There’s a lot of talk these days about the digital supply chain, including what it means and why it’s important. Two questions that always seem to come up in these discussions are “What’s the value of digitization?” and “What’s the business case for it?” I explored these and other related questions with Gary Barraco, Director of Global Product Marketing at Amber Road, in a recent episode of Talking Logistics.
Visibility: Getting to One Version of the Truth
When people talk about the value of digitization, it is often within the context of supply chain visibility. But the conversation around visibility is certainly different today than in the past. “Ten years ago, visibility was primarily at the container or shipment level and that was acceptable,” said Gary. “But today visibility encompasses a complete view of an international supply chain, which requires what is often referred to as a control tower. This brings visibility to each step of the cycle, from design and sourcing to manufacturing and on through to compliance and shipment, all on one platform. This facilitates communication [across all stakeholders] and takes the guesswork out of global trade management. It creates the proverbial ‘one version of the truth’ for you and your external partners.”
The challenge today, however, is not just obtaining this end-to-end visibility, but also becoming more agile and flexible, especially with the rapid growth of e-commerce and customer expectations becoming more demanding. This significantly increases the speed at which companies need to gather and act on the information visibility provides. This requires the use of more advanced technologies and that’s where digitization comes into play.
Digital Supply Chain and Risk Management
The definition of end-to-end visibility has evolved over the past decade. With outsourcing and globalization, near-shoring and localization, as well as the changing global trade landscape with new tariffs being implemented and talk of a trade war emerging, supply chains have become much more complex, and that translates to greater risk.
Initially, companies dealt with added risk by adding more inventory across their supply chains. These buffers of risk are expensive, especially as supply chains become more globalized. Companies can no longer cost-effectively deal with all of the added complexity without new digitization technology that replaces inventory buffers with visibility. This enables them to not only see each step in the supply chain, but also analyze the impact of potential disruptions and develop informed responses. Without this digital help to mitigate risk, margins can be destroyed and service can suffer.
Agility vs. Siloes
Gary points out that the agility needed to deal with constant change and disruptions is the number one goal of many of his clients. Unfortunately, most supply chains weren’t designed for agility. They were built around siloes — around design, source, build, and deliver — and the systems that support these functions were equally siloed. Without a platform that can quickly and seamlessly tie these functions and data together, companies cannot react fast enough to respond profitably to disruptions and changes in customer demands. Digital technology provides this connective tissue. It enables companies to see and evaluate what alternatives are available and respond quickly and profitably. Gary says, “Think of it as supply chain yoga.”
Understanding the Costs
As supply chain professionals, we tend to concentrate on the physical movement of goods, but there is also a financial layer that goes hand-in-hand with the physical. What is the true cost of goods sold? What is the cost to serve each customer? What are the cost implications of changes and disruptions? CEOs and CFOs need the answers to these and many other cost questions to run the business profitably. Cost also comes into play when justifying the purchase of digital platforms that can provide the answers. I encourage you to watch the full episode for Gary’s insights on these cost questions, as well as other topics related to digitization. Then post a question or comment and share your perspective!