Like the air we breathe, the term “digital” permeates every facet of our lives, so much that it’s become a fact of life that we take for granted. We use digital technology to communicate information, learn new skills, sell goods, shop, and much more. While most find this new way of life revolutionary, others might argue that there is nothing really new about digital. Why? Because they have been doing digital forever.
For decades, supply chains have incorporated digital technologies like programmable logic controllers, radio-frequency ID, EDI, and electronic documents into their processes and operations. If that’s digital transformation, supply chain operators have long-boarded that train before anyone else thought of coming along for the ride. Over the last 25 years, these technologies have optimized and streamlined the function dramatically – evolving rapidly to accelerate processes, squeeze costs, and offer better quality.
So why are we still talking about digitally transforming the supply chain? During the SAP Radio episode Digital Transformation Across the Extended Supply Chain, from the Coffee Break with Game-Changers Future, Rick Imber, national vice president for the Extended Supply Chain Center of Excellence at SAP, stated “The key is going digital with your business processes and eliminate all those manual steps so you can give the customer what they want. That’s what supply chain digital transformation is all about – the customer.”
Redefining the supply chain one digital innovation at a time
When executives say that their supply chain is going through a digital transformation, they are not referring to the traditional model of supply, demand, and fulfillment. They really mean the extended supply chain – a close integration with other lines of business units that impact and are influenced by the supply chain such as product development, manufacturing, sales, and operations to name a few. Most important, that entire network needs to revolve around delivering the best-possible customer experience.
According to Michael Yagdar, principal and America’s SAP leader at Ernst and Young, the demand for instant service in near perfect quality is bringing additional pressure to the supply chain. “Every single day, companies provide excellent service or ultimate flexibility to the customer. But the implications for the business are significant. Just look at how the supply chain needs to evolve to meet that demand. Customer intimacy is now the source of differentiation,” he stated during the panel discussion with Imber.
Take smart vending machines, for example. With this new beverage delivery system, consumers can personalize their drink, choosing different flavors and ingredients by simply pressing a few buttons on a single machine. While this may sound like a great differentiator, this is only half of the story. By linking the kiosk to a supplier network, enterprises can provide insights to their suppliers into what consumers prefer and how much they pour at a single visit. Not only will suppliers understand which products are selling and need to be replenished, but they can also pinpoint an opportunity to offer a new flavor on store shelves.
Another great digital technology that is evolving the supply chain is 3D printing. For Barilla, this technology is revolutionizing its pasta production and realigning its entire supply chain. The brand can now offer more than just five varieties of pasta to restaurants, retailers, and wholesalers, giving them a choice of ingredients (vegan!), flavors (Mediterranean tomato!), and shapes (soccer balls to celebrate my favorite team’s win!). By putting a 3D printer in its customers’ facilities, Barilla’s supply chain must anticipate and fulfill every possible configuration. The whole notion of demand anticipation and fulfillment and replenishment is completely flipped. Instead, the supply chain needs to think about arriving at the customer site to service this piece of equipment.
Powering the supply chain of the future
In such a dynamic environment, supply chains – as well as the rest of the business – need a new digital core that can provide full, immediate access to accurate, real-time information about their customers, supplier network, and competitors. Having the right information can make a difference when producing and distributing custom products with shorter lead times and smaller runs to meet customer demand while keeping costs under control, minimizing inventory buffers, and driving productivity to peak levels.
With a new digital core any change in supply and demand can be quickly detected and resolved throughout the supply chain. A large order needs to be suddenly shipped overnight? No problem. The digital core can identify any production gaps efficiently, send an alert about the demand-and-supply imbalance, and provide various options to fix it. Now, the supply-chain process happens in real time with increased visibility and decision support
No matter how efficient your processes, the supply chain is only as good as the supplier network. By integrating the digital core into your suppliers’ network, companies can help ensure that they are using the right and best suppliers.
The supply chain of the future: networked, connected, with a brand-new operational model that keep customers coming back for more.
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For an in-depth look at the digital supply chain and other influences affecting business in the digital age, download the SAP eBook, The Digital Economy: Reinventing the Business World.
Discover the multiple factors driving digital transformation in the SAP eBook, Digital Disruption: How Digital Technology is Transforming Our World.
This article originally appeared in SAP Business Trends. It was modified for Digitalist Magazine.