The Digitization of the Supply Chain

Project that integrates solutions and production planning

Imagine having all of your company’s supply chain information, essential for decision-making, anywhere and anytime you need it. That’s what the digitalization of the supply chain allows, in a simplified way. We are talking about a complex process, which involves feeding data into software capable of exchanging information without obstacles, using the most modern tools to analyze all this material in the shortest possible time.

It’s not simple. Not cheap. But it is an irreversible trend that requires prior studies and collaboration between supply chain players. According to logistics specialist André de Oliveira, 90% of large international companies still do not have mature digital integration projects for the supply chain. But those plans are being drawn up quickly. In 2019, a study by IBM revealed that for 84% of companies, the lack of supply chain visibility is the biggest challenge their managers face. Another report, by McKinsey, shows that 90% of the environmental impacts caused by a company come from its supply chain. To overcome these and other problems, by 2023, 50% of companies around the world will be applying resources to artificial intelligence, according to a Gartner report. But AI is not the only tool being used in this process. The Internet of Things, Machine Learning and Big Data, for example, are also being used. The challenge is not just to collect the data, but to analyze it as quickly as possible.

The digitization of the supply chain is, finally, a process that aims to integrate planning and production solutions capable of creating a visible flow of supplies for each link in the chain in real time. A goal that faces operational difficulties, such as the use of software that does not talk to each other, which is very common. Hence the emphasis on planning.

Even though it requires time and resources, the advantages of this investment are unquestionable. See some of them now:

1. Greater visibility of the supply chain — with the digitization of the supply chain, it is possible to join several data sources, allowing greater visibility of the entire operation.
2. Reduction in the risk of a supply disruption — this was a recurring problem during the pandemic, but with greater supply chain visibility, corrective measures to avoid a shortage of inputs can be taken in advance. The integration between logistics chain management software, such as WMS, ERP and CRM, allows all members of this chain to understand each stage of the chain and know exactly where they should act so that it is not paralyzed.
3. Real-time monitoring of cargo transportation — using systems such as the TMS (Transportation Management System) it is possible to monitor information about freight, tracking of goods, route planning, among other tasks related to cargo handling. In practical terms, this also means a reduction in delivery times.
4. Inventory control — The use of management software (Warehouse Management System or simply WMS) allows you to accurately control inputs and outputs of inputs, ensuring that the availability of items follows demand, avoiding possible shortages and also waste.
5. Inventory Reduction — Inventory represents cash on hold, at least until the sale takes place. In addition, it requires adequate infrastructure for its storage, which means fixed assets such as warehouses.
6. Widespread cost reduction — with a better use of inventory, management systems and equipment that eliminate physical effort, it is possible to have a good reduction in operating costs.
7. Employee performance monitoring — the software allows an analysis of performance and skills, making it easier for leaders to identify a drop in productivity and failures in managerial, administrative and operational processes.
8. Safety for the employee — automation processes in Logistics guarantee less physical risk for the worker, optimizing processes and general form.
9. Opportunities in strategic areas for employees — although automation eliminates many manual operations simultaneously, it opens up opportunities for workers in higher value-added functions, such as research, product development and team management.
10. Higher productivity rate — this is a crucial advantage when meeting high demands. Technological resources make it possible to achieve higher levels of productivity and quality.
11.  Process integration — the digitization of the supply chain guarantees the integration of the processes used in each link, allowing the flow of activities to be improved, quickly and efficiently.
12. Improved collaboration between supply chain members — Data visualization helps make changes to the digital and physical aspects of the supply chain, improving collaboration between different links.
13. Analysis of scenarios and trends — with the adoption of technologies that use deep machine learning, or deep learning, it becomes easier to predict trends or analyze future scenarios.
14. Customer loyalty — optimizing all supply chain processes allocates financial energy and time to meet customer needs, first ensuring permanence in the consumer market, and then opening doors to eventual growth.

But how to start the supply chain digitization process? According to David Simchi-Levi, from MIT, and Kris Timmermans, from Accenture, an intelligent digital supply chain strategy needs three components: a unified view of demand (the focus is on the customer), strategic segmentation of the supply chain, in addition to intelligent planning and execution.

The unified view of demand requires a five-step work: business plan, demand forecast, sell-in forecast for retailers, operational plan and financial plan. Supply chain segmentation means creating information networks for each product, always using customers as a reference and reacting to market responses. That is, each product or service can have its own chain, whose behavior must be dictated by consumer acceptance, stimulating quick reactions from all its members. Intelligent planning brings together, according to the consulting firm Accenture, “scanning, data analytics, and an automated optimization engine to develop advanced planning capabilities that power the entire enterprise—from production scheduling and materials planning to supply planning. By combining KPIs (Key Performance Indicators) and KPPs (Key Performance Predictors) in real time, the company acquires the ability to understand not only what is happening in its supply chain at any moment, but also what is likely to happen soon”. The first results are, to say the least, satisfactory. Those who went through this process saw lost sales decrease by 10% and waste by up to 20%.

But it must be understood that the digitization of the supply chain must be holistic, that is, companies must look at planning, production and data management solutions as part of the same picture, not putting them on different screens. To achieve this goal, collaboration and communication must be improved. Data flow cannot be interrupted. We are talking about a central hub with multiple access points, avoiding bottlenecks and interruptions.

In this way, the supply chain becomes resilient, adapting more resiliently to unforeseen circumstances such as the pandemic, which turned the world upside down in 2020. Of course, the digitization of the supply chain must also be encrypted to protect the data of all involved in the different links of this chain, but that is a subject for another text of ours.

If talking about this type of challenge currently makes sense to you, we at Águia Sistemas can collaborate with a good part of this process. We are able to help your company with the most modern aspects of Intralogistics. Contact us.

(The text above was written using information from the websites delage.com.br, pier8.com.br, maximatech.com.br, accenture.com, revistamundologistica.com.br and hadc.com.br)