{"id":2450,"date":"2022-05-13T11:21:42","date_gmt":"2022-05-13T11:21:42","guid":{"rendered":"https:\/\/www.essnps.com\/?p=2450"},"modified":"2022-05-13T11:21:42","modified_gmt":"2022-05-13T11:21:42","slug":"analyzing-the-positive-impact-of-supply-chain-digitalization","status":"publish","type":"post","link":"https:\/\/www.essnps.com\/staging\/analyzing-the-positive-impact-of-supply-chain-digitalization\/","title":{"rendered":"Analyzing the Positive Impact of Supply Chain Digitalization"},"content":{"rendered":"

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Digitization \u2013 the process of converting text, images or sound into digital form \u2013 is not a recent phenomenon as many believe, but is as old as computers, which made their appearance in the 1950s as the mainframe with magnetic storage in a very small way. Since then it has been growing in tandem with computerization, getting popular with the PCs and laptops, but really becoming mainstream with the internet and mobile devices. Though often confused with digitalization, which is revolutionizing businesses, digitization is just the first step to digitalization, and then culminates into digital transformation. The process of digitalization received an impetus with the advent of Industry 4.0 and has laterally spread to everything connected with the industry, including logistics and supply chains.<\/p>\n

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Supply Chain Digitalization<\/strong><\/h3>\n

The process of sourcing and procurement<\/a> of goods and materials to manufacture a product and then distribute it further to the final buyer is what forms the supply chain. At each stage it is marked by elaborate paperwork from raising the requisition, to identifying sources, procurement, transportation, receipt, storage and then dispatch as finished product, to establish a proper trace and trail, which is both time consuming and labor intensive, adding to costs, besides causing procedural delays. The cost of manually entering all this information into the ERP\/MES or backend system as well as processing all invoices is also quite substantial. Digitizing this paper work and invoices and making them digital with a master data and integrating it with rest of the company\u2019s processes as well as the authorized external sources, will go a long way in eliminating the bottlenecks. This digitization can be easily achieved with appropriate software \u2013 standard or customized \u2013 in the larger process of business automation.<\/p>\n

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Traditional Vs Digital Supply Chain<\/strong><\/h3>\n

Looking at the supply chain digitalization<\/b> explained above one can understand the difference between a traditional and a digital supply chain.<\/p>\n

In the traditional supply chain, the process of acquiring or buying the raw materials and components is done manually with physical documentation which remains in departmental silos. This includes sourcing and procurement<\/a>, designing and manufacturing, testing and quality control<\/a>, marketing and sales, etc., a long chain of procedures before the customer gets the product, with little or no visibility into the process.<\/p>\n

On the other hand, a digital supply chain is transparent, with all the data and transactions available at a glance from sourcing and procurement to inventory management, stock positions and asset tracking to data of manufactured goods and dispatch to end users, with full tracking and traceability at every stage. This makes planning much easier and execution simpler.<\/p>\n

While traditional supply chains function in a linear pattern on slow moving paperwork and coordination, digital supply chains function as a network in real-time with all the information centrally available at a glance.<\/p>\n

The digital supply chains are integrated into the IT and OT systems and function smoothly, whereas the traditional supply chains are silos or standalone systems needing a lot of effort to coordinate everything into a cohesive system.<\/p>\n

More importantly, the opacity of the traditional supply chains slows down decision making as the information is decentralized and hence decision making is slow. In contrast, digitization and central data bases provide better insights into the inefficiencies of the system and help reduce costs by better planning and execution.<\/p>\n

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Importance of Digital Supply Chain to Maintain Competitiveness<\/strong><\/h3>\n

Reducing costs is one of the most effective ways of improving profitability of the enterprise. A supply chain is basically a network of relationships between a company and its various suppliers or customers, where goods and services (raw materials) are received and finished products delivered. It involves transportation and storage and a paper trail of all the documentation for records between scores of suppliers, which run into hundreds for large enterprises. A digital supply chain brings a lot of efficiency by digitizing the manual paperwork of all these suppliers and making it accessible online, cutting a lot of costs, and also saving much time and resources.<\/p>\n

A digital supply chain also offers the much needed transparency which can be used to optimize the system, especially in terms of saving on transportation and warehousing, implementing the Just-in-Time (JIT) concept and further rationalizing the costs involved. Initiated by the Japanese auto giant Toyota decades ago, JIT works best with digitalization.<\/p>\n

But the most competitive advantage brought by digitalization of the supply chain was brought home by the Covid pandemic when the normal routine was disrupted by the lockdown. The businesses that were digitized could manage to run their operations without much trouble, compared to those following a traditional approach.<\/p>\n

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Advantages of Supply Chain Digitalization<\/strong><\/h3>\n

Saving on costs and speeding up deliveries are just two of the advantages of supply chain digitalization and these are enough to justify the effort as it impacts the bottom line. Looking at this from the other end, not digitizing the supply chain adds to costs and delays. But there are other advantages of digitization as well. These include:<\/p>\n