Digital Transformation and Supply Chains

Today, in the era of Industry 4.0 enterprises convert most of their business processes to digital: logistics, new product development, manufacturing, customer relations, and many more. Supply chain management looks like one of the most obvious candidates for digitalization.

Traditional supply chain management consists of largely fragmented, isolated stages related to product development, manufacturing, marketing, distribution and retail. Digital format implies that the chain becomes a fully integrated ecosystem, transparent for all participants - suppliers of raw materials and components, carriers, production management, distributors, retailers and all the rest. Digital control makes it possible to adjust the supply chain in real time, respond to supply disruptions and even anticipate them using the modeling tools, “what if” scenarios and so on.

In the foundation of such an ecosystem lays a range of technologies: logistics systems, procurement and warehousing, analytics, inventory management and integrated management systems.

How to convert existing supply chains to digital form? The process of integrating all the necessary technologies and practices should be very thoughtful and orderly - after all, many people, companies and systems are involved in the supply chains. We have formulated five major steps towards digital supply chain management.

  1. Analyze your supply chain and connections between its components. A four-level maturity model will help you estimate the current state and areas for improvement.
  2. Describe the ideal supply chain aligned with your business strategy. This will be your target supply chain.
  3. Develop the transformation plan. Find out how you will change every component of the supply chain and integrate all the stages in a detailed roadmap.
  4. Test it and make sure the modified supply chain works and complies you expectations. Small-scale experimental projects demonstrating the benefits will help you find the right scenarios to go through the changes. These pilot projects should test the entire supply chain, albeit on a small scale, rather than a limited set of technologies on a large scale. In other words, test projects should be end-to-end.
  5. Launch your transformed process in supply chains that generate most of the profit. Choose key products, main customers, important regions.

Improving efficiency and profitability is not the only result you get by creating a truly digital end-to-end supply chain. As in other digitalization scenarios, you can increase your influence in relations with suppliers and partners, become a supplier of technical standards in your industry, and even discover new business models and sources of profit.

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Sergey Cheronovolenko

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