What is the Supply Chain
If we want to know about the different types of supply chain, we must first know what supply chain is. The definition of a supply chain is best described as a connection between a company and its suppliers to produce and distribute a specific product to the final buyer.
Supply chain activities involve the transformation of natural resources, raw materials, and components into a finished product that is delivered to the end customer. In brief, a supply chain is a process of delivering products from suppliers to its customers.
Let’s look at a brief overview of the entire process:
Supply Chain Management Process
Supply chain management (SCM) comprises of the facilities) and distribution options within a company’s network that are used to improve the company’s performance. There are 5 main steps in this process:
A strategy on managing resources is needed by all companies to supply customer demands for the company’s goods and services. Proper SCM is done by developing a monitoring system with a set metric for the supply chain, to ensure that deliverables are of high quality and are valuable to customers.
Suppliers need to be chosen carefully when looking for the delivery of goods and services. To help with the process, supply chain managers are to set delivery systems and pricing and implement processes for managing goods and inventory.
A schedule of activities needs to be prepared for the manufacturing phase, which includes the production, packaging, testing, and preparation for delivery.
Usually referred to as logistics in SCM. This process is where the coordination of receipts of orders, carriers to send products to customers, and the development of a warehouse network is focused on.
Typically the part of the supply chain with the most problems. A flexible and responsible network is needed to receive wrong and excess products sent back to the company from its customers.
Traditional vs Digital Supply Chain
The main difference between these two is that the traditional way has the processes above happening in the physical world, and the digital way has those processes happening online.
For example, if you wanted to buy a book about 20+ years ago, you would have to physically go to a book store and purchase a physical book. This is the traditional way.
In recent times, you can just purchase a book online, be it an e-book or a physical one, without needing to go out. This is the digital way.
As there is more information to be found in the digital supply chain, we will go into it a little more.
Digital Supply Chain
As the proverb says, "Time and tide wait for none.'' So, time is something which you cannot afford to waste.
In order to save time, it has almost become a must for the physical supply chain to merge with the digital supply chain. According to Cerasis, modern businesses who rely on the physical supply chain realize that paper usage has lowered its efficiencies.
For example, you may have full knowledge about your materials and documents, however, your business partner in another area may have no idea about the steps that are being taken for the development of the organization.
On the contrary, your documentation might be secure and safe and would be in silo-based tracking. However, while managing a business with multiple branches, this independent and unconnected data may not be so efficient or useful.
Although it may seem unharmful at the beginning, this method has some defects. Information stored in one area is not effective when we consider a huge organization with multiple branches.
As mentioned in Cerasis, it is easier to access to data and information due to the increasing availability of the internet. So, switching to digital supply chains is the next step to increase efficiency and reduce mistakes. In a report created by SupplyChainDigest(SCDigest), many supply chain partners are not accustomed to the use of leveraging data, KPIs, analytics and digital supply chains.
Inferring from that, it is important and quite essential to acknowledge the benefits of digital methods for the future of the supply chain.
The Hybrid Supply Chain and its Flaws
The hybrid supply chain is a combination of the physical and the digital supply chain. Its strengths and flaws vary depending on how it is implemented. For example, if the decision of a company is to keep information following the traditional way, then the information might be kept in a local area.
Thus, the branches of the company outside that area are restricted from it. This is clearly not an efficient model for modern businesses. As stated in Cerasis, the world is becoming more and more digital, and access to the internet has increased from 2.8 million people to 3 billion. In a period of 26 years, the number has skyrocketed beyond imagination.
Based on the graph above, the number of connections is increasing larger on a daily basis. Business owners, organizations and companies, all are embracing the benefits of the digital world. So, it is not wise for an organization to use a model which was introduced 20 years ago.
Furthermore, if we consider all the facts, we will see that the old model of the supply chain is inefficient when applied in the modern world and the society of modern business and consumers.
Therefore, the only solution to this problem is to embrace the modern and the digital world and to use digital methods in the supply chain management process for better and effective results. The most noteworthy change in society and business is the digitization of the physical supply chain model. The “The Third Industrial Revolutions” has brought about many changes in the supply chain methods. Moreover, they are aware of the change needed to meet the demands of the consumer.
