How to build a resilient supply chain by going digital
Digital technologies can give you more visibility into your supply chain and more agility to deal with changing conditions. But most importantly, a digital supply chain boosts your power to answer your customers’ needs.
Traditional supply chains tend to be siloed and rigid, with minimal communication between participants and very little just-in-time optimization for productivity and efficiency. When shortages and stoppages disrupt the flow of goods, it exposes just how fragile and vulnerable that way of working can be.
At the same time, concerns over environmental, social and governance (ESG) criteria are causing a lot of companies to rethink their supply chain models. How can you ensure that all the players in a particular supply chain live up to the same standards of corporate responsibility?
To answer these questions, companies are turning to digital solutions. Entrepreneurs are interested in the ways that digital technologies can help break down barriers, increase transparency and produce truly integrated ecosystems, says René Vargas, BDC Senior Business Advisor.
“There are many aspects to a digital supply chain,” Vargas says. “Automation, data analytics, logistics platforms, the Internet of Things (IoT), cloud-based technologies — they all can help make a traditional supply chain smarter, more connected and more efficient. You don’t need to do everything, or everything at once. The important thing is to get started.”
You don’t need to do everything, or everything at once. The important thing is to get started.
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To make that start, Vargas recommends three steps:
Step 1: Get your digital house in order
Start by developing a digital strategy that directly supports your business objectives and is focused on meeting the needs of your customers and suppliers. Identify areas inside the business where technology will bring improvements: greater efficiency, more productivity, better communication or a smoother customer experience.
Download our step-by-step guide on making technology work for your business to get started.
Step 2: Break the silos
Few small and medium-sized businesses ‟own” their supply chain. In most cases, they’re a player in a larger structure built around larger companies.
That’s no reason to ignore the supply chain, according to Vargas: a digitization effort doesn’t have to be top-down or end-to-end immediately. Even smaller players can add value by digitizing their businesses and sharing data that’s useful to other supply chain participants.
To illustrate how data can benefit other members of a supply chain, Vargas gives the example of a conveyor belt company whose machines have various kinds of sensors built in.
“Say your equipment can track running hours, vibration levels, temperature, that kind of thing,” Vargas says. “You could open that information up to your parts supplier and layer on some analytics to predict when replacement components will be needed. Your supplier can adjust production accordingly and you can keep your inventory up to date. Being integrated within a transparent, digital supply chain lets you anticipate and prepare for upcoming requirements.”
Being integrated within a transparent, digital supply chain lets you anticipate and prepare for upcoming requirements.
Step 3: Bring the customer into the supply chain
Traditionally, supply chains have stopped at the customer, but Vargas says it’s time to bring them inside as a way of ensuring that what you do is truly meeting their needs.
“The customer piece is key,” he says. “Enterprise resource planning (ERP), material resource planning (MRP) and customer relationship management (CRM)—solutions like that can all help, but don’t just think about back-end components or processes. Think about ways to actually engage customers through your supply chain so you can better respond and satisfy real-time demands.”
Similar to the conveyor belt company sharing data with supply chain partners, Vargas gives an example of a business using digital technology to share valuable information with customers: the connected cow.
“You have a company that makes a collar and other wearable sensors that attach to a dairy cow to monitor how much it eats and drinks, how many steps it takes in a day and a whole range of biometrics,” Vargas says. “So how could that company use that data?”
Beyond selling the monitoring data to the farmer as a subscription, Vargas says the maker of the equipment could also collect it and aggregate it with data from other farms and livestock to create big data analytics that might drive future product innovations.
“The data flows back into the supply chain and creates new opportunities that benefit the manufacturer and the other players in the supply chain—and results in improvements that serve the customer better over time,” Vargas says.
It’s not a straight line anymore, and trends indicate we’re all heading toward a circular economy. Digitization is the key to transforming business models.
Seize the possibilities
Many smaller and medium-sized companies see digital technology as an expense rather than a source of value, according to Vargas.
He often has to encourage clients to take the leap and invest in tech.
“It’s really important to view digital technology as an enabler of change and innovation,” Vargas says. “Digitization is a key way to optimize processes, prevent losses and generate profits. All of those count as forms of return on investment (ROI). It might take a bit of culture shift to see it that way, but it’s worth it.”
While the very term “supply chain” suggests a series of linear linkages, Vargas says increasingly supply chains are becoming more like clusters of entities that often intersect with other clusters.
“It’s not a straight line anymore, and trends indicate we’re all heading toward a circular economy. Digitization is the key to transforming business models.”
Companies that digitize their supply chains will be well positioned to participate in the circular economy. With increased visibility, they can ensure resources are retained and recovered as much as possible to minimize waste.
“The future lies in regenerative, sustainable and circular economies,” Vargas says. “Digitize today and you can be a player in those. You don’t want to be left behind.”
For more help building a digital supply chain, contact BDC Advisory Services and see how experts like Vargas can optimize your business.