August 27, 2018      2 min read

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.

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.

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