How can you digitize your supply chain?
4 minutes read
By nature, supply chains follow a long and complex design. In addition to your suppliers and customers, you must also think of their suppliers and customers in turn. If you want to increase transparency and efficiency, you must effectively digitize your supply chain. That means you need to look as far ahead as possible. Fortunately, you can start by taking small steps.
François Desjardins, Senior Business Advisor, BDC Advisory Services, suggests a few potential solutions for digitizing your supply chain while focusing on quick wins.
“You have to focus on the most problematic area first,” says Desjardins.
Many business managers are still trying to figure out their sales peaks—which are related to production peaks—with charts done in pencil and paper.
Potential solution 1: Controlling inventory demand with ERP
Inventory control remains a problematic area for many businesses. “Most products are seasonal or associated with holidays or weekends,” notes Desjardins. “Many business managers are still trying to figure out their sales peaks—which are related to production peaks—with charts done in pencil and paper.”
However, it’s much easier to let software do the work for you. You can choose between very simple software to those that are more advanced.
“Opting for an enterprise resource planning (ERP) system that tracks the real-time consumption of your company’s various products will provide a real gain in efficiency,” says Desjardins. “In addition, the ERP system includes supplier peaks in the equation, which further helps manage inventory demand.”
Once your ERP system has accumulated data for a few years, you will be able to be less reactive and more active. You can also combine this data with information such as the weather or the international situation.
“You can set up alerts that will let you know everything that is happening so that you can act quickly and better predict future production cycles,” says Desjardins.
Potential solution 2: Automating purchasing with RPA
In many purchasing departments, purchase orders are still created manually.
“Essentially, someone realizes that a product is missing, so they request a purchase order and then place a rush order for the product,” says Desjardins. “However, all of these steps can be automated.”
This automation can be achieved through robotic process automation (RPA) software, which can connect to the ERP system that knows the real-time consumption of the various products in your company.
“When a certain limit is reached, the order gets automatically generated with the supplier without the need for human approval—for example, if the order is for less than $1,000,” says Desjardins.
If the RPA handles 60% of the orders, your workforce can focus on the more strategic orders.
Creating purchase orders is a repetitive and time-consuming task. Automating this task will allow your staff to focus on value-added tasks.
“If the RPA handles 60% of the orders, your workforce can focus on the more strategic orders,” says Desjardins. “By eliminating the rush factor that often forces them to select the most expensive products, they can optimize the supply chain by seeking real partners.
Potential solution 3: Integrate procurement with product creation
To give yourself the best chance of creating a successful new product, you should think about its upstream supply chain. To succeed, there are several questions you should ask yourself:
- Will the suppliers be able to provide this new production?
- Will they be able to buy the necessary material?
- Will they be able to ensure delivery of the product?
By adopting tools for a digital supply network, you will be able to enter your suppliers’ capability and constraints into your system. Thus, you can refer to it in the process of creating a new product to plan its production and place orders.
“Frequently, businesses take time to develop their product, and then they turn to their suppliers and ask for a very short delivery time without considering their constraints,” says Desjardins.
However, due to the pandemic, it has become apparent that managing supplies in a reactive instead of an active mode weakens the procurement process of many businesses.
“Chinese suppliers could no longer deliver their goods, the price of containers skyrocketed, and companies started looking for suppliers in closer proximity, such as in Canada or the United States,” says Desjardins. “But they faced other problems, such as the shortage of truck drivers and the increase in the price of gasoline. With so many issues to consider, you need to get as much information as possible to maximize your troubleshooting.”
A final tip: Establish partnerships with other businesses
By providing access to all this information easily, digitization can also enable you to create alliances with other businesses for purposes such as sharing resources.
“This could be material resources, such as equipment that you only need at certain times of the year, storage space, trucks and even employees,” says Desjardins. “But to achieve this, you need to know your lows and those of the businesses with which you are creating partnerships. Computer systems must consolidate information on the availability of each partner in real time.”
As competition becomes more and more international, there is also a rise in the number of alliances created between local companies in the same line of business.
“Competitors are realizing that they benefit from sharing resources because they have much in common as well as the same supply chain constraints,” says Desjardins. “Sharing underutilized assets leads to productivity gains.”
At the end of the day, the purpose of the digital supply network is to supply you with the right information in real time to make informed decisions.