What Do Roads in Rural Bali Have to Do With Supply Chain Digitization?

What Do Roads in Rural Bali Have to Do With Supply Chain Digitization?


Vivek Sood




June 12, 2019

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’

Reality is far more interesting and juicy

Thinking of digitization, I was reminded of our business transformation projects and trouble with getting accurate data. Despite spending hundreds of millions of dollars on ERP systems, (and in many cases over a billion dollars), most companies still fall way short in terms of their data – both in terms of accuracy and completeness.

Before starting almost every project we are assured that the data will be in our hands within a few days – at the most. Typically, we count ourselves lucky if the data extracts are available within 3 weeks, and are accurate enough to be useful for analysis.

The nature of things

But, this blog post is not about the barriers to digitization, rather it is about the nature of digitization itself.

Why the data is not readily available, and why is it of such poor quality that it is barely useful for most analysis – this discussion will open up a pandora’s box of pent up feelings within the companies.

Who to blame?

Most technology companies are clueless about the human element, and continue to plough ahead in darkness – and blame their customers for technology failures.

Reading the recent spate of articles on digitization left me with a distinct impression that another element which they show a marked ignorance about is the nature of digitization itself.

No binary switch

The belief that it is a binary switch where you get technology and suddenly your company is ‘digitized’ is far from reality.

Recently, I had the occasion of spending nearly a month on a sabbatical and family holiday in the island of Bali. I happened to travel over the entire length and breadth of the island during this period and noticed the state of the roads varied significantly depending on how far I was from the ‘touristy Bali’.

Gradual and constant effort

What started as paving over the village footpaths, would gradually morph into high-quality road, which would later be widened to accommodate growing traffic, and later replaced by a highway/motorway in parts.

Most island roads were, however, still narrow village paths paved over for modern transport. All this existed simultaneously at the same time and will continue to exist well into the future – with gradual upgrades from one level to next over the years.

Effort can be hastened

That is the state of digitization of supply chain and will continue to be, with gradual upgrades from one level to next well into the future. We have no Y2K type crisis (remember that?) that will force upgrades, and dollars are scarce in most companies that do not enjoy some historical or political advantage.

No amount of hype from IT vendors is going to change this reality. Also, CEOs and CFOs of long memories of past IT projects that failed to fully deliver.

Perhaps the next generation of executives will be gullible enough to fall for the same hype again.

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Vivek Sood

Our Quick Notes On Five Flows Of Supply Chain Management

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  • Rahul Chatterjee, Analyst | Consultant | Advisor | Digital Strategist | Supply Chain Logistics says:

    Digital supply chain technologies are helping some companies achieve a step change in performance in more complex areas. Consider the potential of automated replenishment to transform manual processes. Amazon, for example, offers the Dash Button, an Internet-enabled device that consumers press—without having to log on to an account—to reorder laundry detergent, diapers, and other grocery items.

    • The term is not clearly defined. On one hand, digital supply chain is the way and channel to distribute goods or services that had previously been supplied in physical form – such as books and music. On the other hand, the digital supply chain stands for the technologies which help to better design, plan and manage the flow of goods or orchestrate the participants in the ecosystem.

      • Rahul Chatterjee, Analyst | Consultant | Advisor | Digital Strategist | Supply Chain Logistics says:

        Hey, Samar thanks for your valuable comment

    • Digital supply chain primarily addresses matching customer demand as expressed by orders with inventory items obtained from various suppliers, at different fulfillment centers, and transportation / cost options to define and implement a way to get the customer’s desired order to the customer while minimizing inventory costs, packaging costs, transportation costs, delivery time, etc. Typically the systems require a mixture of expertise across systems software, algorithms, machine learning and operations research optimization techniques to select a near-optimal fulfillment plan from the large number of permutations / combinations of all possible fulfillment plans.

    • The digital supply chain is a process of networking between individuals and organizations involved in a business deal that is initiated in a paperless environment, using web-enabled capabilities. Whereas a supply chain is the simple networking between all individuals, organization, and activities involved in a business process from the manufacturer to the end user. Precisely a supply chain is a set of two or more individuals or organizations directly involved in selling or buying services, products, information from a source to a buyer. The whole process done with the aid of digital technology is termed as digital supply chain. Digital supply chain integration is being used more widely in today’s world.

  • Instead of a definition, I’ll give you an example.

    Amazon sells Paperbacks and Hardcovers. Most paperbacks are sold for $9.99. That includes publisher commissions, warehousing, transportation costs and finally Profits if any. Enter Kindle ebook. You pay the same $9.99 to download it. Costs associated with the transaction are a near 0 when averaged over all ebooks sold by Amazon

    • A digital supply chain is a supply chain whose foundation is built on Web-enabled capabilities. Many supply chains use a mix of paper-based and IT-enabled processes. A true digital supply chain goes far beyond this hybrid model to fully capitalize on connectivity, system integration and the information-producing capabilities of “smart” components.

      The ultimate goal of the digital supply chain is to enable insights for increased efficiencies, doing away with waste and facilitating greater profits. Companies with a digital supply chain are better able to move resources, assets, people and inventory to where they are needed at any given time in order to reduce costs by responding proactively to transportation and manufacturing risks. The potential payoffs of a fully realized digital supply chain include savings in every area, from resources, time, and money to a reduced environmental footprint.

    • The foremost aim of the digital supply chain is to deliver insights to increase efficiency and to produce higher profits for the organization without any manual intervention.

  • To overcome today’s retail challenges, digitization in the supply chain is essential. However, retailers are very slow in this process of supply chain digital transformation. A digital platform that collects and analyzes real-time data from across the supply chain network makes businesses quick and efficient. It allows making informed decisions and ability to react to opportunities and risks when they occur. Digitization in supply chain protects businesses from getting impacted by risks and increases profitability.

  • With a cloud-based SaaS platform, supply chain operations and management become quick and effective as there are no servers to own, operate or maintain; you just need to plug-in and you are ready to go. Supply chain digitization is not a single step process. In digitization, the most critical area can get addressed first; once the benefits are evident, retailers can move to the next step of it. For retailers, it is important to ensure that the SaaS platform they have chosen supports the modular approach and allows them to choose combinations of solutions that are suitable for their business requirements.

  • Supply chain management platforms must integrate with the technology systems used by retailers. The cost of integration of some of the platforms are high and the time taken can be lengthy. A platform worth investing in will easily integrate with the existing work system without any high-cost demand and lengthy time requirements than planned to commit. A right platform should easily integrate with the existing ERPs, constantly transferring live data from the data points to the single dashboard, providing a holistic view of supply chain management.

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