What is Digital Supply Chain Management? The Ultimate Beginner's Guide

In our hyper-connected realm, getting merchandise to customers quickly and professionally is more critical than ever. That’s where digital supply chain management comes into play leveraging cutting-edge skills to transform outdated supply chain processes.

Traditional vs Digital Supply Chain Management What’s the Difference?

Let’s start with the fundamentals – supply chain management oversees the flow of goods data and finances as they move from supplier to consumer. Traditionally, this process relied heavily on manual tactics, including:

Phone calls and fax communications to coordinate orders
Paperwork trails to track shipments
Forecasting based on historical data and intuition
Siloed systems between supply chain entities

While this approach worked for decades, it’s no match for today’s customer potentials and global complexity. Delays disruptions costly inefficiencies are common challenges.

Digital supply chain management. By applying technologies like artificial intelligence, Internet of Things (IoT) connectivity, robotics, and data analytics, companies can radically modernize their supply chain operations.

Real-time data replaces assumptions. Predictive insights anticipate future snags. Automated processes reduce manual touchpoints. And collaborative platforms connect everyone involved.

Here’s a quick overview of some key digital supply chain capabilities:

Supply Chain Visibility

IoT sensors and RFID tags enable real-time tracking of products, assets, and shipments
Blockchain creates immutable record-keeping and secure data sharing
Real-time alerts for delays, damages, or missing inventory

Predictive Analytics

Machine learning analyzes historical data to forecast demand and consumption patterns
Predictive models identify potential risks, bottlenecks, quality issues, etc.
“What-if” scenario planning prepares for all contingencies

Intelligent Automation

Digital twin software models and optimizes complex supply chain processes
Robotics and autonomous vehicles automate warehouse tasks and transportation
AI and chatbots facilitate self-service ordering and issue resolution

Integrated Planning

Cloud platforms consolidate data across the entire supply chain network
Sales, inventory, and operations planning is collaborative and synchronized
Digital control towers provide an end-to-end view of all activities

In essence, digital supply chains are responsive, resilient, and data-driven – a far cry from pen-and-paper processes prone to oversights and delays.

Read this Blog: What’s the Difference between 3PL and 4PL Logistics Providers?

Why is Digital Supply Chain Management So Important?

At this point, you’re probably thinking – this all sounds great, but is digital transformation really worth the effort for my supply chain? The answer is a resounding yes.

Increased Visibility and Transparency

With real-time data and tracking competencies, there are no more “black boxes” in the supply chain. Companies gain a complete line of sight into their shipments, orders, and inventory levels at any given moment.

Ability to Predict and Mitigate Disruptions

Unexpected events like natural disasters and transportation problems supplier lacks are inevitable. However digital supply chains can sense potential risks early using IoT monitoring, predictive analytics, and scenario modeling tools. Issues that used to bring everything to a standstill can be proactively addressed.

Optimized Inventory Management

Power-driven by AI and machine learning, digital supply chains exactly forecast demand to certify the right products are available when and where customers need them. At the same time, they reduce excess inventory sitting idle.

Streamlined Logistics and Lower Costs

Mechanical routing capabilities like digital twin reproductions optimize transportation lanes and warehouse operations. This unlocks huge cost savings while making distributions faster and more reliable.

Sustainability Benefits

By reducing waste, maximizing asset utilization, and optimizing routes, digital supply chains significantly minimize their energy use and carbon footprint.

Competitive Advantages

At the end of the day, digital supply chains enable companies to deliver superior customer service, control costs, mitigate risks, and rapidly adapt to changes. According to Gartner research, organizations that are digitally matured are 1.6 times more likely to be profitable.

Still not convinced? Here are a few powerful case studies of digital supply chain transformation:

Nike

Implemented an AI-powered analytics system called “Pl ural” to centralize data across their global supply chain
Cut product creation time from 12 months to 6 months
On track to save over $1 billion in logistics and manufacturing costs

Amazon

Employs over 300,000 robotics units in warehouses to automate operations
Uses digital twin simulations to test new warehouse configurations and processes
Advanced logistics systems can predict delivery times down to the minute

Starbucks

Leverages AI and IoT sensors to monitor coffee qualit y from farm to cup
Mobile order and pay app integrates with store inventory and operations
Digitized traceability efforts underpin ethical sourcing commitments

The bottom line? For enterprises managing complex global supply chains, going digital is no longer an option – it’s an operational imperative. Doing so unlocks game-changing efficiencies, savings agility business intelligence.

