The Effects of Digital Supply-Chain Management Transformation

Supply chain management (SCM) is the management of the flow of goods and services. It also includes all the phases from gathering the raw materials to releasing the final product. It is now considered a vital tool to boost customer experience. Businesses are investing more and more into SCM in order to gain a competitive advantage in the marketplace.

Through coordinating internal information and materials, SCM represents an effective tool which leads to efficient and economical warehouse solutions. Not long time ago, SCM was a school of thought limited to very small number of people in the business. However, thanks to business schools and consulting firms, SCM has become a widely recognized approach in diverse industries. In this article, we’ll try to show you how supply-chain management is applied and what it means for the businesses. 

Digital transformation in Supply-Chain Management

The product life cycles are getting shorter and we are witnessing a great increase in product variety every year. In addition, the demand of the customers are shifting rapidly. This change is putting too much stress on supply chain. Since the 1990s there has been a tremendous increase in information technology and now the SCM is making use of technology so as to keep pace with the dynamic processes. Thanks to the introduction of Artificial Intelligence and Machine Learning, SCM has transformed into a digital tool which enables real-time information sharing, coordination and decision making among companies. A recent McKinsey study found that the average supply chain has a digitization level of 43 percent. The same McKinsey research suggests that, on average, companies that aggressively digitize their supply chains can expect to boost annual growth of earnings before interest and taxes by 3.2 percent—the largest increase from digitizing any business area—and annual revenue growth by 2.3 percent. Here is a few areas in which the SCM changes the perspectives.

*High level of interaction 

The latest advances in SCM are now increasing the level of interaction among enterprises. Now that the SCM has become a new industry standard, the companies in different fields have become to use the same language. There has never been a more communication between initiatives from different industries and third-party logistics.

*Removing the stress

Matching supply and demand is a costly business. It is also very unforgiving if you make a small mistake and miss the customer’s expectation. Therefore, digital SCM can help companies to increase production and distribution. By reducing the focus on physical medium increasing services and online channels, the SCM can make the ground for market mediation.

*Demand-based management

Marketing efforts require aggressive pricing policies and advanced demand-management instruments. It is very important to observe customer behavior or pattern to align the available supply with the customer demand. This will lead to more sales and increase in income alongside the customer journey.  

The below are just simple examples of how SCM can affect your business. However, once a company sets out a vision to digitalize the SCM, there are many more benefits. To begin with, the advanced SCM, results in better decision making. Machine-learning systems can provide supply-chain managers with recommendations for how to deal with particular situations depending on the new customer orders. Automation is just another important tool to enhance the operations. Automated operations can take supply-chain professionals burden and create time for them to focus on more valuable tasks. Besides, automation eliminates the need for manual efforts thus making workers more efficient and productive. Having implemented SCM correctly, you will have the opportunity to engage with customers in a much improved way. Digital SCM not only provides benefits to retailers but also gives much freedom and control to customers. They can easily track and trace their orders while getting regular updates about the shipping process. “A digital supply chain can help a company scale its business model,” says the CEO of Makhina, Mehmet Ali Çalışkan and adds, “We are living in uncertain times. Yet, one should not just focus on the negative side. You can always have a need to scale up your business and you can only manage this by having digital SCM. Restrictions, lockdowns, regulations or unexpected turning points can lead the customers into your business more than you plans and beyond your expectations. So it’s high time you got prepared right now!”

Of course it’s not a very easy task to promote your company to digital SCM. The shifting process can be painful and cause even a temporary set back for your goals. Nonetheless, adaptation of digital technology such as artificial intelligence and machine learning is becoming a more common ground for many different industries. As a result, we are seeing that it’s a reachable goal to improve  supply-chain performance quickly at a modest cost. Çalışkan stresses the importance of long-term strategies. “You need a definitive transformation road map. You should work with partners which embrace the benefits of digital SCM and speed up transformation without being late for the future.