Can companies become truly lean, responsive and versatile by implementing digital transformation in the supply chain?

While many companies are embracing digital transformation when it comes to customer-facing initiatives, a full technological transformation requires considerable changes on the back-end as well. Effective management of today’s business supply chain is progressively influenced by an organization’s ability to adopt new approaches to transparency and coordination.

The numbers don’t lie: Peter Sondergaard, global head of research of Gartner, predicts that a full quarter of future enterprise spending will be on integrating digital assets to fulfill evolving needs, and nearly 20 percent of those funds will be apportioned to the supply chain. That big of an investment requires a solid strategy, one that focuses on how your supply chain leverages data to translate information into solid decision-making.

A Vision of the Future

The key elements of any successful digital transformation of the supply chain include analytics, optimization and traceability. One of the most significant trends in the supply chain sphere is a movement toward relying on big data and sophisticated predictive algorithms to serve customers as well as internal needs. Companies that don’t—or can’t—take advantage of the coming digital opportunities in supply chain management run the very real risk of falling behind.

So how do you get there? In short: by using data and the right technological tools to maximize efficiency and productivity while decreasing costs. But this answer, although simple, is one that involves a number of separate elements in your supply chain. Every component must work together in frictionless harmony for your company to be successful in this arena.

Improving Cooperation

As technological innovation continues to bring down the costs of communication and collaboration within and across industries, implementing external solutions becomes not only feasible, but prudent. Niche startups have begun to dominate in a growing number of fields and many existing companies are now embracing the idea of externalizing core functions and coordinating assets with these new suppliers and partners.

Transparency plays a large part in this collaboration, with accurate data forming the cornerstone of successful joint ventures. Many businesses, however, are loath to share customer, pricing or supply-chain data, even with friendly parties. In response to this hesitation, companies are developing digital safe spaces where brands can share data without fear of having it stolen or otherwise used for nefarious purposes. These “cleanrooms” are governed by strict non-disclosure rules and protected by strong security standards, allowing companies to collaborate freely and make more informed decisions about potential partnerships.

Closing Gaps

This kind of integrated data environment works on an individual scale as well, providing a more accurate view of your supply chain. This holistic perspective can help you fill the gaps between the various stages of production and delivery. In healthcare, for instance, there is a plethora of electronic patient data available, but most organizations lack the ability to use this information in the most effective way. This means that individual patient records are often unavailable when practitioners need them. There is also no real way to harness the unprecedented amount of collective health data to improve individual diagnoses, treatments and outcomes.

Future supply chains not only need to be seamless but multifunctional, providing operational insights that affect overall business strategies. With more comprehensive visibility, companies are better equipped to manage how they deliver goods and services, decreasing costs for themselves and their customers.

Optimizing All Links

Every link of the supply chain is important, and each one must be fully optimized. But refining individual components is only so effective. The entire process must be inter-optimized.

An often-overlooked consequence of having a singular focus is how making changes in one area may adversely affect another. For example, few would argue that reducing operating cost in the warehouse is a bad thing—unless you happen to be one of the workers who now has to increase their production to meet the same quota with fewer resources. This one-dimensional view jeopardizes the effectiveness and profitability of not only your supply chain, but your entire organization.

Operational boundaries of the future will be defined by analysis and algorithms. Business leaders will use predictive analytics technology to run “what if” simulations that allow them to determine how a certain course of action affects every aspect of the company. These forecasted scenarios can provide insight into the full impact of major decisions, such as closing an under-performing production facility or reassigning customers to different distribution centers.

Clearer Demand Forecasting

Anticipating customer demand is at the forefront of every business leader’s mind. To achieve this goal, your company must create a supply chain that is both stable enough to perform reliably and agile enough to quickly pivot in response to changes in demand.

The thorn in most companies’ paw is the sudden spikes and drops that seem to come out of nowhere. However, many of these variations actually occur in a fairly foreseeable manner if you’re leveraging your supply chain data effectively.

By combining data about past customer behavior, current orders and historical industry information, algorithms can accurately predict customer appetites, including seemingly random surges. Companies that can quickly respond to changes in demand will be able to capture an increased share of the market with always-available inventory and manpower.

Supply chain leaders face four fundamental issues: a lack of visibility across the supply chain, inefficient processes, ever-increasing costs and variable demand. Big Data and predictive analytics can help companies collect relevant data and then apply those findings to manage the supply chain from end to end, creating a company that’s lean, responsive and versatile.