We care about every worker in our worldwide supply chain… what we will not do – and never have done – is stand still or turn a blind eye to problems in our supply chain. On this you have my word.
Tim Cook
In today’s fiercely competitive and quickly evolving business environment, digital supply chain transformation is not merely a choice—it is a requirement. It entails the fusion of state-of-the-art technologies, data-driven decision-making, and a comprehensive strategy for supply chain management. This shift gives businesses the ability to increase productivity, cut expenses, boost consumer happiness, and react quickly to the shifting needs of the contemporary market.
What is digital supply chain transformation?
A typical supply chain follows some processes that include designing a product, estimating demand, sourcing and procuring the raw materials, planning how to market the final product, taking orders, and delivering it to the customers. Additionally, a complete transition from conventional, manual, and analogue supply chain procedures to a digitally-driven, integrated system is known as digital supply chain transformation. To optimise every part of the supply chain, it includes putting cutting-edge technologies into practise, as well as automating processes, sharing data in real time, and doing data analytics.
But trade wars, viruses, cross border tensions have made the complexity higher for the supply chain executives. So, digitization and technologies have accelerated the pace of business and transforming the traditional supply chain into global supply chain. Today Customers are becoming more demanding. They want to buy products from those companies which provide ethically sourced products and fastest doorstep deliveries. For these reasons full visibility is needed across the end-to-end supply chain. To improve the productivity, utilization, and demand it is essential to leverage technologies and transforming the traditional supply chain into supply chain 4.0.
In this evolving industry better, digital solutions have become available, and companies went towards technologies that denote the so-called digital supply chain.
Also read: Supply Chain 4.0: Efficiency, Transparency, and Beyond
What is supply chain management?
Supply chain management is the management of the flow of goods and services in any supply chain. It includes the point of origin, storage of raw materials, end to end order fulfilment, point of consumption of any entity. It is a centralised management system of any supply chain. With a good functionality of this system, companies can cut excess cost and keeps away themselves from the recalls and lawsuits.
Supply Chain Management (SCM) includes the below mentioned steps:
- Customers’ orders.
- Planning
- Purchasing
- Inventory
- Production
- Transportation
Arranging Logistics of supply chain management, it is possible to provide the right item in the right quantity at the right time at the right place for the right price in the right condition to the right customer.
Also read: 4 Big Differences Between Supply Chain and Supply Chain 4.0
Financial Supply Chain
Any company’s financial activities divided in two categories on the basis of supply chain, one is physical supply chain, and another is financial supply chain. As you know, the physical supply chain is the flow of goods and services towards the end customers, whereas the financial supply chain is the flow of money from customer to supplier. Financial supply chain is a term that refers to the monetary transactions between buyer and seller in any trade to improve business efficiency.
Within a larger supply chain ecology, the financial supply chain plays a crucial role. Its main emphasis is on the administration of financial transactions and processes pertaining to the sourcing, manufacturing, and delivery of goods and services. It is essential to the smooth operation of businesses and the achievement of their financial goals because it facilitates the movement of information and money along the supply chain.
Financial Supply Chain Management (FSCM) follows some methodologies like automating transaction, tracking invoice approval and settlement processes from initiation to completion. In this end-to-end management process of FSCM it is possible to maintain visibility throughout the system.
Financial and physical supply chain is so much interlinked, that after allocating considerable resources to manage the physical supply chain, if disconnection occur between these two supply chains, then there will be severe consequences on a company’s working capital.
What is Just in Time?
Just in Time (JIT) is an inventory management strategy. It requires working closely with the suppliers, so that goods are received from them within the scheduled production time. For maintaining zero inventories across the supply chain, JIT demands careful planning and superior software. Thus reduces the scope of error. The goal of just-in-time (JIT) production and inventory management is to maximise productivity and minimise waste during the manufacturing process. The production and delivery of goods or components exactly when, exactly when, and in the precise quantity needed is the fundamental tenet of just-in-time (JIT) logistics. Since its inception, JIT has been implemented by numerous industries globally, and it is frequently linked to the Toyota Production System.
Leader’s Tip
Encourage a culture of continuous improvement and innovation within your organization.
JIT challenges and benefits
Challenges:
- As JIT only based on customer’s original orders, so it is very difficult to rework orders.
- Strictly based on timelines, manufacturers cannot wait for better pricing.
- Excessive consumption of fossil fuels for packaging and fastest shipment.
- No extra stock means no backups.
Benefits:
- By eliminating overproduction and unsalable inventories, JIT reduces inventory wastes.
- Order only when customer places an order, thus decreases warehouse holding cost.
- Giving manufacturers more control, company does not purchase raw materials until an order received.
- Local sourcing helps in reduction of time and cost of transportation.
Top 5 supply chain Challenges & Strategies:
Challenges:
Now in modern supply chain of 2022 companies faces new challenges to remain successful within the e-commerce space. Thus, they must evolve to reach customer expectations and all the routes to the market. So that they can withstand the main supply chain challenges companies face today.
The top 5 supply chain challenges are discussed below:
Material scarcity:
Since pandemic has started, retailers and suppliers are struggling to fulfil the abrupt rise in consumer demand due to limited availability of various parts and materials. Rising fuel price increases difficulty in transportation, thus causes material scarcity.
Spike in freight prices:
Lockdown insisted the container shipping in a considerable manner in e-commerce business. But the insufficient shipping capacity and the shortage of empty containers causes spike in freight prices.
Problem in forecasting the demand:
Pandemic and lockdown have shut down the forecasting of market demand. Supply chain challenges during covid is, to improve the predictions for demand.
Port congestion:
Labour shortages and social distancing associated with the pandemic have jerked the whole system of supply chain. Although the loading unloading process at global docks goes according to the plan, congestion occurs because the port capacity is already full. That means carriers are unable to fulfil the delivery commitments.
