The meaning of the phrase, “supply chain digitalization,” has become somewhat obscured recently due to overuse and misapplication. In truth, the practice can be transformational and help electronics manufacturers improve operational efficiency and improve profitability.
However, small to medium enterprises (SMEs) can only realize the full potential of the methodology if it is properly implemented.
Here is a closer look at what supply chain digitalization really means, the practicalities involved, and the benefits it offers to SMEs.
What Does It Mean to Digitalize a Supply Chain?
Supply chain digitalization refers to the process of transitioning a firm’s analog production and logistics processes to digital platforms.
SMEs that utilize software to order materials, monitor inventory levels, track shipments, gather market intelligence, and automatically exchange data with vendors and customers have embraced digitalization.
Analog manufacturers should begin their transformations by adopting an enterprise resource planning system (ERP) across the organization. These platforms enable brands to perform many procurement functions electronically and provide access to the above-listed features.
Once a manufacturer begins using an ERP, it can integrate more advanced connected technologies into its operations.
Leading-edge digital supply chain tools include:
• Blockchain-based digital record keeping
• Electronic components e-commerce platforms
• Autonomous manufacturing equipment
• Artificial intelligence (AI) driven quality control systems
• Bluetooth low energy sensors
• Internet of Things (IoT) powered self-directed factories
Do SMEs need to overhaul their production and logistics divisions overnight? No, because doing so would be expensive, inefficient, and likely unsuccessful.
Instead, firms should focus on integrating ERP into their operations before attempting something more extensive. However, electronics manufacturers should make supply chain digitalization a near-term priority to remain competitive.
Why Should a Company Digitalize its Supply Chain?
The core benefit of digital supply chain management is that it allows companies to eliminate inefficiencies and boost productivity. As firms’ employees off-load repetitive tasks to automated tools, they can redirect focus to their more complex responsibilities.
Another benefit of digitalization is that ERPs provide procurement specialists insights into potential material shortages, shipping restrictions, and vendor issues. With that information, purchasing professionals can plan ahead and avoid unnecessary production and logistics line challenges.
For example, SMEs can utilize Sourcengine to browse more than 550 million electronic components listings from over 2,600 traceable suppliers. The e-commerce platform lets firms order the mission-critical raw materials they need to keep by clicking a few buttons. The online marketplace also offers worldwide shipping and delivery rescheduling to prevent disruption at the production level.
Companies can also decrease their overhead costs by automating part or all of the manufacturing facilities.
That said, firms can do more than just reduce costs by modernizing their manufacturing and logistics operations.
A McKinsey & Company survey found brands that digitalize their supply chains improve their annual pretax earnings by 3.2 percent. The consultant firm determined technological integration allows businesses to increase their income by improving forecasting and customer satisfaction.
Similarly, Pricewaterhouse Coopers conducted a study showing firms that invested in modernizing their production and logistics segments experienced an average revenue increase of 7.7 percent per year.
Although “supply chain digitalization” has become a buzzword, the practice provides SMEs with significant returns on their investment.
It’s All About Leadership
It is important to note, like any systemic change, implementing supply chain digitalization takes a lot of work. At minimum, companies need to integrate new technology into their operations and train employees in their use. When firms do not put in the effort to adapt to increased technological integration, adverse outcomes occur.
USA Today reports 70 percent of digital transformation initiatives proved unsuccessful in 2019. Why did so many corporate modernization efforts fail? Because many companies fell short in communicating the importance and nuances involved in overhauling long-standing workflows, processes, and tools.
As such, leaders that want their organizations to enjoy the many financial and operational benefits of supply chain digitalization have to step up. Executives need to directly enunciate their goals and expectations to their employees before and during the technological integration process. By doing so, CEOs replace their teams’ insecurities with a sense of real enthusiasm about the future.