The Role of Technology in Transforming Supply Chain Management
Supply chains are essential to every company’s operations. Any organization engaged in the business of selling goods to consumers relies on the efficiency of its supply chain. The supply chain is what links together all the resources, companies, technologies, and individuals involved in selling a product or service to consumers. As a central component of operations, the supply chain can represent an opportunity for grand success or crippling failure.
The difference between the two comes down to how efficiently a supply chain is run. This is where supply chain management comes in. Supply chain management allows companies to reduce costs, improve efficiencies, and have positive interactions with their customers. Harnessing the power of technology to bring about positive transformation in their supply chain is a question many organizations face today.
In this post, we will look at how technology in supply chain management will become a key driver of business growth in the coming years.
A company looking to scale efficiency and reduce costs cannot afford to treat supply chain management lightly. Instead, supply chains should be given the same weight as harvesting important data and as an opportunity for delivering additional value. Optimum supply chain management involves the five parts of the supply chain, namely:
Every part of the supply chain can benefit from the integration of technology. Currently, supply chain management is one of the most neglected areas of business operations, especially when it comes to adopting new technologies. A study by McKinsey & Company found that the average supply chain is only 43% digitized while only 2% of respondents stated that supply chain management was the focus of their digital strategy.
However, that can soon change. Another survey, this time conducted by Deloitte, found that 73% of respondents surveyed said that their organizations were considering overhauling their approach to supply chain management. Fortunately, more companies are realizing the benefits of transforming their supply chain management strategies and they are turning to technology to do so.
The global pandemic in 2020 proved that the traditional models of supply chain management were vulnerable. Today’s technological innovations seek to address the existing shortcomings within supply chain management practices.
Even before the Industrial Revolution, technology was a key driver of change when it came down to how we conducted business. In today’s Digital Age, technology is once again rewriting the rules of business as it enables faster, more secure, and more efficient ways of doing things. The application of technology in supply chain management has advanced greatly this last decade and the list of possibilities keeps growing.
Here are four new technologies that are being used to transform supply chain management today:
The IoT represents an opportunity to gather a wealth of relevant data from its assets be they finished goods, transportation containers, or storage facilities. Using IoT, companies can improve a supply chain’s asset tracking, inventory management, demand forecasting, and decision-making capabilities.
The advent of blockchain technology is poised to become a boon for supply chain management. Blockchain functions as a distributed digital ledger, thereby circumventing the problems found in traditional track-and-trace operations. By using blockchain, companies can ease the friction between record-keeping and tracking the path their products take through the supply chain. Incorporating blockchain technology into supply chain management has multiple benefits such as:
● Immutability: Once conducted, transactions on a blockchain cannot be altered or deleted.
● Reliability: Since all transactions on the blockchain are recorded permanently, it serves as a reliable record.
● Tracing: Because the blockchain’s ledger is shared by all stakeholders, tracing a particular asset within it is made easier.
● Security: All parties on a blockchain for business are verified, ensuring secure transactions.
AI is currently capturing the imagination of the world. It is the brave new frontier for technological innovations. Industry leaders like Google and Microsoft, as well as pioneers like OpenAI find themselves in a tight race for new breakthroughs. Data gathered by PricewaterhouseCoopers projects that AI will be contributing as much as $15.7 trillion to the global economy by 2030.
The ramifications of this AI gold rush are being felt in the field of supply chain management as well. AI can analyze large volumes of data generated at every stage of the supply chain and can come up with logistics plans. AI can also ease communication issues between different players within a supply chain. By taking the burden off human workers, AI can fuel a productivity spike in a company’s supply chain.
With the volume of data generated within a supply chain, companies must turn to technology to refine that data into actionable insights. This is where technologies like predictive analytics come into play. Predictive analytics can parse through large volumes of historical and current data before using it to identify patterns, predict different outcomes, and estimate which outcome has the highest probability. For supply chain management, this has many benefits, such as:
● Predictive maintenance
● Route optimization
● Demand forecasting
● Inventory optimization
These four technologies are set to revolutionize the way businesses approach supply chain management. But they are just the tip of the iceberg. A wholesale technological overhaul is on the cards for supply chain management across every industry.
In addition to these four technologies, other innovations that are likely to impact how supply chains function are:
● Cloud technology
● Machine learning
● Digital twins
● 3D printing
The nature of supply chains is changing in the 21st century. As digitization inevitably transforms supply chain management, the companies that are best able to adopt new technologies will be the ones to reap their benefits. A growing global economy requires new ways of doing business. It is no longer a question of whether companies will start integrating technology into their supply chain management plans, but when.