FAQs (Frequently Asked Questions) On Supply Chain Digitisation
Following are some of the frequently asked questions (FAQs) on Supply Chain Digitisation that we have encountered in our speeches, workshops, seminars, and other forums. Feel free to ask more questions if your particular question is not answered below.
Why we are qualified to write this list of FAQs on Supply Chain Digitisation?
VERY FEW PEOPLE KNOW SUPPLY CHAINS LIKE WE DO - retail, beverages, food, milk, dairy, meat, livestock, explosives, chemicals, cotton, rice, graphite, solar power, natural gas, crude oil, fertilizers, electronics, packaging, glass manufacturing, machine parts, automobiles, industrial goods, mining, etc are just some of the industries where boards and executives have benefited from our proprietary knowledge of the supply chains.
Click on our project methodology above to see how Supply Chain Digitisation is an integral step in each and every project that we have undertaken in the last three decades.
Since when no one had heard of supply chain, our co-founder Vivek Sood has been considered one of the most authoritative professionals in the field when it comes to the subject of Supply Chain Digitisation in Australia, Asia, North America, South America and Europe.
He has written four seminal books about restructuring supply chains to gain massive advantage in business. He also regularly delivers keynote speeches at business schools and conferences such as University of Technology Sydney, Supply Chain Asia, Asian Bankers Forum, APEC Business Advisory Council.
He has been quoted in the authoritative business press and over 100 academic papers written by supply chain researchers around the world. Vivek and his team have examined thousands of supply chains during their projects over the last three decades and helped hundreds of executives build safe, cost effective and sustainable supply chains and careers.
FAQs (Frequently Asked Questions) On Supply Chain Digitisation
Digitisation Is An Emerging Term In Supply Chain management. What Is Meant By Digitisation, and how is it different that digitalisation?
Different people have different definitions of Digitisation and Digitalisation - and the distinction between these two terminologies is drawn in many different ways.
Most people take mainly an information technology perspective when answering this question. In this website, we will take a supply chain perspective to answer this fundamental question.
This website brings a unique supply chain oriented perspective that most people taking a non-supply chain perspective miss.
To understand supply chain digitisation, we have to turn the clock back and go to manual supply chain management days when all the five supply chain flows were conceptualised, tracked and optimised without computers. In fact, at that time, the term supply chain management was not even invented.
It will be safe to say that the history of supply chain management is the history of digitisation. With each succeeding generation of supply chain management, a new wave of digitisation has been let loose on the business world, making supply chains more and more efficient and effective at the same time.
So, what exactly happens with supply chain digitisation? What is the magic of digitisation?
The first thing that happens with supply chain digitisation is that the record-keeping becomes digital, on a computer based system, rather than manual - on a piece of paper.
The second thing that happens is that many supply chain processes are gradually automated.
The third phenomenon that occurs due to supply chain digitisation is that supply chain processes are integrated across the various functions within a company and even across the company suppliers and customers.
As a result of supply chain digitisation, gradually more efficient supply chains emerge because of progressively better optimisation.
What is digitalisation?
On the other hand, the term digitalisation refers to the change from analogue to digital technology in many industries. In telecommunications, television, intrumentation, and many other sectors, replacing the last generation analogue technologies with digital technologies brought in a wave of digitalisation at one point of time.
However, in supply chain management, analogue technology was not applied extensively, except for in rudimentary instrumentation. All the same, whenever analogue technology in supply chain management is replaced by digital technology, the process can be called digitalisation.
In general, digitalisation leads to better digitisation with a new generation of digital technology.
Why Is Supply Chain Digitisation Important?
As previously mentioned, the history of supply chain management is the history of digitisation in companies.
Supply chain management itself was invented in 1977. Since that time, the terminology and methodology were routinely deployed by more progressive companies to manage their internal functions in a more coordinated manner.
This progress became possible only because, at the same time, computers and digital technologies becoming available to enable companies to co-ordinate supply chain data in real-time.
With each succeeding generation of supply chain management, digital technology has improved considerably. As a result of the digitisation, ability of the C-level to integrate a company’s various functions has significantly enhanced. It has optimised the operations considerably.
This significant improvement in the company's performance is why supply chain management evolution has been crucial to most companies.
How Is The Digital Economy Impacting The Supply Chain?
Digitisation is making the Supply Chain faster, more intelligent, connected and autonomous. As stated in an earlier answer, supply chains are becoming more integrated and more optimised.
This thought is top of the mind with C-Level decision-makers. It presents opportunities for companies to embrace The 5-STAR Business Network as a strategic partner with their suppliers and customers.
How Do we Digitize our Supply Chain, What Are The key Steps?
The progress of digitisation in companies is parallel to the evolution of the companies’ supply chain.
We have tracked this evolution in our book Unchain Your Corporation (www.unchainyourcorporation.com) in an excellent detail for four succeeding generations from the 1970s to 80s 90s to the year 2000s and beyond.