Therefore, the adaption in supply chain management requires intuition of KPIs, data collection and analysis, process automation, process management, organizational design, and the full integration of IT applications across an organization that creates the Digital Supply Chain System.
Data from atkearney.co.jp: The Impact of Technology in Supply Chain System
The Benefits of Digital Supply Chain Systems
A supply chain is only as strong as its weakest link, states Accenture. For supply chain partners who are still planning to take advantage of the digital supply network, the weakest link is truly every single process, communication, links and point in the supply chain.
While some process automation may be beneficial, it still lacks worth if it is not compared with the information gathered across from physical, geographical or digital boundaries.
Some huge advantages may be witnessed when supply chain partners embrace the vast opportunities and potentials of the Digital Supply Chain System.
Embracing the Future
Due to the slow process of the physical supply chain, many business entities maintain a backward-looking approach. This had negative results in the supply chain system.
According to Cerasis, almost 40.1 percent of the supply chain organizations use and work entirely in this manner. However, reports related to the digital supply chain method shows that digital methods are making supply chain entities more forward-looking.
Improve Teamwork Potential
Data visualization tools change the effectiveness of both the digital and the physical aspects of the supply chain. This creates an environment where the organization can share its documents and data with all segments of it. This improves collaboration among the different sectors of the organization.
Venture into the World of Digital Products and Services
The Digital world has brought modern products and services. These products and services are not always physical. Applications such as Amazon Prime, Daraz, Uber and Netflix represent organizations that are directly based on the internet. You can only avail of their products or services over the internet.
Some other applications such as Etsy (an e-commerce platform for handmade items), are far more complex and upgraded that directly connects the customer with suppliers. Therefore, your company needs to accept the change. It is essential, and only then you can hope to meet the demands of your customers.
The producer is a third party between the customer and the supplier. They require accurate information of the customer and seller generated data for better and precise production.
Create Accurate Strategies Through Data Visualization
As data becomes more accessible, this data will be used to advanced analytics opportunities. The accurate visualization of data can help you to see the flaws of your method and to change where it is necessary.
Moreover, applying or using data will be simpler if the capability of data visualization increases. For instance, if the manager of your organization receives data from yesterday’s contract, it will be great. However, if the manager receives a detailed graph of the data, it will help him to understand the defects and change where it is necessary. Additionally, it will help him to eliminate the defects of yesterday’s flaws and take actions accordingly for the betterment of your organization.
The Sharing and Connection of Data
The essential aspect of a successful modern supply chain is the Internet of Things (i.e. health tracking peripherals that consolidate all information on to one platform, FitBit). According to Cerasis, the Internet of Things is responsible for gaining improved methods of transferring products, defensive maintenance, and developments in procedures.
Although, the IOT also has its limitations. Therefore, the Digital Supply Chain System can be used as a catalyst to remove these limitations. With the help of the DSN, the limitations can either be reduced or removed completely.
For instance, devices connected through the Internet of Things can be used to distribute data across multiple sites and companies. Therefore, the connections and sharing of data can create a network that is better-connected among the segments of your organization.
The era of the typical physical supply chain management is disappearing. Soon, the silo-based and paper-based supply chain system will be no more. The requirement of local data or information is increasing. Thus, the embracement of digital supply chain system is also increasing. Very shortly the necessity to accept the digital system of the supply chain will be more solid than ever.
Business entities should resolve to digital supply chain system to acquire faster production and supplies. It will help them to eliminate their shortcomings and acquire speed which is necessary for procurement and supply both.
The entities that are still connected with the old supply chain method are falling behind from the rest. This may lead to the extinction of the organization. Thus, most of the entities are now switching to the new model of the supply chain. It begets many benefits that are undoubtedly increasing the productivity of the organizations.
Cerasis expounds that, the question of many businesses should not be whether technology can be applied to increase efficiency, reach new markets, gain new policies or reach additional clients more effectively. Rather, the challenging question will be whether technology can be applied quickly enough to avert the extinction of the company.