By T. Leigh Buehler | 10/23/2023
Digital transformation is everywhere, and the supply chain sector is one area that the digital shift is revolutionizing at an astonishing rate. Today's digital supply chain management involves the merging of the traditional supply chain processes a company uses with advanced digital tools to achieve operational efficiency. To stay competitive in today’s global market, companies should transition their traditional supply chains into digital supply chains.
Traditional vs. Digital Supply Chains
Managers of a conventional supply chain spend a great deal of time and labor looking for possible issues or predicting the effects of issues. However, these control methods, used in traditional supply chains, are primarily based on human activity and are unreliable.
By contrast, digital supply chains share up-to-date data in real time, creating a more effective supply chain strategy. That information allows companies to better anticipate issues and respond at a faster rate before a problem can escalate.
Traditional Supply Chain
A traditional supply chain focuses on linear processes, which includes components like raw material procurement to final product delivery. This supply chain format involves distinct and consecutive stages. A conventional supply chain emphasizes optimizing each stage of the process for efficiency, but each stage is often isolated from the others.
Information and data in this type of supply chain are often siloed, meaning that information might be manually collected and stored in different systems. These various systems cannot share real-time data, which makes analytics for traditional supply chains more challenging. While traditional supply chain systems may be configured to share data, it isn’t in real time and the data is often delayed.
Years ago, when I worked as an inventory manager for a large women’s clothing company, I was always amazed at how the supply chain system caused 48-hour delays. We could accept shipments and inventory from warehouses, plug them into a store’s inventory log, and sell an item, all before the warehouse system would update itself that items were gone. As a result, ordering from the warehouse was a nightmare for in-demand items.
Also, a conventional supply chain tends to have a slower response time to market changes and disruptions, which is due to its linear nature and lack of real-time data. With limited visibility in a traditional supply chain, stakeholders may only be aware of their immediate stage in the process and that leads to a lack of transparency across the entire supply chain.
Digital Supply Chain
Digital supply chains involve a dynamically interconnected system, using technology to integrate the numerous stages of an effective digital supply chain and to ensure a digital transformation. The key feature of any digital supply chain is the flow of data between processes.
Digital technologies like artificial intelligence (AI), cloud platforms, and the Internet of Things (IoT) create real-time data collection and analytics. This information is then shared across the digital supply chain, allowing for better informed and timely decision-making by supply chain managers and other organizational personnel.
Overall, an effective digital supply chain ensures real-time data exchanges, a holistic view of the full process, and end-to-end efficiency.
Using predictive analytics in a digital supply chain, company personnel can achieve a digital transformation and rapidly address any potential challenges or react to market dynamics and consumer demands. This rapid response creates more efficient demand planning and smarter logistics planning for companies and their supply chains.
For organizations, advanced digital technologies create more transparent views of the entire supply chain process. Also, end-to-end transparency enhances trust and collaboration among stakeholders.
The 7 Essential Elements of a Digital Supply Chain
A digital supply chain is a supply chain network powered by enhanced digital technologies, using digital solutions to automate operations like procurement, production, and the distribution of goods. These supply chains involve vital components like warehouse processes, logistics processes, supplier performance, and cross-functional teams use real-time digital technology to enhance each segment of the supply chain.
There are seven basic elements that make up sustainable digital supply chains:
- The Internet of Things
- Advanced analytics
- Cloud computing
- Artificial intelligence (AI) and machine learning
- Blockchain
- Integrated platforms
- Cybersecurity
The Internet of Things
The Internet of Things is the interconnectedness of digital devices beyond your smartphone or a traditional computer. It is about gathering and exchanging data between digital technologies. For a digital supply chain, IoT allows for all that data to be shared in real-time visibility across the supply chain so that the performance of supply chains can be improved.
Connected devices can be regular household items to industrial machinery. For example, if you run low on milk in your refrigerator, a smart refrigerator can send you a notification.
Another example is a smart thermostat. If it uses machine learning to track your daily patterns, the thermostat can automatically adjust the temperature of your home or office.
Products such as the Nest home thermostat or the Samsung Family Hub refrigerator are both made possible because of IoT. These devices use technologies such as Wi-Fi, a 5G network, Bluetooth, and Zigbee, and some smart products even use satellite connections to communicate and send data to each other.
