What is supply chain digital transformation and why is it important?

The global market for supply chains is expected to reach $13.7 billion in the next six years. The predicted market growth is based on the latest technologies in supply chain operations. Hence, it is obvious that in order to thrive in the competitive market, companies must adopt supply chain digital transformation.

93% of companies say they are actively engaged in supply chain digital transformation. As one of the best digital transformation companies in the market today, we help companies implement digital transformation seamlessly.

But what exactly does this supply chain digital transformation mean, and how can businesses successfully navigate this transition?

What is Digital Transformation in Supply Chains?

Digital transformation is the process of using digital technologies to fundamentally change how a business operates and delivers value. In the supply chain context, this means leveraging technologies like AI, IoT, robotics, and advanced analytics to optimize processes, gain real-time visibility, and enable data-driven decision-making.

The goal is to create a “smart” supply chain that is connected, collaborative, cyber-aware, cognitively enabled, and comprehensive. This allows companies to improve efficiency, agility, and customer-centricity while reducing costs. For example, Walmart’s digital supply chain transformation has enabled more accurate order tracking for customers.

So, by integrating the latest technologies, businesses can create a digital supply chain that is:

1. More Visible: Real-time tracking and monitoring of operations provide end-to-end visibility across the entire supply chain.
2. More Agile: Quick adaptation to market changes and disruptions becomes possible.
3. More Efficient: Automation and optimization reduce waste and improve resource utilization.
4. More Collaborative: Enhanced communication and data sharing foster better partnerships with suppliers and customers.
5. More Predictive: Advanced analytics allow proactive problem-solving and risk management.

For example, a manufacturer using IoT sensors can track the location and condition of raw materials in transit. It allows for better inventory management and reduces the risk of stockouts or overstock situations. Similarly, demand forecasting with the help of Artificial Intelligence can help retailers optimize their inventory levels – reducing carrying costs while ensuring product availability.

Check: Case Study of Digital Transformation of ABC Talkies by ViitorCloud

Problems in Traditional Supply Chain Systems

Traditional supply chain systems, while functional, are increasingly proving inadequate in today’s fast, globalized business environment.

Some of the key challenges include:

• Lack of Transparency: Isolated systems and poor data sharing lead to delays and difficulties in tracking products.
• Manual Processes: Time-consuming manual work is error-prone and causes issues like stockouts or excess inventory.
• Inability to Adapt: Rigid supply chains can’t quickly respond to changing market conditions or disruptions.
• Inaccurate Forecasting: Relying on historical data makes it difficult to predict demand, especially with changing consumer preferences.
• Fragmented Operations: Lack of coordination between supply chain partners results in inefficiencies and higher costs.

Consider the case of a traditional retailer struggling with inventory management. Without real-time data on stock levels and sales trends, they might order too much of a slow-moving product while running out of demanding items. This not only ties up capital in excess inventory but also results in lost sales and dissatisfied customers.

Hence, such issues have been exacerbated by the pandemic, which has heightened the need for resilient and agile supply chains. Companies with digitized operations have fared better during this disruption.

Why Is Digital Transformation Important in the Supply Chain?

Digital transformation plays a very important role in supply chain management. Here are some key benefits of digital transformation in the supply chain:

1. Visibility and Transparency

Digital technologies provide real-time visibility across the entire supply chain. For instance, blockchain technology can create an immutable record of every transaction, enhancing traceability and reducing the risk of fraud or counterfeiting.

2. Efficiency and Cost Reduction

Automation and optimization of processes can significantly reduce operational costs. A study found that companies with digitally mature supply chains can reduce their supply chain costs by 20% on average.

3. Better Customer Service

With improved visibility and predictive analytics, businesses can better meet customer demands and expectations. This leads to increased customer satisfaction and loyalty.

4. Agility and Resilience

Digital supply chains are better equipped to handle disruptions and adapt to changing market conditions. During the COVID-19 pandemic, companies with digitally mature supply chains were able to respond 3-4 times faster to disruptions compared to their less digitally mature counterparts.

5. Data-Driven Decisions

Advanced analytics provide insights that enable more informed and strategic decision-making. This can lead to improved forecasting, better inventory management, and optimized logistics.

6. Sustainability

Digital technologies can help in reducing waste, optimizing routes, and improving resource utilization, contributing to more sustainable supply chain practices.

7. Innovation and New Business Models

Digital transformation opens up possibilities for new business models and revenue streams. For example, predictive maintenance enabled by IoT can create new service-based offerings for manufacturers.

Also Read: Check ALKMY Digital Transformation Journey

A Roadmap for Supply Chain Digital Transformation

At first, going for supply chain digital transformation seems a daunting task, but it doesn’t have to be. Here’s how a phased approach to get started:

1. Choose the Right Digital Transformation Consultant

The first step is to look for a reputable and experienced digital transformation company like ViitorCloud. If you find an expert company, you are halfway on the road to successful implementation.

2. Analyze Current State

Assess existing processes, systems, and pain points. Interview stakeholders to understand goals and requirements.

3. Design Future Vision

Define the target and required capabilities. Decide whether to enhance or replace current systems. Create architecture and integration plans.

4. Develop Project Plan

Outline deliverables, milestones, team structure, and budget. Identify and mitigate risks. Estimate ROI.

5. Implement in Stages

Roll out new technologies and processes incrementally to minimize disruption. Start with pilot projects in high-impact areas.

6. Optimize and Scale

Measure performance against KPIs. Gather user feedback. Make improvements and deploy successful initiatives more broadly.

Throughout this journey, change management is critical to drive adoption. Communicate benefits clearly, provide ample training, and celebrate wins along the way.

Key technologies to consider include:

• Cloud computing for scalability
• AI and machine learning for advanced analytics
• IoT for real-time tracking
• Robotics for warehouse automation
• Blockchain for secure information sharing

The most successful transformations take a holistic approach, employing people, processes, and technology towards a customer-centric operating model.

Read: Why technology consulting services are important for businesses today

Supply Chain Digital Transformation Examples

Many companies are already benefiting from digitized supply chains. Let’s look at some examples of how companies have successfully implemented digital transformation in their supply chains:

• Unilever uses AI to predict demand and automated planning. This has reduced forecast errors by 30% and inventory by 25%.
• BMW Group uses Blockchain to drive further progress in supply chain transparency.
• With digital transformation, Pfizer was able to pack and distribute its medicines faster during the pandemic.
• Maersk provides end-to-end shipment visibility to customers using blockchain.

As these cases show, digital transformation can deliver significant value when done right. The key is to start now, learn fast, and scale what works. ViitorCloud has over 13 years of experience in digital transformation and technology consulting. You can contact us to understand how you can revamp your supply chain management with digital transformation.

Final Words

Hence, it is evident that the digital transformation of the supply chain plays a revolutionary role in today’s business. We can tell from the examples and data that companies that successfully implement digital technologies in their supply chains have very high improvements in efficiency, agility, and customer satisfaction. While the journey to digital transformation may seem challenging, ViitorCloud can make your journey smooth and seamless.

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