Just what is a digital supply chain, anyway? And how can companies achieve it? Hans Thalbauer, senior vice president of IoT and digital supply chain with SAP, has some answers.
Q: How would you define “the digital supply chain”?
Thalbauer: It comes down to all the business processes and solutions that are relevant for a chief operating officer or chief supply chain officer. It includes manufacturing, engineering, asset management, logistics and supply-chain planning.
Q: Which business models and trends are driving the need for a digital supply chain today?
Thalbauer: Companies are starting to see that they can transition their entire business by running supply-chain manufacturing differently. So they’re introducing new forms into the business. That can mean going from a wholesale retail model to a direct-to-consumer model, establishing an online retail platform. It can mean having digitized instead of physical inventory. And using 3D printing technology.
Q: What’s happening in the outside world that’s forcing them to move forward?
Thalbauer: The need to think about customer centricity first — how they can serve the customer in the best possible way. Consumer-products companies around the world are moving to this direct-to-consumer model. At the same time, how can they do that the most efficient way?
Q: What is meant by the concept of a “digital mirror?”
Thalbauer: The entire supply chain needs to be mirrored in order to run processes differently. You can start to predict what might happen based on the information you see. The concept is very important to help get to this predictive environment we want to create.
Q: Are supply chains really operating in a completely real-time mode, with everybody on top of what's going on?
Thalbauer: Not yet, but we will get there. Companies are adopting the concepts of machine learning, blockchain and the internet of things, to automate processes across networks and create the total visibility needed to run their supply chains.
Q: But few companies are making use of blockchain right now. And artificial intelligence and machine learning are still in their infancy are they not?
Thalbauer: We’ve made a lot of progress in adopting machine-learning technology already. On the blockchain, I would agree with you — we are at the starting point. It's about bringing together a network of people and companies in order to make that work. But I have no doubt that blockchain will also be adopted more and more, especially for tracking and tracing “from farm to fork.”
Q: For a company that’s just starting out on its digital journey in the supply chain, where does it begin?
Thalbauer: You need to be able to connect to business partners, and that requires the technology I described before. For consumer-products and retail industries, you need a clear understanding on the demand-management process, and tie it into the logistics process right away. You want to create an individualized, personalized product for the end consumer.
If technology just stands by itself, that does only part of the trick. You need to tie it into the business process — into manufacturing, transportation and planning — to generate the value.
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