Pandemic has changed the customer attitudes:
To maintain brand integrity towards customers, it’s important to maintain quality and safety standard.
Strategies:
Pandemic has created so many supply chain challenges, that retailers and suppliers have to face on a routine basis. But there are multitudes of global supply chain strategies.
The top 5 supply chain strategies are discussed below:
- Maintaining liquidity in business with flexible access to capital.
- Become more flexible in diversified sourcing of supply chain strategies during covid.
- Work with a freight forwarder who are able to negotiate at scale by aggregating shipments to smaller retailers.
- Identifying alternative shipping ports can help in reducing congestion.
- Improve demand forecasting by using automations.
Pandemic has changed the future of digital supply chain. In future most of the companies will invest in AI and advanced analytical capabilities.
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Industry 4.0 supply chain management:
Functioning without human intervention, industry 4.0 supply chain management system enables an automated system of creation of goods and services along with supply and delivery. The trends of industry 4.0 supply chain going towards automation by adapting artificial intelligence (AI), cloud computing, industrial internet of things (IOT), cognitive computing etc. Moreover, new stage of development in supply chain management 4.0 (scm 4.0) indicates the coordination of material information and financial flows in corporate networks which is largely automated and permeated with digital technologies.
Supply chain digitization is emphasized as the new interconnected business system which extends from isolated, local, and single company applications to supply chain wide systematic smart implementations of scm 4.0.
Leader’s Tip
Ensure that your strategy aligns with your organization’s overall mission and vision.
Industry 4.0 components:
- Uses of innovative manufacturing technologies help in making customer-centric design, producing and selling individualized products.
- Flexible automation of physical processes via robotics increases efficiency.
- By applying machine learning and artificial intelligence (AI), decision makers can react on changing conditions and unexpected events.
Trends in industry 4.0 supply chain management:
Industry 4.0 requires companies to rethink the way they design their supply chain. Several technologies have come but customer expectations change the scenario. Besides the need to adapt the supply chain to transform the company into a digital supply chain, the digitization of the supply chain enables companies to address the new requirements of the customer. Digitization brings about a supply chain 4.0 which will follow the below mentioned points.
- Faster approach:
On the basis of forecasting, new approaches of product distribution reduce the delivery time.
- More flexibility:
Flexibility in changing demand of supply chain able to react dynamically with in the changing requirements.
- More granularity:
The demand of customer for individualized products is continuously increasing which gives a strong push towards micro-segmentation and granularity.
- More efficient:
Efficiency in the supply chain is boosted by the automation of both physical tasks and planning. Robots handle the material complete automatically along the warehouse process from receiving, unloading to packaging and shipping.
Supply chain digitization steps:
Smarter sourcing, inventory management, capacity management through digitization in the traditional supply chain, help manufacturing business in reducing cost. These help in making highly digitized operations and sophisticated supply chain partners. Question is what to do to achieve this level of digitization in your supply chain?
There are some steps of digitization of supply chain mentioned below.
- Aligning technological and operational goals:
First thing, it is important to make sure that operational goals of your business is going to be digital. If you go for shorter term needs, then according to the current situation decision makers can’t adapt the innovations. If you go for longer term goals, then it might encourage the planners or decision makers for opting the new technologies.
- Involving diverse stakeholders:
Going digital will affect a lot of stakeholders in variety of ways. While making changes in software environment, it’s important to keep in track with all of the existing system. Try to involve as many stake holders as possible for digitization push.
- Leverage IoT (Internet of things) devices:
How does these IoT help promote a digital supply chain?
Selection of devices on real time basis i.e. which one is more helpful and provides business with a further roadmap for digitization.
- Develop analytics capabilities:
Develop analytics capabilities by assessing financial resources and where it should invest along with intellectual resources i.e. in which sector the organization’s expertise is going to develop?
- Embrace industry 4.0:
In the revolution of industry 4.0, automated digital workflow combines with physical system and advance planning. Thus, full visibility is possible throughout the supply chain.
Conclusion
Supply Chain 4.0 and digital supply chain transformation are major developments that are changing how companies compete and run their operations in the rapidly changing field of supply chain management. Thus, these ideas prioritise customer-centricity and sustainability, real-time data sharing, and the integration of cutting-edge technologies.
In conclusion, by establishing a digital, linked, and predictive environment, supply chain management is being revolutionised by digital supply chain transformation and supply chain 4.0. Additionally, adopting these ideas helps companies achieve consumer expectations, maintain competitiveness, enhance operational quality, and deal with the difficulties of a quickly evolving business environment. Also, these methods will remain crucial in determining the direction supply chain management and logistics go as companies grow.
FAQs
Digital supply chain transformation: what is it?
A deliberate strategy to modernising and improving supply chain operations through the integration of cutting-edge technologies and digital solutions is known as “digital supply chain transformation.”Thus, it entails enhancing visibility, efficiency, and decision-making across the supply chain by utilising technologies like cloud computing, automation, data analytics, and the Internet of Things.
Explain supply chain 4.0 to me.
The next phase of supply chain management development, known as supply chain 4.0, is defined by the fusion of digital and analogue processes. Also, it entails applying ideas like IoT, AI, and real-time data exchange to create a connected, customer-centric, and predictive supply chain.
Key Takeaways
- IoT, big data analytics, cloud computing, automation, blockchain, artificial intelligence, and machine learning are all used in digital supply chain transformation.
- IoT, AI, digital twins, real-time data sharing, and cyber-physical systems are all essential components of supply chain 4.0.
- Supply Chain 4.0 and Digital Supply Chain Transformation both use data analytics and real-time monitoring to improve visibility.