Why Are Digital Supply Chains So Important?

Written by
Start a trial of Unleashed software
Written by
3 Minute Read
Share Blog:

In our increasingly digital world, consumers are demanding speed, convenience and accuracy. Technology has helped many businesses keep up with these demands, and in particular, the rise of the digital supply chain has increased efficiency for manufacturers.

However, many companies are struggling to keep pace with the onslaught of digital trends that are disrupting traditional supply chain management, slashing response times and raising customers’ expectations. The speed of change can be overwhelming, especially for those that are not digital natives.

70% of executives expect digital innovation to have a significant impact on their supply chains during the next five years, according to a recent Bain survey, up from just 63% in 2016. Given this, it is vital to understand the benefits of a digital supply chain in order to keep up with the rise of digital innovation in the supply chain.

What is a digital supply chain?

A traditional supply chain model can be briefly summarised as the networking between all individuals, organisations, and activities involved in a business process from the manufacturer to the end user. A digital supply chain carries out traditional supply chain functions with the aid of digital technology such as radio frequency identification (RFID), global positioning systems (GPS) tracking, smart labels, and barcodes. Find out more about digital supply chains.

Why is it so important?

The primary aim of the digital supply chain is to deliver insights to increase efficiency and to produce higher profits for the organisation.

Relatively few companies have unlocked the full potential of digital technologies. A recent McKinsey study, for example, found that the average supply chain has a digitisation level of 43%, the lowest of five business areas that were examined. A mere 2% of the surveyed executives said the supply chain is the focus of their digital strategies.

The same McKinsey research suggests that on average, companies that aggressively digitise their supply chains can expect to boost the annual growth of earnings before interest and taxes by 3.2% – the largest increase from digitising any business area – and annual revenue growth by 2.3%. From a financial perspective, then, digitising the supply chain is an important investment.

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.

Challenges of a digital supply chain

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.

Automation and improved decision making

Aside from the financial benefits, a digital supply chain is also important because it automates processes and improves decision-making capabilities. Further, automated operations can streamline the work of supply chain professionals and allow them to focus on more valuable tasks. For example, digital solutions can be configured to process real-time information, automatically eliminating the manual effort of gathering, scrubbing, and entering data.

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.

More about the author:
Share Blog:
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.

More posts like this
Subscribe to receive the latest blog updates