Key Components of an Effective Digital Supply Chain

So what exactly goes into building a world-class digital supply chain? While technology is a key enabler, it involves much more than simply buying the latest software. An integrated, holistic strategy considering both digital capabilities and organizational processes is required.

Here are some of the core components underpinning a robust, future-proof digital supply chain:

Internet of Things (IoT) and Connected Devices

IoT provides the foundational connectivity and real-time data streams to gain true supply chain visibility. A few key IoT applications:

RFID and Barcoded Tagging: Low-cost RFID tags and barcodes enable tracking of products, assets, and shipments at every supply chain node
GPS and Geofencing: GPS trackers and geofencing alerts monitor transportation vehicles and routes
Environmental Sensors: Sensors monitor temperature, humidity, light exposure, shock events, and more for quality assurance
Industrial IoT: Equipment sensors and systems enable predictive maintenance to reduce downtime

Big Data and Predictive Analytics Platforms

All the data captured from connected IoT devices is accumulated in big data platforms. From there, machine learning mockups can analyze the material to uncover trends and insights, including:

Demand Forecasting: Predict product/SKU demand based on historical data, market conditions, social media trends, and more
Risk Analytics: Analyze supplier performance, weather patterns, global events, etc. to assess and mitigate potential disruption risks
Inventory Optimization: Determine optimal inventory levels and reorder triggers based on demand forecasts

Some leading big data/analytics platforms include Microsoft Azure, Google Cloud, AWS, and purpose-built tools like o9 Solutions.

Supply Chain Management Software

At the heart of any digital supply chain is connectivity – seamlessly sharing information and coordinating activities across the extended supply chain network. Robust supply chain management (SCM) software platforms make this possible.

Some key SCM software capabilities:

Sales and Operations Planning (S&OP): Align supply and demand plans across procurement, production, distribution, and sales
Logistics Management: Optimize transportation routes, mode selection, fleet management, and distribution planning
Supply Chain Control Tower: Centralized visibility and monitoring of end-to-end supply chain performance metrics
Track and Trace: Capture real-time data and visualize product/shipment movement across the supply chain
Warehouse and Labor Management: Enhance putaway inventory management, and workforce utilization

Well-known SCM software vendors include SAP, Oracle, [Blue Y

Artificial Intelligence and Machine Learning

AI and machine learning are critical enablers, helping companies extract insights from vast data streams and automating complex decision-making. Some key AI supply chain applications include:

Demand Forecasting Models: Using algorithms like regression analysis, neural networks, etc. to accurately forecast product/SKU demand
Supply Chain Planning and Optimization: Constraint-based optimization and prescriptive analytics to balance supply and demand while minimizing costs
Intelligent Order Management: AI assists with order prioritization, promising, sourcing, and fulfillment based on factors like inventory, locations, customer priority, etc.
Conversational AI Chatbots: Natural language chatbots provide self-service options for order management, issue resolution, and status updates

Leading AI vendors in the supply chain space include Aera Technology, Kinaxis, and OMP.

Robotics and Automation Systems

While AI optimizes decision-making robotics, and automation physically execute many supply chain tasks and workflows, including:

Warehouse Automation: Autonomous mobile robots (AMRs), automated storage and retrieval systems (AS/RS), robotic arms, and more to automate warehouse operations
Transportation and Last-Mile Delivery: Self-driving trucks and delivery vehicles, drone delivery for remote locations
Manufacturing/Production Automation: Robotic assembly lines, autonomous guided vehicles (AGVs), automated quality inspection

Major providers of warehouse robotics include 6 River Systems, Locus Robotics, and Berkshire Grey. For manufacturing robotics, Fanuc, ABB, and Kuka are category leaders.

