The Digital Supply Chain Explained

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To define the digital supply chain, we must first define the supply chain. The supply chain describes the chain of processes, events and information sharing that occurs from the point at which a raw product or ingredient is supplied, all the way to when it is sold to the waiting consumer at the end of the line. Now, a digital supply chain refers to the digitalisation of the supply chain, where the series of processes are integrated in a digital way to enhance efficiency.

What is a digital ecosystem

A digital ecosystem is the greater web of digital supply chains where they all intermingle and share information. For example, companies such as Apple, Google and Amazon have large, complex, underlying networks where data gathered at user-interfaces is fed back into the system to create more personalised online spaces for consumers to enhance their experience, add value to their life and essentially boost brand loyalty and sales.

To understand the need for a digital ecosystem for large companies and their long-term viability we need only look to Google and Yahoo. Starting from the same humble beginnings, they each took a different path in building their empire. Google expanded and built a web where they evolved into many different applications depending on user trends and market competition. As such, they have become a force to be reckoned with and worth just over $500 billion. On the other hand, Yahoo! stuck to what they had started out doing and as a consequence have a net worth of $4.8 billion.

Digitalisation of the supply chain

Digitalisation refers to making traditional processes and communications of the supply chain digital so that all tasks are automated and as such, occur with a lot more efficiency and with a higher degree of accuracy.

The end goal of digitalising the supply chain is to enhance connectivity and collaboration from planning and design all the way to sales so that less human time is involved, the whole process happens more quickly and there are less inherent errors and risks associated with it.

What does it look like for manufacturers and distributors?

When a product is physically sold to a customer at checkout or ordered online through a webstore, associated data is fed back into software systems involved with ordering, manufacturing and managing stock in the warehouse. New products can then be made or ordered to replace what has been sold, thus creating a seamless cycle where there is a constant supply of product and a lesser need for storage of items for the just-in-case scenario.

Of course, the supply chain also involves transportation, and digitalisation of this component sees companies being able to track their products throughout its journey from supplier to warehouse. This capability reduces the occurrence of shipments going missing, and in the event they do, it reduces the amount of time associated with replacement shipments being sent, further supporting consistency of supply.

Digitisation of the supply chain

On the other hand, digitisation refers to converting a physical product into a digital version. This not only changes the supply chain but also the form of the product, which further enhances efficiency, accuracy and sustainability while reducing risk. For example, where a physical book might have traditionally been ordered, an ebook exists in its place with an instant download available from anywhere in the world, as soon as payment is received. The consequences of this are obvious, with improved efficiency and reduced governance costs (which include the costs associated with exchanging items between companies and consumers).

What tools can help to digitalise your supply chain?

An important tool available to your business which promotes digitalisation of your supply chain and improves fulfillment times, improves accuracy, reduces the need for excessive storage of product and reduces overheads, is inventory management software. Find a solution that increases transparency between supplier and manufacturer and takes the headache out of managing your warehouse and ensuring consistency of supply to your customers.

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Melanie - Unleashed Software

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.

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