipment and interruptions should also be a goal – something a digital supply chains make possible.

When an unscheduled stop is needed, picking the best driver from a fleet of mostly en-route drivers depends on factors such as route, location, stop, expected time of return and SLA. Updated details on a driver’s location, destination, and trip duration are all important bits of information in a digitally enabled transportation system.

Used judiciously, this approach will help minimize the impact on the overall SLA schedule; furthermore, system-augmented dispatching can help predict unanticipated stops and choose a driver who best matches that unscheduled stop profile with the smallest possible SLA impact.

Becoming digitally enabled means constantly toggling between an organization’s digital and analog supply chains. From capturing an order to delivering it to the customer, this conversion to a digital supply chain could be the spark your company needs to enact a far-reaching digital transformation.

If you believe that your organization is ready for a digital supply chain, you can begin by considering these questions: To what extent is the enterprise in tune with social media awareness regarding its products and the ways that enterprises leverage that awareness to increase demand? How much does it learn from its experience and find insights by mining every bit of data that flows through its daily business? Can it leverage sophisticated technologies like data science, AI, robotics, IoT and machine learning to examine its supply chain data and find answers to questions that have not yet been asked?

By addressing these questions, an organization can begin the journey of leveraging the digital enablement of its supply chain.

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