The process of digitizing global supply chains continues to generate a lot of interest and discussion in the industry, perhaps because it’s really about embarking on a transformational journey. While the end destination offers some great potential benefits, there are some key questions for many companies, including: are we even ready to get started? What are the prerequisites to digital supply chain transformation? And once we get started, in what ways can we ultimately achieve value?
What is a “Digitized” Supply Chain?
Considering we have had spreadsheets, PDF documents, and other electronic representations of the supply chain for years, what makes a “digitized” supply chain different? Ty explains that these and other electronic documents, together with many paper-based forms, are static data sets that generally cannot be automatically understood and used by digital supply chain applications. Therefore, Ty defines a digitized global supply chain as a structure for taking all of the previously “paper-like” data sets and putting them into a master database and an executable model of the global supply chain. “That is the key to unlocking the value of digitization,” says Ty. Without that complete, aggregated view you can’t take advantage of the many opportunities out there to make smarter and faster business decisions.
Three Ways to Create Value Through Digitization
Ty sees the value of digitization in three main areas: collaboration, automation and analytics. He notes that collaboration can be both visual and digital. Visual collaboration is the ability to take information gathered from many supply chain partners who may be in different countries, different time zones, and may speak different languages, and display the information on web browsers to inform people so they can make better decisions. Digital collaboration is the ability for disparate computer programs to share information through standardized communications protocols such as EDI and XML, and potentially blockchain in the future. This enables data to be entered only once, with the inherent reduction in manual effort, cost, and errors, so it can be used to collaboratively manage the supply chain.
The second area of value is in automation. By letting applications share data and analyze supply chain operations, usually much faster and more accurately than humans, people can be removed from routine processes so they can concentrate on exceptions. Ty cites an example of an alert that a container ship is two hours from port. This may trigger a notice, through predictive analytics, to a drayage company that my containers will clear customs within three hours and they should have trucks ready to pick them up. It may also alert the warehouse that the shipment should arrive in five hours so the proper labor resources can be ready to unload.
Another area where automation adds significant value is in global trade documentation. There are so many and different import/export regulations globally, which change regularly, that it is very hard for humans to keep up. Automation not only speeds this process, it also greatly reduces compliance risk.
The third potential value area is through analytics. Once you have an aggregated master database with transaction history, there is a wealth of information that you can mine to better understand your supply chain and take advantage of opportunities to optimize operations and improve collaboration. Then everyone is working off of the same version of the truth and can take the appropriate action to optimize their portion of the supply chain in a way that benefits all partners.
What Are the Benefits of Digitization?
It’s obvious that if you’re more efficient and collaborative, if you’re able to make better decisions faster, and if you can reduce errors and risk, you will achieve significant benefits. But how, specifically, will digitization drive real benefits? How can you reduce freight forwarder and brokerage fees, for example? How can you leverage free trade agreements? How can you mitigate risk when unexpected events occur?
I encourage you to watch my conversation with Ty where he addresses those questions and more, including the role of emerging technologies like blockchain, machine learning, and Internet of Things (IoT) in creating new opportunities and benefits. Then post a question or comment and share your perspective on this topic!