Today, many executives face a decision about whether to press forward and defend these supply chains, or begin to invest in digital capabilities that promise better integration and resiliency and can fuel differentiation, sustained prosperity and growth. Adding some urgency to this decision is that newcomers and some established players are beginning to adopt digital supply chains, which could put those that do not at a competitive disadvantage in the near future.
The arguments for going digital and creating smart, highly responsive supply chains across geographies and markets are powerful. In terms of new outputs, digital technologies create real-time value chain visibility and flow monitoring, smart warehousing and logistics operations, retrospective root cause performance and optimization analysis.
Meanwhile, digital supply chains improve current operations by integrating S&OP planning, reducing the impact of value chain disruptions through increased visibility and opportunities to take action, and increasing material availability by optimizing warehousing and distribution operations.
So, in practical terms, what would a smart, digital supply chain look like in the future? For starters, it is customer-specific. This tailoring is made possible by capabilities that integrate information in real time from a vast array of sources to know where goods are in the supply chain. This increases the number of potential action points within the supply chain and hence efficiency opportunities and the potential to expedite in response to changing needs. Perhaps most importantly, the digital supply chain opens up multiple paths-to-market, giving a company the agility and resiliency to quickly work around disruptive events.
This point about shortening the supply chain is critical. Today, a company in the U.S. sourcing from Asia will get products to market in 45 to 60 days — at the earliest. But those lag times in our digital age are increasingly unacceptable to consumers. Companies will need to find ways to compress that product lifecycle; smart, digital supply chains will be integral to this effort.
For the time being, these digital supply chains might be more expensive to build and operate than their established, solid state cousins. However, digital supply chains make possible a wide array of efficiencies and add resiliency that could quickly close the cost gap.
For example, a digital transportation management system could make decisions based on actual weather forecasts instead of relying on historical events. Instead of using more expensive temperature-controlled trucks between certain dates based on previous weather patterns, a smart TMS could make the decision about whether to use a temperature-controlled truck based on the actual weather forecast.
Looking forward to 2020 and beyond, digital supply chains will become more common. Executives relying on solid state supply chains have some tough decisions to make about whether and how fast to migrate, but the effort is essential for resiliency in the face of industry disruptions and long-term success and sustainability.
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