Blockchain for Secure Data Sharing

As supply chains become gradually digitized and connected, cybersecurity and data integrity take on critical importance. This is where blockchain’s decentralized, immutable ledger provides massive value:

Provenance Tracking: Create an auditable record of all transactions, transferring of goods, and data sharing across the supply chain
Smart Contracts: Code automatically executes contract terms like payments once delivery/quality conditions are met
Supply Chain Finance: Blockchain-based payments can facilitate seamless financing of transactions between buyers and suppliers

Top enterprise blockchain platforms include IBM Food Trust, Corda, Hyperledger Fabric, and solutions from Everledger and Skuchain.

Of course, technology alone does not make a digital supply chain. Accompanying them requires reassessing processes, breaking down organizational silos, and cultivating digital skills. We’ll cover best practices for digital transformation next.

Best Practices for Digital Supply Chain Transformation

Implementing digital supply chain capabilities is a journey, not a single project. It requires a holistic, long-term strategy with executive leadership and cross-functional buy-in. Some best practices to guide that journey:

Have an Overarching Digital Supply Chain Strategy

Start by defining your goals – whether increasing agility, reducing costs, improving sustainability, or enhancing customer service. Identify key performance indicators to track progress.

Map your current state across processes, systems, data, skills, and more. Develop a future-state vision of where you want your digital supply chain to be. This blueprint will guide your transformation roadmap.

Invest in the Right Supply Chain Technologies

With a strategy in place, you can prioritize investing in the digital capabilities most impactful for your operations – whether IoT, AI/ML, automation, blockchain, etc. But avoid piecemeal solutions that can’t integrate.

Look for proven solutions with a roadmap for continuous innovation. Also evaluate deployment options like on-prem, cloud, or hybrid. Cloud supply chain software is gaining popularity for its faster implementation.

Master Data Management and Integration

For digital supply chains to function optimally, you need accurate, timely data flowing seamlessly across systems, partners, and stakeholders.

Establish uniform data standards, governance policies, and integration protocols. Implement a master data management solution to maintain a “single source of truth.” And cultivate capabilities like data visualization and advanced analytics.

Workforce Training and Change Management

Technological solutions are only as good as the people using them. Develop comprehensive training programs to educate your workforce on new digital tools and data skillsets. Articulate the “why” behind changes to build buy-in.

Digital champions and super users can drive grass-roots adoption. Consider incentives and support structures to reinforce desired behaviors.

Examples of Digital Leaders

While every company’s transformation journey will differ, we can learn from pioneers already capitalizing on digital supply chain innovations:

Schneider Electric

Implemented an integrated supply chain control tower with real-time dashboards across procurement, logistics, inventory, etc.
Applied AI/ML to enable end-to-end planning from raw materials to distribution
Reduced annual logistics costs by $26 million while improving on-time delivery

Stanley Black & Decker

Utilizes IoT sensors and advanced track-and-trace capabilities to monitor shipments and asset locations in real-time
Digital twin simulations optimize warehouse operations, new facility design, and transportation routes
25% productivity improvement in digitally-enabled facilities

PepsiCo

Deploys AI solutions to collaboratively forecast demand with major retail partners
Control tower provides enhanced visibility from suppliers all the way to distribution centers
Achieved over $1 billion in productivity benefits across their supply chain

Conclusion

Digital Supply Chain Management (DSCM) represents a transformative approach to managing supply chains in the modern era, integrating digital technologies to enhance efficiency, visibility, and responsiveness. This beginner’s guide has explored the foundational concepts and benefits of DSCM, emphasizing its role in optimizing processes from procurement to distribution.

By leveraging technologies like artificial intelligence, Internet of Things (IoT), and blockchain, organizations can achieve real-time data insights, predictive analytics, and streamlined operations.

These advancements empower businesses to adapt swiftly to market changes, reduce costs, and improve customer satisfaction through enhanced product availability and delivery speed. Moreover, DSCM fosters collaboration across stakeholders, breaking down silos and promoting transparency throughout the supply chain network.