The evolution of the digital supply chain

Digitization of the supply chain is not new. Either as a concept or as a reality. But it does find itself in an interesting spot these days.

Consider these three perspectives.

“The ‘digital supply chain' will be the logistics technology concept of the year.” That's from Clint Reiser in the Logistics Viewpoints newsletter this month from ARC Advisory Group.

“Why your business should not go digital.” That's from Frederic Gomer of B2G Consulting in a blog from APICS (now known as the Association for Supply Chain Management).

“CIOs to Everyone: Please stop the Digital Transforming.” From the Wall Street Journal's CIO Journal.

Hmmm. That trio is certainly a cause for pause if nothing else, especially the third one. A little clarification of that one would help.

“Like so many ideas that start out as legitimate business concepts, the term digital transformation has been overused, misused and hijacked to the point where it has become a meaningless catch phrase.” That's according to Scotts Miracle-Gro Company CIO Marc Sims. And he's not alone in that view among CIOs. But it doesn't have to be that way.

Digitization is real and has already made its mark at companies as diverse as Amazon, 3M, Pfizer, Colgate, P&G and Unilever.

Thinking about it, you could say that the state of digitization today fits in the Gartner hype cycle somewhere between “the peak of inflated expectations” and “the trough of disillusionment.” That said, it's clear that digitization is a tough slog. And well it should be.

To begin, just consider the scope of digitization. It's a really big thing. It doesn't just involve the supply chain. It spreads across the entire enterprise, to its partners and to its customers. Narrow that down to the supply chain, and it gets smaller but not a whole lot less complex.

As Rich Sherman of Tata Consultancy Services explains in NextGen: The Interview, “digitization is a technical exercise that collects all transaction data from all of the silos (in the supply chain) into an electronic state in a data base…So now all the silos have common access to data sources outside of their function.” That's a powerful proposition.

Not only is digitization a ginormous technical exercise, but is more than a simple translation from established non-digital data to digital data. It also involves many of the nextgen supply chain technologies covered in this newsletter. Internet of Things. 3-D printing. Blockchain. Cloud. Artificial Intelligence. To name just a few of these emerging technologies.

It's important to note that these are entirely new paths for the digital supply chain. The infrastructure to use them is being built as we speak. And will be for many years to come. Not all have to be part of how any company manages its supply chain. But going forward, these and others are likely to be important players for most companies and certainly leaders. The biggest advantage they offer right off the bat is all are digital to start. No translation needed. But it will take some time regardless.

Fortunately, digital transformation is happening both within and outside the four walls. “The warehouse will be ripe ground for digital transformation in 2019,” says Reiser of ARC.

He cites “digital edge technologies” such as advanced warehouse controls systems (also called warehouse execution systems) as important here. “Within the four walls of the warehouse these systems receive sensor inputs from automation across the system, evaluate according to predetermined guidelines, and respond in near real-time to achieve operational objectives.”

Reiser looks outside the warehouse too with a close eye on supply chain visibility. He includes digital feeds all the way from social, weather and news feeds to the IoT and GPS feeds from truck fleets. Combine that data with analytics and what's created is a digital system that can take action now to fix something that is outside of preferred norms. That is the essence of the value of a digital supply chain, growing pains and all.

It's worth noting that digitization is about more than just data. There's also the matter of best practices and processes for digital data. In fact, the SCOR (Supply Chain Operations Reference) model is being updated by APICS to better align with digital strategies.
There's also the matter of the process used by a company to go digital. How a company goes about it is critical, explains Gomer of B2G Consulting. Go about it poorly, and comments from Miracle-Gro's Sims really start to resonate.

Gomer strongly recommends that companies “consider revisiting the basics of supply chain transformation as a prerequisite to digitization.” In other words, evaluate your supply chain framework for opportunities to better integrate siloed functions. Then use these to identify initial points of digitization. Gomer says a company's capabilities, culture and C-suite will then play leading roles in making digitization a success.

By the way, Gomer is far from alone in his recommendation to tread carefully on the path to digitization. It doesn't just happen. It's not a big bang event. Digitization is an evolutionary process that will transform supply chains in so many ways beyond simple data. It's worth getting right, the first time.

Gary Forger is special projects editor for Supply Chain Management Review. He can be reached at [email protected].

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