- The first step in digitising your supply chain is to assess your supply chain precisely in terms of its current state.
- The truth is that almost every supply chain is digital, at least to some extent.The only difference is how far down the path of supply chain digitisation has a particular company travelled up to now.
- We have prepared diagnostic tool kits for this purpose which can be accessed by clicking here.
- Once you know at what stage of sophistication and evolution your supply chain digitisation is currently situated, you can create a goal, and a plan to get to that goal.
- We have addressed this topic in a great deal of detail in our book Unchain Your Corporation. The following infographic from this book summarises the evolution of supply chain and digitisation in organisations:
How can we Leverage IoT, AI and automation In Supply Chain Digitization?
The first step is to make sure that your company is ready for IoT, AI and automation. If you deploy these technologies when the company is not yet prepared, all you will get is chaos. It is akin to trying to start a car from a stationary stop in the 4th gear.
The start of digitisation is essential rudimentary supply chain planning, scheduling, and control, which is akin to the car’s first gear.
Only when you achieve this level of sophistication in your digitisation can you move on to the second, or third gear or sophisticated supply chain planning. The following picture demonstrates the equivalents of the second and third gears of supply chain digitisation.
Most companies that rely on ERP software for their digitisation get permanently entangled in a never-ending cycle of upgrades and project shortfalls. Unfortunately, they rarely make it out of the digitisation box to enable sufficient deployment of IoT, AI or Automation on a large enough scale to be meaningful.
However, there is a way out of the box of ERP that traps you. We detail the way in our book, Outsourcing 3.0 - (www.outsourcing3.com). The following infographic gives the highlights of the way forward - (if this is one of your problems you will have to get the book for more details) :
In a drive towards Supply Chain Digitization, How can we Develop supply chain Analytics Capabilities?
Supply chain digitisation and supply chain analytics go hand in hand. For full detail of supply chain analytics techniques - see our FAQs on supply chain analytics.
What is the relationship between supply chain digitisation and supply chain dashboards?
Think of an aircraft or a boat which is navigated by feel. As the craft becomes more significant, and navigation becomes more complex - narrow channels, celestial navigation, night time navigation, and low visibility due to fog - the need for instrumentation grows. Today, digitisation replaces the drive for instrumentation in supply chains.
Supply chain dashboards are similar to the dashboards on an aircraft, ship or car. They give just the right vital information at the right time in the correct format. Without supply chain digitisation, this is impossible.
Supply chain dashboards are closely connected with supply chain digitisation and you can peruse our FAQs on supply chain dashboards.
While driving supply Chain Digitization, How do we engage Diverse stakeholders?
There is always a group of stakeholders who benefit from the status quo. They are vested in the current model and prove to be recalcitrant, or reluctant hold-outs.
A most common example is that of information hoarding within organisations.
If someone took a handful of companies money and stored it in his office drawer only to be used by him - all hell will break loose. Now imagine what will happen if someone takes a bunch of company information and data, and decides not to share it fully and openly with his colleagues.
Information hoarding is rife within organisations, and digitisation is the answer to the problem. Yet, these very stakeholders will do everything in their power to block efforts towards digitisation unless you give them an equally significant stake in the new model, or make them redundant before the drive towards digitisation.
Explain The Benefits Of Supply Chain Digitization?
All the known benefits of supply chain management are accentuated and enhanced by digitisation.
- Better Integration - leads to cutting across the silos and much better co-ordination across departments, functional areas and organisations. This cuts all the eight wastes that are typically endemic in a business.
- Better Optimisation - leads to progressively better planning and control of supply chain operations, again cutting the eight wastes in a multitude of place to a bare minimum.
What Are The eight wastes cut by supply chain digitisation? How big are they anyway?
While there is some confusion about the eight wastes because of varying definitions of these - in general, these eight areas are addressed:
- Defects - waste of effort
- Overproduction - waste of production resources
- Waiting - waste of time
- Not utilising talent - waste of talent
- Transportation - waste of capacity
- Inventory excess - waste of product
- Motion waste - waste of work
- Excess processing - waste of capability
Besides cutting the eight wastes, what are other significant benefits of supply chain digitisation?
Supply chain governance - read our quick notes on supply chain governance to understand how digitisation is absolutely essential for supply chain governance.
Supply chain control - you cannot control or manage what you cannot measure. You cannot measure well enough without digitisation. It is that simple.
Market share - customer expectations are sky high. Customer churn is the norm. Keeping the customer is almost as difficult as gaining a new customer. Ability to deliver the promise is critical. Without digitisation what will you deliver? How will you let them know that you delivered the promise? Will they beleive your claims unless you show them credible numbers at the right time?
Margins - Leaders in digitisation earn almost three times the margin compared to the laggards. See the figure below:
Will supply chain digitisation ALWAYS lead to positive outcomes?