Once a smart device collects data, that data is either processed on the smart device (known as edge computing) or it is sent to a centralized data center or cloud environment to be processed. This data is then sent to the user via a dashboard, notifications, or other visual means.
Advanced Analytics in a Digital Supply Chain
The largest driver behind an efficient digital supply chain is advanced analytics. With analytics, data is collected, processed, and analyzed to provide insights to stakeholders, make predictions, and provide intelligent decision-making. Being able to accurately interpret data is imperative in a digital supply chain.
Traditional data analytics focuses on understanding historical data. But advanced analytics goes further than that and uses sophisticated software to understand patterns and predict outcomes for digital supply chains. Analytics for these digital supply chains can be broken into three sections:
- Predictive analytics
- Descriptive analytics
- Prescriptive analytics
Predictive analytics allows company personnel to forecast any potential disruptions within the supply chain. They can potentially foresee any spikes in product demand or other important supply chain information. Predictive analytics uses data, algorithms, and machine learning to predict outcomes for supply chains based on historical data.
Descriptive analytics helps organizational employees to understand the current state of their supply chain. For this type of analytics, raw data is translated into understandable information for supply chain personnel and stakeholders.
Data is gathered at the different segments of the distribution channel and time-stamped for each step. After that, distribution planning teams can follow the status of each product. Stakeholders can look at the information from descriptive analytics and understand how their supply chain is performing over time.
Prescriptive analytics involves the information given to stakeholders to decide the best course of action based on supply chain data analysis and their knowledge of supply chain risk management. Prescriptive analytics is about optimizing and automating decision-making to create more efficiency and responsiveness for digital supply chains.
A great example of using data analytics for customer satisfaction is Domino’s®. This pizza company uses data analytics and supply chain planning in its digital supply chains to track every piece of data, ranging from delivery times to customer ratings.
By analyzing customer feedback and operational big data, Domino’s can identify areas that need improvement, target supply chain disruptions, and alter its menu and delivery process to meet customer demand. Advanced analytics to ensure optimal supply chain performance is a key portion of Domino's management strategy and digital supply chains.
Cloud Computing
Cloud computing uses the internet and cloud-based platforms to deliver computing services (such as servers, storage, databases, networking, software, analytics, and intelligence). For companies and supply chain professionals, using the internet to deliver these services offers flexible resources at affordable prices. For instance, instead of companies needing to own and maintain their own physical servers and data centers, they can rent these resources from a cloud service provider.
In digital supply chains, cloud computing enables more integrated, agile, and scalable infrastructures for businesses. Cloud platforms allow for seamless communication and data-sharing among stakeholders, so that all parties in the supply chain have access to real-time data around the globe.
The online fashion retailer ASOS uses cloud technology to offer services internationally. The company does not need to maintain equipment, like servers, by using cloud technology. Saving money on technology allows this clothing retailer to focus on other aspects of the business, like opening new stores or hiring staff, to achieve its business objectives.
Artificial Intelligence and Machine Learning
Artificial intelligence (AI) and machine learning (ML) can help with a digital supply chain transformation by adding an intelligence layer within the digital supply chain. Both technologies offer the ability to analyze large quantities of data, predict trends, optimize operations, and automate processes.
AI simulates human intelligence with machines, and systems are created to perform tasks that would typically require the use of human intelligence. These tasks can be problem-solving, recognizing patterns, or making decisions. AI systems and machines can learn from data and adapt, or they can work within predetermined parameters.
Machine learning is a segment of AI. It is based on the concept that machines can be given data and can “learn” from it.
This learning occurs outside a programmed task. ML uses statistical approaches to allow machines to improve tasks with experience.
Global retailer Target® uses AI in its supply chain strategy to enhance the customer experience. For instance, AI conducts demand planning, assortment planning, and inventory optimization for this retailer. Target also uses AI robots in warehouses to automate sorting and restocking processes.
Amazon® is an excellent example of a company utilizing machine learning to increase the customer experience. ML permits this company to gain insights into the relationship between repeated website visits and product recommendations. So if a customer purchases a recommended product and returns to the website again, this information is tracked and analyzed.
Blockchain
Blockchain is a type of technology that records transactions across multiple computers in a manner that only allows data to be added but not altered after it is recorded. This way, once the data is stored within a blockchain, it is a permanent part of a ledger.
