A recent McKinsey publication found that the average supply chain has a digitisation level of 43%. This was the lowest percentage out of the five business areas that were examined. According to McKinsey, companies that digitise their supply chains can boost their annual earning before interest and taxes by 3.2% and annual revenue with 2.3%. But despite these numbers, only 2% of the executives said that the supply chain is the focus area for their digital strategies.
For a digital transformation to be successful, supply chains must keep their traditional strengths (reliability, predictability, quality) while at the same time allowing for innovation (more significant use of automation, quicker responses to changing needs, more transparency across the supply chain). This transformation is not just one single activity. It is a set of activities that span across processes, technology, policies and metrics. Ultimately, an interconnected digital supply chain improves the customer involvement and should be the main focus of any supply chain executive in the future.
Let's take a closer look at some of the biggest issues a digital transformation in supply chain can solve.
A well-managed supply chain needs full end-to-end visibility. This is crucial in maintaining a healthy business, especially given the modern business complexities. Financial and reputational risks keep all organisations on edge, and managing these risks manually can sometimes be a challenge amidst other business priorities.
At its core, supply chain visibility is about knowing where your products are at any given time. A lack of a supply chain visible increases the chances of disruption and interruptions. This can be prevented by digitally transforming your supply chain. You then gain full control and visibility.
Assuming your company has balance inventory, meeting production and sales forecasts, logistics is the next area where a digital transformation makes a difference. An ineffective warehouse cannot process on-time inbound and outbound orders.
Inbound orders that come from suppliers or distributors, will most likely have a "dead-period" while waiting to be stored in your warehouse. If this is not done rapidly, the warehouse operators' ability to pick items, will be compromised. Further, this impacts outbound orders to the customers. The results is a delay in filling prescriptions, which again will result in either weighty fines or poor buyer experiences.
Automating your warehouse helps minimise these inefficiencies, and visual feedback cues from handheld devices can minimise or avoid error-prone warehousing responsibilities. These data- points will help you comprehend how to improve all warehouse activities.
The delivery process can either be done using your own fleet or by using third-party transport. However, both options bring their particular set of challenges, such as balancing transportation costs against timeliness and coping with rush orders and unscheduled drops.
With digital route optimisation, you are better equipped to handle unexpected stops or external factors out of your control. You will have the critical real- time information you need to deliver to your customers as promised. It will also make it easier to reduce costs in terms of time, fuel, equipment and interruptions.
Becoming digital makes your company more agile and it will be easier to change plans. A switch to a digital supply chain could be the first step you need to endorse a far-reaching digital transformation.