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3 Reasons Manufacturers Should Digitalize Supply Chains in 2020

Cargo trucks driving with the sunset in the backdrop as the deliver component supplies to manufacturing companies; find out why supply chain professionals must digitize the chain now in 2020.

Today, electronics manufacturers face challenges from predictable instabilities (like shifting consumer interests) and unforeseen disruptive events (such as the coronavirus pandemic). Thankfully, recent advances in technology have provided OEMs and CMs with a way forward through digital transformation. But given the current global economic situation, companies might feel some apprehension about investing in systemic change.

Here are three good reasons why electronics manufacturers should not wait when it comes to digitizing their supply chains in 2020.

Digitization Helps Firms Build Resilient Supply Chain Ecosystems

In terms of supply chain management, ecosystem refers to a cross-industry network of partners working together to ensure positive mutual outcomes. By pooling information resources, suppliers, logistics companies, and manufacturers make themselves more resilient when dealing with expected or unanticipated disruption. With greater data accessibility, firms can quickly implement contingency plans and create new response strategies.

In a supply chain ecosystem, all participants should ideally be sharing data through a multifaceted ERP system. That way, an issue affecting one organization can be addressed before it impacts its partners. For instance, many countries initiated manufacturing and international travel lockdowns to halt the spread of the coronavirus. As a result, several OEMs lost near-term visibility because they were caught off guard by the change.

However, firms operating in supply chain ecosystems have the data resources to mitigate the impact of the global health crisis.

Suppliers can inform OEMs about production delays, which gives them time to contact alternate vendors in non-locked down regions. Logistics providers can alert partners to temporary shipping lane changes so other delivery methods, like air freight, can be implemented. And manufacturers can reschedule drop-offs and adjust orders to account for government-mandated factory closures.

Despite the clear financial benefits of the ecosystem model, Gartner reports only 21 percent of SCM leaders currently have highly resilient supply chains. Given the array of challenges facing manufacturers at present, failing to embrace digitization invites serious future consequences.

Digitization Provides OEMs and CMs with Crucial New Product Data

Supply chain digitization offers OEMs and CMs benefits beyond resiliency. Through collaboration, suppliers and logistics firms can integrate ERP software into their workflows. This allows manufacturers to gain crucial market intelligence that can inform their new product development strategies.

For instance, UNESCO notes pandemic related school closures displaced more than 290 million students worldwide earlier this year. As a result, administrators the world over initiated remote learning programs to give young people access to crucial educational resources. This trend created a massive new market opportunity for OEMs as demand prompted a 32 percent year-over-year spike in low-cost laptop shipments.

The coronavirus’ impact on the remote education technology sector is not limited to the near-term. MarketWatch recently forecast the distance learning technology segment will reach $227.45 billion by 2027, more than double its 2018 value.

OEMs and CMs should consider that paradigm shift when planning out their future NPIs, but they should also factor in supply chain data. Using an ERP platform, firms can integrate supplier and logistics data to gain crucial production insights. Buyers can add new vendors to their ecosystems to head off potential tariff hikes on items like memory modules and LED panels. They can also compare part lifespans to attune component purchases with end-user replacement cycles.

Harvesting granular market and manufacturing insights through digitization can pay enormous dividends for manufacturers. Accenture reports that companies leveraging supply chain ecosystem data could generate up to $100 trillion in product and service opportunities by 2028.  

Digitization Enables Companies to Improve Financial Outcomes

Supply chain digitization means more than building resilient ecosystems and integrating data insights into new product development. It also refers to the process of modernizing existing networks and systems through advanced connectivity and automation.

In a recent report, PricewaterhouseCoopers (PwC) surveyed over 1,600 executives representing businesses in 33 different industries. The firm determined companies that have advanced the capabilities of their supply chain ecosystems are well-positioned to thrive in the post-coronavirus landscape.

The research firm found its most resilient respondents:

• Synchronized operations with partners in real-time to optimize supply chain management.

• Utilized artificial intelligence to expand and improve supply chain capabilities.

• Employed automated warehouses and asset tracking systems to enable smart logistics functionality.

PwC’s report asserts that firms that invest in supply chain digitization now will be better off in the future, but it derived its insights from existing datasets. The group found companies that embraced advanced connectivity and automatization in 2019 cut their supply chain costs by 6.8 percent and increased revenue by 7.7 percent.

Anticipated and unforeseeable disruption are risk factors for electronics manufacturing in 2020 and beyond. But OEMs and CMs that digitize their supply chains prepare themselves for success by becoming more resilient, forward-looking, and financially robust.

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