Digital Transformation of Supply Chain - Role of Decision Making Technologies (Part - I)
What is Digital Transformation? Is it a hype or real?
Is it about automation of jobs?
Is it about using mobiles/tablets/computers instead of paper/excel?
What transformations can happen?
What are decision making technologies?
Digital Transformation is a process of aiming at increasing the efficiency of the organization by embracing the digital technologies which will help in churning huge data from various sources and aid in decision making by generating insights from the data and automating repetitive tasks.
As an Organization/Supply Chain Executive/Planner, Why should I care?
Do you remember your Nokia phone? And yes mostly, you would be missing that brand. What happened to it? Have you seen that lately?
“Competition boss, Competition”.
These days, competition can kill a business in a matter of months. You will be left behind if you are not transforming yourself in today’s digital world. Supply Chain is becoming complex day by day and in the process it is generating huge amount data. Data is the only source from where one can derive insights but exponential data growth is making traditional approach unviable to explore huge data. You should be in a position to make use of this huge data by automating its handling processes, applying analytics to derive information to make better decisions and improve your Supply Chain performance. Digital technologies will be of great help in this process.
What is the Objective of Digital Supply Chain?
“Data is the new oil” is the latest phrase that is trending. If you have enough data that can be used to derive insights about your customer which will enable your business handle them better, you can change the game. That’s how Amazon, Google are changing the world.
The ultimate objective of any Digital Supply Chain is to make better decisions by making use of the data collected from various sources and improve the supply chain performance/responsiveness. Digitalization of business can significantly impact the productivity and reduce the supply chain costs and become more efficient in fulfilling the customer demand.
Is it Artificial Intelligence/Machine Learning that I am hearing out recently?
Digital Transformation is not about one system or one technology and is not restricted to one department of an organization. It covers end to end supply chain with all the stakeholders involved like Sales, Marketing, Logistics, Suppliers, Production to fulfill the business objective. To support digital supply chain objective, organizations are using technologies like machine learning, predictive analytics, optimization algorithms, computer vision, IoT sensors, block chain, and other innovative technologies to bring real-time end-to-end visibility over the supply chain and advanced planning applications to optimize the performance of operations. Usage of the technologies is dependent on your business objective and need.
I am already using ERP/Excel for all my work? Is it not enough?
Imagine you have a feature phone like Nokia at nominal price; will you buy an expensive smart phone? Yes, because the capabilities of smart phone are more than a feature phone and those capabilities are required in your day to day life to better manage things. Similarly, ERP is designed for a specific purpose and its capability is not enough in today’s digital world. ERP is very small part of the total transformation process.
Suppose you are a production planner of a medium sized manufacturing company and considering the shop floor you are handling,
- Do you get real time visibility of current production status?
- Can you give an estimated delivery date for a new order considering the current production status and without violating due dates?
- Can you predict the machine breakdown and its effects on the order delivery dates?
These are some of the standard complexities which require an answer at the earliest to better manage the supply.
What are decision making technologies?
Today’s supply chains are global and complex in nature and adding to that the data generated is huge from the demand side (PoS, Social, IoT etc.) and supply side (hundreds of products, different processes, limited capacity). Decision making technologies are logic driven and can handle the complexity hidden in the supply chain to generate decisions using various algorithms and derive actionable insights.
As the name indicates, any technology that is deriving insights from data compounded from various sources and helpful in making decisions related to the business can be called as Decision Making Technology. These are backed with advanced analytics, optimization algorithms, machine learning techniques etc.
Should I employ an external consultant for this?
You should not depend on anyone except yourself. Because, you know your business better than anyone else and you know the problems you are facing on a daily basis. Internally, you can perform an analysis if you have the bandwidth and skill set required and then set out an objective yourself. But, third party is required to get an outsider perspective of your operations and they can suggest industry best practices which they have successfully implemented as you won’t be having visibility to other businesses.
Till date, many organizations have been using digital supply chain technologies such as planning systems (Ex. APO) for years to improve service and reduce cost. But now, with the advent of technology required to handle the data across the chain, advanced analytics capabilities combined with cloud solutions, Digital Supply Chain is not hype anymore. As per BCG, leaders in digital supply chain have more than 40% higher operating margins and at least 20% lower working capital.
Organizations need to strategize at the earliest to be competitive and become examples of successful Supply Chain Transformation. Just like any other transformation, digital transformation should on-board all the stakeholders with clear-cut objective and implemented in a phased manner.
In the next post, we will look into various decision making technologies that can be used in Supply Chain Transformation for better decision making.
