The Digital Supply Chain is the future. The Digital Supply Chain involves the real time awareness of everything going in throughout the end-to-end Supply Chain, enabled by electronic connectivity and the automated presentation of information and analytics to inform and make the best possible decisions.
The real time awareness and linkage that enables the Digital Supply Chain journey is based upon the electronic connectivity of every node, every process, every entity, every movement and every aspect of that end-to-end Supply Chain.
Electronic connectivity is THE backbone that makes the Digital Supply Chain a reality. It is the next step on this incredible journey.
Building the Foundation
Historically Supply Chain execution, like that of any other function, has been based upon a highly transactional, paper based way of doing business. Faxes, paper purchase orders, typewritten lists of anything and everything, memos, and on and on.
As I began my career I experienced all of that. If you wanted to send a message to someone in the company you send either a handwritten or typewritten memo on carbon paper. Making presentations involved creating acetate slides, or transparencies.
Talking with someone remote meant getting on the phone, leaving a voice message, or perhaps paging them. And if you needed to send them information either a fax or the regular mail was the best way to share stuff.
Obviously this all meant that there were, compared to current days, lengthy delays in getting things done.
The entire process of finding suppliers, visiting them, conducting an RFI or RFQ, selecting suppliers, qualifying them, negotiating, signing contracts, getting samples, issuing POs, getting responses or acknowledgements, accepting alterations, getting delivery, inspecting goods, receiving invoices, paying invoices, getting payment confirmation, and on and on, all could take months and even years.
The lengthy time was simply a result of the manual, non-electronic, delays inherent in working in an analog world.
With the advancements in computer technology, the internet and digitalization, we now live in a much different and faster paced world.
As proof you need look no further than the smartphone in your hand. Smartphones are more or less glued to people these days. In your hand you have the computing power that dwarfs that of the computers that put man on the moon.
The Apollo 11 spacecraft that first landed man on the moon had a power of 12, 500 flops (floating point operations per second). The Apple 12 smartphone has the power of 11 trillion flops, all in the palm of your hand.
As such we have a level of personal connectivity that is unrivalled in human history. No matter where you go you are electronically connected to the world. You, your movements, your searches, your activities and your meetings, your pictures, your voice and almost everything you do is electronically connected and tracked.
But the application of this connectivity is lagging behind in the industrial world. There are advancements certainly. Electronic systems are pervasive in manufacturing, warehousing, logistics, distribution, finance, inventory, I/T, and business in general.
What is missing however is the full end-to-end electronic connectivity, centrally connected, across an entire business’ Supply Chain, from lower tier to suppliers all the way through to end customers.
Very few companies have that entire Supply Chain electronically connected. And that connectivity is the foundation for any Digital Supply Chain. And that is why establishing and maintaining end-to-end electronic connectivity is needed.
Points of Connectivity
A Digital Supply Chain requires the collection of all possible electronic data from every node in the network in real time. The amalgamation of this data in turn allows for the creation of real time analytics, summaries, and either automated decision making or the presentation of all necessary information for human decision making.
But all of this starts and ends with the collection of electronic data. Data must be collected at every node:
All tiers of Supplier operations should be connected. This means not only your direct, first tier suppliers, but in turn their suppliers and their suppliers. Connectivity should include their operations (manufacturing, warehousing, material handling, inventory, quality control, procurement, planning and finance).
2. Distribution Centres and Warehouses
Inventories, goods in receiving, goods in process, goods in shipping, and goods being returned should all be electronically tracked. This should also include open orders and orders in progress, and shipping tracking information.
Every step of the manufacturing process should be connected, including the tracking of inventory raw materials, inventory in process, sub assemblies, and finished goods. This is required for both insourced and outsourced manufacturing operations.
4. Logistics Carriers
Any entity that is responsible for the movement of goods anywhere in the Supply Chain needs to be tracked. Whether it is a major international carrier or a courier or an Uber driver, the movement of goods needs to be tracked in real time.
Depending on how a company goes to market they may use channels. This could be a retail store, a distribution centre, or direct to customer delivery. Whichever channels are used they must all be electronically connected to show order status and movement and inventories.
Customer orders, delivery commitments, and delivery tracking must all be connected. This also includes any customer returns activity.
7. Reverse Logistics Service Providers
Returns may be processed by a company or by a designated service provider. The movement of goods to and within that entity need to be tracked. In many cases those goods can be repaired and returned to market as refurbished goods.
The Nature of Connectivity
Ideally every element of the end-to-end Supply Chain is connected identically, to a single standard. That is not however a current reality. That does not mean that connections should not be made.
It does mean that a standard information layer needs to be created for presentation regardless of any differences in how the data is collected underneath.
This information layer can then be customized as needed. Procurement for instance will want to see different information than Customer Service personnel or Warehouse Management.
Overall a Control Tower needs to be established which presents and consolidates a holistic real time view of the end-to-end Supply Chain.
Crawl – Walk – Run
If anyone was asked to establish the end-to-end electronic connectivity of every node of their Supply Chain you can see how many people could be easily overwhelmed. It is an enormous and important task and it can take a long, long time.
The key is to concurrently develop a tactical plan and a long term strategy.
For instance you may want to start getting all of your internal manufacturing and warehousing operations up and running. Then you would target getting your 1st tier suppliers on board. Then you want to get your logistics carriers, both inbound and outbound, on board. After that you want to get your 2nd and 3rd tier suppliers aligned. And on and on.
The monumental nature of the task means that you need to establish short term goals which will result in the connectivity of your entire Supply Chain over the longer term. Step by Step.
This approach will also facilitate learning, improvements in process over time, and increased speed of connection.
The foundation of any Digital Supply Chain is electronic connectivity. If you don’t have it then you don’t have real time data. If you do have it then you can focus on assimilating and presenting this as information that can be acted on in real time.
Before you start thinking about implementing higher level technologies, you have to establish the foundation.
On your Digital Supply Chain journey after you have created the vision and after you have put in place digital transformation leadership, you have to have electronic connectivity.