Why do we need a digital supply chain? Here are six reasons for you!
2024-07-26 / tech
Many companies claim to be undertaking digital supply chain transformations, yet some do not fully understand the rationale behind it and merely follow the trend blindly, hoping that this article can provide some insights. Let's explore the six reasons why digital supply chain is necessary.
1. Enhance the speed and agility of the supply chain
In traditional manufacturing enterprises, the focus is on production and sales, with information technology and supply chain management not being at the core. As the market experiences overcapacity and weak demand, companies need to understand market demands more quickly in order to respond swiftly.
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Recently, a friend consulted me with a problem. His company has 50-60% of orders that cannot be shipped after being produced each month. The sales team's explanation is that customers delay or cancel orders and shipping schedules are postponed, leading to a significant backlog of inventory in my friend's company.I analyzed the reasons for him, and the main source is still with the customer. You need to ask the customer to provide more accurate order information. If there is a need to postpone the order, it should be notified to your sales as early as possible.
The company can set a time period during which it should not easily allow customers to postpone or cancel orders. If customer demand information is transmitted more quickly, it can help upstream suppliers to better arrange production and avoid unnecessary inventory.
Digitalization can increase the speed and agility of the supply chain, allowing changes in downstream demand to be transmitted to the upstream more quickly, reducing the "internal consumption" throughout the entire supply chain.
2
Improve Global Data Visibility
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(Note: The original text seems to be cut off at the end, so the translation is based on the provided content.)Why can't customers share fluctuations in demand in a timely manner? There are two possibilities: the first is unwillingness, and the second is lack of capability, with a focus on the latter.
Customers have downstream customers as well, and to obtain accurate demand information, it is necessary to have real-time data, understanding the location and quantity of inventory.
Electronic spreadsheets and data that are isolated in various information silos are technologies that find it difficult to provide global data visibility. The situation in the supply chain is constantly changing, and it happens simultaneously on both the demand and supply sides.
Whether it is a change in information on either end, it needs to be updated in a timely manner; otherwise, it cannot reflect the current situation. Without digital tools and relying solely on planners to make manual changes, not only is the efficiency low, but mistakes are also prone to be made. Achieving global data visibility is even more challenging.
3. Avoid the Bullwhip EffectDigital technology can collect, integrate, and report data, showcasing actual supply chain activities and preventing upstream suppliers from being misled by false information, thereby avoiding the "bullwhip effect."
Data that has been artificially processed often includes a buffer. For instance, when providing forecast information to suppliers, procurement may worry that the forecasted quantity is too low, and suppliers might not have enough raw materials on hand, so they increase the forecasted amount.
Due to a lack of security, many people will artificially amplify demand information, leading to the bullwhip effect. Inventory accumulates more and more in the system, and it is always difficult to be digested.
To avoid this negative effect, digital technology replaces inventory with information flow, transforming push production into pull production. Demand signals are sent from the sales terminal, helping planners to respond quickly to actual demand.Providing Insights
To formulate strategies, top executives need various insights into the supply chain, such as trends in future sales, inventory, and transportation costs, which will affect the company's cash flow and profits in the future.
Has anyone experienced this? Even though we have ERP software, we still rely on Excel spreadsheets. Executives often ask the supply chain for various data. There are not so many ready-made tables in the system, and many need to be customized. Planners have to extract data from multiple sources, then merge them together, and provide insights to the executives after analysis.
Without digital tools, planners can only manually collect, store, and analyze data before they can provide insights. The whole process is time-consuming and inefficient. If the situation changes, such as natural disasters, regional conflicts, or port strikes, the plan has to be redone. Using efficient, integrated digital technology can enhance the company's strategic analysis capabilities.
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Improving Data AccuracyOften, there is a situation where we enter data into a system or form once, but we need to repeat the input action in another place. This is a meaningless repetition of labor, which is a pure waste.
In Excel, data synchronization can be done, and it can be refreshed after updating the data source. However, this method is not very convenient, as it not only requires customization but also can be easily modified by others.
Information systems can better solve the problem of a single data source. Data can be entered once, stored in one place, and used in multiple transactions without the need for repeated input or the risk of formula modification errors.
6
Strengthen the trust relationship in supply chain cooperationDue to the lack of smooth information transmission, there are often frictions between the upstream and downstream of the supply chain. Orders that have been well-prepared but are rejected by customers will inevitably lead to complaints from suppliers. In the long run, this will damage the cooperative relationship between the two parties. Information technology can create greater trust among supply chain partners by utilizing real-time information sharing, deepening the relationship of trust.
From the public account: CIO Club
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