According to the Trends e-magazine, business today is moving from the “transition phase” of digital supply chain technologies (to improve service levels and reduce costs) to the “deployment phase.” This phase includes the latest technologies like mobile networks, sensors, advanced analytics (“big data”) and the cloud – and the results, they claim, are enabling companies to generate “dramatically better returns on their investments.”
According to a recent study by the Boston Consulting Group, leaders in digital supply chain already enjoy competitive advantages that include improved product availability (by 10%), 25% faster response times to market changes, 30% better working-capital reductions, as well as higher margins and faster cash conversion from sales.
The study suggests three important strategies companies can apply to achieve these results:
- Fix performance gaps. Examples cited included using “advanced analytics” to calculate optimal inventory allocations and forecast demand. That’s tough to do with traditional ERP they note, if the data is static and monolithic. So they suggest employing add-in tools – many are available in today’s marketplace — that “ride on top of legacy (ERP) systems.” Thus, they use the newest tools on top of proven systems to better analyze sales trends, production and their respective supply chains. Another tool finally beginning to show results, not just promise, is RFID, as it’s being applied to analyzing large volumes of data. Utilizing RDID gates in its stores helped one large European retailer to better track and manage its in-store replenishment, resulting in drastically increased on-shelf availability of product. The RFID sensors relay massive amounts of data and improve replenishment, resulting in sales increases of 2.5% and cost decreases of 4%, they report.
- Innovating business processes. Automated replenishment is one such example: Amazon now offers the Dash Button, an internet-enabled device that users press to reorder laundry detergent, diapers and other household goods. The idea has now spread to other products. At the same time, businesses are using “big data” initiatives to monitor control points all across their global supply chains along with advanced allocation algorithms to decide which customers should receive goods that are in limited supply, to track down components in real time, to predict delivery times more accurately, to quickly reroute parts around disruptions and become more customer-centric in supply and demand, resulting in improved margins and more dynamic product routings.
- And finally: Disrupt the supply chain. Companies are using digital supply chain technologies to find new routes to customers, decentralize activities and speed up delivery. They’re developing direct-to-customer in-house capabilities, doing automated (and robot) order fulfillment “to enable small-scale distribution for 10% of the cost possible a decade ago.” Not to mention 3-D manufacturing (a topic we’ve covered several times here), as well as mobile 3-D printing where a delivery truck can print a customer’s order from a data file sent to the nearest vehicle to get items to shoppers faster, using less warehouse space.
All these innovations and more mean the future of supply chain innovation and digital disruption are happening, at least on a large-company scale, now. And that inevitably leads to similar technologies penetrating the SMB space soon enough.