In the past, supply chains operated on push-based strategies where manufacturers produced goods which were then pushed down the supply channel. This created gaps between supply and demand and led to poor inventory control, with high instances of inventory shortage and waste. Traditional supply chains generally focussed on individual performance and rarely considered intermediaries. Little thought was given to synchronising with channel partners, seeking feedback or planning for long-term growth.
In contrast, the digital supply chain is a collaborative digital environment that integrates numerous technologies, activities, outputs and supply chain flows. Digital supply chain models have strong networks and collaborative partnerships across the entire supply chain.
Digital supply chain
Companies operating within a digital supply chain are creating strategically unified computing environments. All businesses in the supply channel can generate and share information, which can be beneficial to the other parties.
This critical data progresses through cloud servers and databases, collecting and disseminating information to drive value through the supply chain, facilitating enhanced consumer service and better product offerings.
Organisations with a digital supply chain can quickly move assets, people and resources to anywhere they are needed. Companies that integrate digital technologies into their supply chain can quickly improve service levels while cutting costs.
Benefits of a digital supply chain
Of the many benefits a digital supply chain provides, the most important one is the cost-effectiveness. The key feature of an integrated supply chain is its ability to reduce governance costs, including the cost of exchange with supply partners and other functions within the organisation.
The digital system improves collaboration between businesses because digital tools help to make changes in both physical and technological components of the supply chain. It helps create strong relationships between suppliers and procurement teams and the with the right integration of individual systems and consistent monitoring, will improve both efficiency and performance.
Companies that struggle to keep pace with new digital trends find that efforts to improve service can disrupt their low-cost distribution models. They often have the right infrastructure to start with but lack the digital tools necessary to increase supply chain reliability.
These new technologies are changing traditional supply chain management, slashing response times but also raising consumer expectations. The speed to market offered by new supply technology also opens companies up to potential cyber attacks if they fail to undertake the right precautions and security measures.
As companies make choices around product offerings and the customers they want to serve, they can also customise supply networks to address consumer objectives. This can include the chance to acquire products faster or obtaining them at the lowest possible price.
Companies can take segments of the supply network and align them to what is most important to current needs. Real-time inventory control, analytics-driven demand intuiting, dynamic inventory fulfilment and point-of-sale powered auto replenishment are all features of a digital supply chain.
Sales optimisation can be gained through inventory-driven dynamic pricing and sensor-led forecasting, as well as improving inventory control through efficient process and the reduction of inventory waste.
Make the shift
Digital supply chains mark a significant shift away from traditional, linear supply chain models into a collection of dynamic networks. They can plan and alleviate transportation and manufacturing risks resulting in time-saving and cost efficiencies in multiple areas.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.