Pre-pandemic, businesses already had a heightened interest in advanced analytics, so it was hardly a shock that COVID-19 should be the catalyst for widespread end-to-end digitalisation of supply-chain processes.
According to a 2020 McKinsey report into how COVID has shaped supply chains, almost every company is either planning to invest in full-scale digitalisation or already is, with construction the only sector not embracing digital transformation en masse.
Today’s ongoing digitalisation programmes mostly focus on visibility, as companies strive for a better picture of the real-time performance of their supply chains.
Here, we get the views of two logistics tech professionals on what digital transformation of the supply chain means for them.
What are the biggest barriers to digitalisation?
AS: The most complex issue is standardisation of processes across the globe. Global supply chains involve multiple stakeholders, and they often use different systems. Some still use paper-based documentation and tools such as Excel to manage complex tasks that it was never designed for.
Others who are further along the digital transformation journey can find themselves using disparate systems or solutions that are not a fit for their business goals.
We're finding that, at the moment within the industry, many companies focusing on their digital journey often don't know where to start or select the wrong vendors, and this leads to disillusionment.
BW: In general, the biggest barrier to digitalization is sheer complexity. One of the hardest decisions is choosing where to start in order to be successful. Secondly, there’s not just one tool or system that can completely digitalize your operations. It usually involves layering on top of an existing system and working within existing processes.
How can digital transformation barriers be overcome?
AS: Those who succeed know what problems they are looking to solve and have a clear vision of how technology will support them, adding value to the bottom line. To extract value, a business needs to convert its process to digital and adapt business operations to extract the possibilities that stem from digitalisation.
It's critical to have clearly defined objectives and goals and ensure change-management methods are used in the implementation of digitalisation technology. A systematic approach to the transition or transformation of the organisation's process is required to support the change, control the change, and help people adapt to the change.
BW: To work through these barriers, start small and simple, focusing on areas that are within your control and are likely to have high user adoption. Consider focusing your digitalisation efforts inter-department, inter-partner, or inter-silos. Forego pilots and proof of concepts and instead use a phased implementation approach.
Take a single business process—such as transportation, warehousing, or planning—and then roll it out from there, demonstrating success and capturing the lessons learned at each phase. Do not be afraid of failing and making mistakes as digitalizing the supply chain is an iterative process. Tackle more complex processes like order management with an outside partner that has additional experience and expertise.
Is collaboration key for digitalisation programmes?
AS: Data sharing and transparency are essential to maintain supply chain flows. Supply chain software solutions should be able to ingest data in various forms, including digital. For example, a delay notification so the warehouse can manage inventory expectations from production and communicate proactively. The digitalisation of the data can be transformative, providing data-driven insights to supply chain stakeholders of the information that matter most to them.
If a firm can digitalise in just one area, what would you recommend?
AS: After the past few years, we have all felt the impact at a consumer level of supply chain disruptions. I would start with supply chain risk management and use the insights to communicate status updates up and downstream proactively.
Leveraging data for transparency, visibility, situational risk-management - and incorporating these things using real-time data - will reduce risk in the supply chain, which is what we’re trying to do - whether that's the risk of theft or a failure of temperature control. The ultimate goal is to deliver safe and effective products.
BW: Choose an area where all parties have a vested interest in being connected. A more mature function like transportation or warehousing is often a good place to start. Then follow that in order of increasing complexity to eventually tackle areas like order management, forecasting and planning.
Which area of supply chain is most difficult to digitalise?
AS: Any area where there are multiple parties involved, because every company has a different way of operating. In ocean shipping for example, each carrier, location, or party has a different way of booking a shipping order and confirming freight will be loaded onto a vessel.
Because of this, operators have to sift through hundreds of emails each day, review non-standardised documentation, and assess which steps they need to take to ensure the right cargo goes to the right place at the right time. Meanwhile, it’s hard to predict exactly when a supplier will have cargo ready for a shipment, whether the right equipment is available to them, and what steps need to be taken in order for it to reach its destination. All of this makes for a complex process that very few people or systems are well equipped to manage. Because so much data exists in many different places or forms of communication, the process remains fairly archaic by today’s standards.
BW: The backend of the supply chain, from raw materials to sourcing and manufacturing, is typically harder to digitalise since there are so many different players with varying degrees of maturity.
For example, you could have a vendor that is very reliable in terms of quality and cost but they still use spreadsheets to manage shipment schedules. It would be harder in terms of implementation and adoption to digitalize processes with a vendor like this as compared to a more mature contract manufacturer.
What is the biggest benefit of digitalisation?
AS: Transparency. Digital transformation creates the opportunity to make better business decisions. It creates more efficient workflows, increases data security, improves customer service, and brings information into a central location where it can be accessed, analysed, and the value extracted.
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