No, this is not even a general rule. A misguided digitisation effort can suck up many resources and cost a lot of time and money while yielding little tangible benefits to the organisation. Our book Outsourcing 3.0 (www.outsourcing3.com) is replete with case studies of misguided digitisation projects and key learnings from them.
How Are Digital Business And Supply Chain Interrelated?
As mentioned earlier, the history of the supply chain and this history of digitisation in businesses are closely inter-related.
The first supply chain management project became possible only because of digitisation. Dr Wolfgang Partsch, our senior partner in Munich, built the worlds’ first supply chain model on his Apple MK II computer as the technology of integration and optimise became available.
Today, digital technology can make customer experiences better by giving supply-chain leaders more control and providing customers with unparalleled transparency: for example, track-and-trace systems that send detailed updates about orders throughout the lead time. Application of AI, automation, IoT can make supply chains secure, sustainable, and efficient while cutting the costs and waste.
What Are Various Stages Of Digitisation?
Some people think of digitisation as a binary condition - sort of black and white, or on and off. Either you have digitisation, or you don't.
In reality, as I write in detail in the article What Do Roads In Rural Bali Have To Do With Supply Chain Digitization? the situation is a lot more complex. Here is what i wrote in that article:
Digitization Is The Buzzword Of The Moment In Supply Chain
Going by the number of articles and posts on digitization, you would think that the pope has just discovered religion.
In fact, I recently read an article which used the word ‘digitization’ nearly 100 times in about 4 paragraphs.
It talked about demand digitization, supply digitization, inventory digitization, fulfillment digitization, planning digitization, and many such things.
Is this really that new? Since the days of SAP (late 80s), or before, digitization has been gradually gaining pace. Yet, current articles are making out as if there is a switch you flick – and suddenly you have ‘light – aka digitization’.
Clearly some parts of the business - e.g. finance, or headquarters - are a lot more digitised than other parts of the business - e.g. supply chains or last miles.
In reality there an entire continuum of possible conditions - ranging between a 12 lane highway, and a cowpath - which can exist within any single company.
We have identified four such stages of digitisation which frequently exist within trading or manufacturing companies - which roughly correspond with the four generations of supply chains.
What Happens In The First Stage Of Digitisation?
What kind of systems would generally replace manual record keeping and analytics?
Very few companies would straight away switch over to a billion dollar autonomous supply chain system from this situation.
In the past, typically a large mainframe with black screen and green alphanumerals was the norm. Most output came out via dotmatrix printers. These systems had a variety of names and applications. Some were made just to process customer orders or purchase orders. Other were made for just manufacturing resource planning (MRP), while some were meant for just inventory management.
These rudimentary systems solved a number of massive problems with manual record taking and keeping. They were far more effective and efficient as repository of information and ability to analyse information.
However, when better systems came along their flaws became clear to everyone who got used to the second generation systems. Some of these critical flaws and business consequences of the first generation systems are given below:
How was the second wave of digitisation introduced? What were the second generation systems called?
The second generation systems were called ERP - Enterprise Resource Planning systems. SAP and Baan were the two trendsetters at that time.
The process is shown in the infographic below:
These second generation systems were much better than the first generation systems. Yet, in retrospect it became clear that many flaws were endemic in their planning and control capabilities:
if ERP and ERP-II are the systems of the second generation of digitisation in last century, then what is the third generation of digitisation?
What shortcomings did these systems foster on the organisations using them?
what is the evolution of current state and future of digitisation and supply chains?
What Is The Biggest Challenge In Implementing Digitization In The Supply Chain?
Digital technology is a double-edged sword: It presents a significant opportunity, but it also holds some of the biggest challenges in supply chain management. Following are some of the key challenges:
Lack Of Expertise To Lead Digitization Initiatives
Organisational Structure And Culture
Lack Of Overall Digitization Strategy, Conceptualisation Ability Or Diagnostic Skills
However, none of these challenges is as significant as the endless spiral of ERP upgrades and implementation shortfalls described in the next answer.
What Is This Endless Spiral Of ERP Upgrades And Implementation Shortfalls That You Talk About?
Since the early days of ERP systems, significant hype was built around these software systems, and magnificent expectations were sold as part of the deal. No real-life system was capable of meeting all those expectations, and then the endless spiral started with promises of meeting some of those expectations with the next upgrade. Growing expectations with technological advancements meant that reality never caught up with expectations. A great majority of companies are caught up for the last two decades in an endless spiral of chasing their tails and never getting out of the ERP box.
Sink of swim Report: how information technology can save or ruin supply chains
Access the short guide to this report by filling in the form below:
Notes on FAQs
Clearly, any such list of frequently asked questions (FAQs) about supply chain can never be fully exhaustive. Neither is anyone, including us, the final authority and arbitrator on this or any other topic.
You will have your own opinions on many of these topics, and will have many other questions.
We throw open the comments section to you for your opinions and questions. We will try to address all of these, and the best ones will attract a reward in the form of one of our books, or publications.