The term digital supply chain is not new. Tony Hines1 coined it back in 2001, long before the “digital” trend. Originally, Hines intended it to mean simply the supply chain of non-physical goods, such as music and e-books, as opposed to physical goods such as car parts or apparel.
- 1. Hines, Tony (2001).From analogue to digital supply chains (in Fashion Marketing). London, Amsterdam, New York: Elsevier.
In order to avoid confusion, one would contend that a more accurate term for this today would be “digital goods supply chain”, as opposed to “physical goods supply chain”.
Things, however, are not as clear-cut as they appear, because physical goods today are no longer purely physical. They are, or very quickly will be, all connected, equipped with sensors and various IT mechanisms that allow them to act and react as they move within the supply chain. Cars, watches, shipping containers, and even components on the manufacturers’ shop floor, have means to inform, influence and even reconfigure the very process of which they are part. Like physical goods, they still require transport, and warehouse space. Unlike physical goods, they are no longer passive waiting to be acted upon, but actively taking part in the decision on what they should become and where they should be.
Digital is about changing how business works, through the adoption of digital platforms – cloud, big data, mobility and social media. It is therefore not only about making new services accessible via mobiles in order to address new markets, and even less about automating a what was once a manual process.
Digital transformation is about making the enterprise more successful and competitive, more agile and closer to the customers thanks to the digital platforms.
This implies that the enterprise:
- Adapts its business model and organization to be open to multiple distribution channels.
- Is always ready to meet new customer expectations – agile deployment of new services, and a new customer experience.
This creates new challenges for the supply chain:
- Management of new interaction patterns, and new interaction channels with an ever increasing number of providers and consumers
- Ability to operate securely and in a controlled manner, within an information space that extends to the entire ecosystem of partners, and even competitors.
Connectivity is the central piece of a digital supply chain
According to TechTarget, a true digital supply chain fully capitalizes on connectivity, system integration and the information-producing capabilities of “smart” components.
The ultimate goal of the digital supply chain is to enable insights for increased efficiencies, doing away with waste and facilitating greater profits. Companies with a digital supply chain are better able to move resources, assets, people and inventory to where they are needed at any given time in order to reduce costs by responding proactively to transportation and manufacturing risks. The potential payoffs of a fully realized digital supply chain include savings in every area, from resources, time, and money to a reduced environmental footprint.
According to LSA, for a supply chain to become digital, it is not enough to modify it or automate it! You must rethink it entirely, in order to create a digital ecosystem. You will then get a scalable and agile, more connected and intelligent supply chain that will take into account data flows, physical flows, resources, customer data, finance, logistics providers, materials, products and supply. The digital supply chain must allow the sharing of this information in real time internally, and also with suppliers or subcontractors, to foster collaboration.
According to Supply Chain Shaman, a digital supply chain process uses new technologies to define processes to sense, respond and orchestrate in a bidirectional manner from market to market (from the channel to supplier networks). The processes move at the cadence of the market. This is a very different definition than the traditional supply chain practices that are often touted as “best practices.” Supply chain practices are almost 35 years old, and they are slow to change.
Finally, according to Accenture, a digital supply chain is connected, intelligent, scalable, and rapid. Connected is the foundation, leveraging various digital capabilities for extensive visibility, outsized influence and high levels of control. Moreover connected companies interact more fully with the entire business ecosystem. Often in real time, they can react, relate and communicate more completely with customers—diagnosing the latters’ needs and involving them in product planning and design initiatives.
Business benefits from connectivity are improved planning, execution and collaboration. Connectivity also allows more data to be captured, resulting in Actionable intelligence, proactive decision making, and Advanced data analytics to better meet customer expectations.