Digital Transformation of Supply Chains
We are living in exciting times! We experienced major disruptions in our Just-In-Time (JIT) supply chains. The bullwhip is still in full effect (after Corona, Ukraine war), leaving many industries with shortages in materials, high stocks of end products and increased prices of labour, energy and materials. We are struggling to get the supply chains back in sync with the demand signal. Progress towards a new equilibrium is underway, but we are no there yet.
And that seems to be a perfect breeding place for renewed energy in efforts to transform the supply chain. Digital transformation is the process of adoption and implementation of digital technology by an organization in order to create new or modify existing products, services and operations. The goal for its implementation is to increase value through innovation, invention, customer experience or efficiency (source: Wikipedia).
Digital transformation will help supply chains to become more agile, proactive and resilient. Think of integration of technologies like blockchain, Internet of Things (IoT), artificial intelligence (AI), and cloud computing. Nowadays a lot a manual labour is involved in creating forecasts, production plans, updates to these plans, updates to the data needed (like prices, exchange rates, order quantities, lead times, production times, etc.). Parts of this processes are automated, but an overall overview where changes in one part of the supply chain and the effect is difficult to generate, labour intense.
The good news is that technology has evolved to a state in which it can actually support the end-to-end planning of supply chains. With less manual labour, more automated tasks (think AI) and the implementation of exception management. Many planning platforms start introducing AI capabilities that allows planners to look at the generated plans and focus on key exceptions, data points that fall under or over specific set thresholds. Less manual labour, more automated.
Digital transformation also allows for true connected planning. We see a lot of organisations that struggle to get a total overview where Demand, Supply and Finance are connected and aligned into one plan (one truth). Every department uses its own planning methodology and system(s), no connection exists between the departmental siloes. New technology enables the connection across departments as well as the extension of your supply chain to customers as well as your suppliers.
In some cases we have seen that our customers start to connect their largest customers to their planning environment, so these customers can put in their demand in time in the planning platform. The same can be done for your suppliers by connecting them and allowing access to the information they require. Based on the generated supply planning, your suppliers are able to see the demand on their products (raw materials, semi-finished goods) and can align on your plan. Or provide an early warning system, so you get the latest updates and are able to respond quickly.
We have created complex supply chains in the last decades where JIT was key to fulfil demand, have low inventories and low prices for customers. But all in a very labour intense process, which proofed difficult to adjust quickly. With the latest and future technology, supply chains can hugely benefit of digital transformation. Automate the many supply chain process where possible, connect within organisation across departments (connected planning) and extend supply chains (to customers, suppliers). Focus on exceptions based on reports (dashboards, KPI’s) that show the attention points for planners and we are able to react much faster to events and changing conditions in supply chains.
We are living in exciting times!