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What does supply chain digitization hold in future?

The GOAL is ambitious; To build a supply network that’s efficient, resilient and responsive.

Today’s supply chains are a set of discrete silos involving finance, marketing, product development, manufacturing, distribution and customer relationship. But this landscape is set to undergo a paradigm shift over the next decade. The walls are set to dissolve with the advent of digitization, creating a transparent and integrated ecosystem of business functions. This new environment is projected be an intertwined cobweb of several key technologies – cloud computing, data analytics, 3D printing, automation and robotics, artificial intelligence (AI) and the internet of things (IoT) along with the business processes.

At the heart of all activities sits the supply chain, and it is key to the operations of every company that manufactures or distributes anything. Two key factors are driving the shift towards digitization of supply chains. One, new technologies like big data analytics, the cloud, and the Internet of Things are pushing into the market and second, more importantly, more exacting expectations on the part of consumers, employees, and business partners are pulling companies to develop more reliable and responsive supply chains.

Many corporations from across the globe are betting big on the digitization of supply chains. According to a research by PWC, companies with highly digitized supply chains and operations can expect efficiency gains of 4.1% annually, while boosting revenue by 2.9% a year. Another research by McKinsey predicts that companies that aggressively digitize their supply chains can expect to boost the annual growth of earnings before interest and taxes by 3.2%—the largest increase from digitizing any business area—and a topline growth by 2.3%.

And the race is already on. Companies across industries the globe are already investing heavily to develop their own versions of the Digital Supply Chain (DSC) and driving the change along the chain through to their suppliers in the upstream and to distributors and retailers on the downstream.

For instance, in transport and logistics, Proctor and Gamble (P&G) have implemented a digitally enhanced operational program called Control Tower. It lets P&G see all, plan and manage the transportation: inbound, outbound, raw materials, finished product. This has helped P&G reduce deadhead movement by about 15% driving reductions in cost as well as emission levels.

Another digital innovation that is driving P&G’s Supply Chain is digitally connecting the distributors and retailers. P&G’s GDSN – Global Data Synchronous Network – is a standardized data warehouse that allows P&G to connect with retail partners in a fully automated way, with no human intervention. The data is kept dynamically updated. A few years ago out 70% of orders between retailers and suppliers had errors. But with a common data warehouse like GDSN, that number has gone down to virtually zero.

GE has launched and invested heavily in a new data platform called Predix. It envisions Predix to be the dominant host of industrial apps, an analogous to the Android platform for smartphones. Hence, it has been kept as open source like android. For example, Pitney Bowes uses the Predix platform to analyze data from its machines in order to manage them better.

In 2014, Amazon started rolling out robots for managing warehouses originally developed by Kiva Systems., a company Amazon had bought earlier and renamed Amazon Robotics. The robots make warehouse work less tedious and physically taxing and has improved efficiency great extents. Amazon now has more than 100,000 robots in action around the world, and it has plans to add more to the army of robots.

Recently DHL conducted tests on an augmented reality system at a warehouse owned by Ricoh. The warehouse employees were equipped with smart glasses containing software and navigated along optimized routes via the glasses’ graphics display through the warehouse. This enabled them to find the right quantity of the right item much more efficiently also reducing training time. Over the three weeks of the test, 10 order pickers succeeded in fulfilling 9,000 separate orders by picking more than 20,000 items. The resulting productivity improvements and reduction in errors increased the overall picking efficiency by 25%.

Turning again to P&G who are using data modeling and simulation innovate and that is reflecting in the company’s R&D. Product design using traditional techniques takes a lot of time while using modeling and simulation the company is able to make thousands of variants in seconds giving P&G great cost and time advantage.

Supply chains are extremely complex and no company has yet succeeded in building one that’s truly digital. But many applications are now being tried and tested to achieve the goal we started with. With different industries implementing DSC at varying speeds and complexities, this scenario is expected to change. The first movers will gain an advantage which might be difficult-to-challenge in the race to Industry 4.0. The real test will be the many new business models that digital supply chains promise, its impact on job creation and the top and bottom lines of organizations.

Sounak Ghosh
Pursuing MBA in Operations || Traveller, Blogger & Photographer

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