Blockchain offers transparency, security, and traceability. It can be used to prevent counterfeiting by enabling secure records of a product’s origin and movement through the company’s supply chain. Blockchain also verifies the authenticity of those products.
The cryptographic and decentralized makeup of blockchain makes it highly secure against malicious attacks. Once the data is recorded on a blockchain, it is nearly impossible to remove it or change it.
The French multinational retail giant Carrefour uses blockchain technology to track the process that their milk, meat, and fruit goes through. Blockchain technology tracks the items from farm production to the stores.
This technology has increased customer trust because consumers could be sure where items they bought were coming from. The company uses a QR code that a Carrefour customer can scan from any phone.
This QR code provides information about where and when a product was harvested. It even contains information as to whether pesticides were used to grow a product and offers other useful information that consumers may want to see.
Integration Platforms
To create a truly digital supply chain, integration is key because it ensures that different systems all speak the same language. Integration platforms serve as a centralized solution that enables the continuous exchange, processing, and transfer of information among the many applications, systems, and entities in a supply chain.
Supply chains involve suppliers, manufacturers, distributors, retailers, and customers. Because all these stakeholders use different software systems, integration platforms are critical in ensuring cohesion and efficiency throughout the supply chain.
Platforms like MuleSoft or Apache Camel offer pre-build connectors so that companies do not need to create custom coding. As companies implement more software-as-a-service (SaaS) solutions, these integrated platforms enhance the efficiency of software while improving the customer experience.
Cybersecurity
Within a supply chain, there will always be risk. With the rise in all the fancy new technology for a digital supply chain, the responsibility of safeguarding data is paramount. Cybersecurity is now a non-negotiable component of resilient supply chains.
Cybersecurity identifies potential vulnerabilities in the supply chain and prioritizes the risks based on potential impact and likelihood. This information allows stakeholders to make an informed decision about which risks need to be handled immediately. Companies use data encryption to ensure that if any data is intercepted, it can remain unintelligible to unauthorized parties.
Network security is a function of cybersecurity. It uses firewalls, intrusion detection systems, and prevention systems to safeguard the company’s network infrastructure.
Cybersecurity is essential in business because a breach can cause destructive consequences like financial loss and reputation damage. Organizations must prioritize cybersecurity to help prevent any potential digital catastrophe.
A new cyber threat hitting the business world is bot attacks on e-commerce sites. Advanced bots hide their real location through anonymous networks. They can facilitate account takeovers where hackers then make fraudulent purchases like gift cards using data from customer accounts with saved credit card information.
According to CSO Online, malicious account takeovers are responsible for almost one in four login attempts for e-commerce websites. Bots can also install malware that steals credentials or performs actions using the customer’s name. Supply chain leaders need to safeguard their entire chain through the use of cybersecurity measures.
Global Supply Chains and Technology Is Always Evolving
In the global supply chain, technology is always evolving. What one company uses today will most likely not be the supply chain technology they use in five years.
Similarly, digital tools and strategies are constantly changing. As more businesses adopt the use of artificial intelligence, augmented reality for warehousing operations, and even drone deliveries, the supply chain must be able to shift, too.
A company that does not adopt a digital supply chain risks losing its competitive edge. Sure, not all companies need a large and sophisticated technology system. But with consumers demanding faster deliveries, better product availability, and increased transparency, companies must reimagine their supply chains from the digital perspective.
Digital supply chains offer tangible benefits that businesses can leverage to transform their supply chain processes. Embracing this shift can result in enhanced operational efficiencies, cost savings, and a superior customer experience.
If you are a small business or a global corporation, the question isn’t if you will integrate digital into your supply chain, but when.
American Public University and Supply Chain Management Degrees
American Public University offers several online bachelor's and master's degrees to enable adult learners to improve their knowledge of digital supply chain management and the digital transformation the supply chain field is undergoing. These degrees include:
- B.A. in Reverse Logistics Management
- B.A. in Supply Chain Management
- B.A. in Transportation and Logistics Management
- M.A. in Reverse Logistics Management
- M.A. in Supply Chain Management
- M.A. in Transportation and Logistics Management
Domino’s is a registered trademark of Domino’s IP Holder, LLC.
Target is a registered trademark of Target Brands, Inc.
Amazon is a registered trademark of Amazon Technologies, Inc.
