Can a supply chain be both lean and agile? With the correct digital transformation, the answer is ‘yes’. In this article, we take a look at how the pandemic pushed the need for digital transformation, the benefits of the changes, and several ways implementation of new processes adds agility to an already lean supply chain.
How The Pandemic Sped Up Digital Innovation
Pressure from the pandemic revealed weaknesses in inventory management and stretched its limits, presenting digital transformation as the obvious the tool to help this area meet consumer and corporate demand. As a result, storage facilities were more wiling to experiment with new technologies to fill the gaps created by those weaknesses. As the pandemic continues to play out, companies are quicker to adopt technologies that are adding agility to the supply chain for both the short and long term.
Pressure from the pandemic has caused a shift in how all of us do business. As the world continues to be transformed by circumstances related to the pandemic, companies need to stay ahead of trends and be prepared for whatever the next phase may be. Some ways to prepare for the future post-pandemic world, are outlined below.
The Benefits of Digital Transformation
Although cost is the main factor determining whether a business adopts digital transformation or not, several benefits follow from adoption of new processes. The benefits include improved customer experience, expanded agility, increased productivity, increased data volume, the cultivation of a digital culture, better profits, and improved management of resources. Each digital transformation is unique to the individual company. Personalization is what makes this process successful in any application.
Step 1 – Data
For a supply chain to be agile, the network should pull and understand data from all sources while being flexible enough to make supply chain updates. This involves various data collection systems, including data loggers. With the volume of data collected with new technology, legacy systems fall short in effectively handling it. Basically, a corporate digital transformation is needed to understand all data coming from every system. That includes in-house data and information received from the supply chain. When a company understands all available data, even if incomplete or dirty, effective outcomes can be projected to improve the supply chain.
Step 2 – Digitization
The supply chain weakens when data entry requires human input. Understanding the significance of this reality is important when shipping products from supplier to supplier. A digital supply chain includes tools that rely on digitized logistics, and processes to effectively function. If manual processes are required to convert information for use in a digital process, the overall system slows. When the entire information train is digitized, the system should function independently. Digitization streamlines several processes and contributes to a lean supply chain by making it faster and more agile.
Step 3 – Supplier Alignment
Predicable shipments keep the supply chain moving forward. When shipment dates slip later and later, it affects supply chain management systems. Digital transformation fine-tunes the necessary alignment with suppliers. With a digitized supply chain, when products are needed, they can be quickly ordered when available and easily tracked from the moment the order is fulfilled to when it is received. Digital monitoring every step of the way permits issues to be resolved quickly. Plus, with a digital supply chain, everyone who has to know what is going on with a shipment will have real-time access. If a change is required, all parties are informed.
Step 4 – Change Management
Incentive alignment is the main principle of change management. Through the process of digital transformation, incentives for procurement will differ from those for operations or finances. Silos result when incentives do not align with goals and can result in greater costs and higher risks. By aligning incentives, your business returns to being both lean and agile. Change management provides the means to grasp how data, digitization, and supplier alignment all build upon each other. An example of this is a strategic supplier alignment built from a digitized supply chain with a firm data foundation that saves money.
Step 5 – Acting Now
Anything worth doing is worth doing now. But putting off digital transformation, your company risks falling behind and being less competitive in a crowded market. The digital transformation of a supply chain takes attention and time. It is a project that will require care and can’t be only partially completed or performed in phases that stretch into an overly long timeframe. Companies that delay digital transformation of their supply chain are doomed to failure as they fall back on existing technology that limits their ability to adjust and adapt when the next big disaster occurs. That doesn’t mean another catastrophic event won’t happen, but companies that keep up with technological advancements are better able to quickly pivot in response to changd circumstances.
The pandemic has affected the world in many ways. One of the major effects is how supply chains have needed to alter due to changes in consumer behavior and availability of products. New pressures on supply chains revealed weaknesses that had not previously mattered. For many, a massive digital transformation was needed to put companies back on track and able to meet demands. While supply chains experienced a period of fine-tuning to make them leaner and more efficient, digitization helped speed that process and gave companies agility they might not otherwise have achieved. This factor has greatly improved the ability of companies to meet demands and provide better service. As pressures from the pandemic become somewhat more predictable, companies should not read this time as a sign that there will never again be another major event strongly and suddenly affecting the supply chain. Instead, now is the time to adopt digital transformation in preparation for whatever next big wave arises.