Understanding The Digital Supply Chain: Impact and Advantages

Supply chains have always been straightforward—a traditional supply chain has multiple steps that you build on, one by one. First, there is sourcing or manufacturing. Then, after you complete those stages, you have to think about distribution and sales. If any stage is held up, it has the potential to shut down the entire supply chain.

A digital supply chain aims to get rid of that risk by using data produced during the different stages to develop responses on demand. A digital supply chain uses analytics and data to stay flexible in the case of sudden changes or disruptions.

A digital supply chain has several benefits as well as risks that you need to know before using it. Here are some things to keep in mind.

Understanding the Digital Supply Chain

A digital supply chain uses interconnected systems, real-time data, and other digital tools to enhance the traditional supply chain process. A digital supply chain may use artificial intelligence (AI), blockchain technology, or the Internet of Things (IoT) to share information about the different stages of the supply chain.

The Digital Supply Chain vs. the Traditional Supply Chain

The traditional supply chain is a step-by-step process that requires manual supply chain management. A traditional supply chain has linear workflows and is prone to siloes within its data systems. As a result, it’s less adaptable and efficient than a digital supply chain.

The 5C’s of a Digital Supply Chain

There are five core aspects of the digital supply chain. These are called the 5C’s:

Connected

If there’s one thing a digital supply chain can do, it’s communicate. The digital supply chain handles logistics with RFID tracking, IoT sensors, and cloud-based platforms.

Collaborative

Collaborating keeps the supply chain transparent and efficient. In a digital supply chain, this includes sharing data and analytics with stakeholders, manufacturers, customers, supplies, and logistics providers.

Cyber Aware

Another C is being cyber-aware. When items are digitized, there is always a risk of cyber attacks. A digital supply chain must have a solid cybersecurity program with protective protocols to keep it safe from attacks.

Cognitively Enabled

The digital supply chain can use cognitive technologies. These technologies include artificial intelligence, which can process much more data than an average person in the same timeframe.

Comprehensive

Comprehensive digital supply chains offer complete transparency from start to finish. Since everyone can see what’s happening within the supply chain, there is a reduced risk of delays. There is also an opportunity for better decision-making processes based on past data and future projections.

7 Key Benefits of The Digital Supply Chain

There are many benefits of using a digital supply chain rather than a traditional supply chain. Here are seven:

Increased Personalization

It’s possible to improve personalization because of the ability to look at customer data and preferences rapidly with AI and other tools. With customer data, it’s easier to offer customized products or services to customers.

Greater Flexibility

A digital supply chain has more flexibility because of its core design. When you use digital tools, you get better insight and reduce the risk of slowdowns and hangups.

Improved Planning

Thanks to AI-driven forecasts and the collection of analytics, the digital supply chain allows for improved planning and scheduling. It’s much easier for companies to predict future trends and adapt accordingly.

Improved Decision-Making

Digital supply chains have a mass amount of data collection taking place during each stage. With real-time data availability and thorough analytics, it is simpler for companies to make sound decisions about their processes.

Improved Collaboration With Stakeholders

The digital supply chain fosters an environment that encourages collaboration. With better transparency, stakeholders, supplies, logistics personnel, and retailers can all work together to make the supply chain more efficient.

Real-Time Monitoring and Tracking of Inventory

Using IoT sensors and real-time data analytics gives your business a more comprehensive look at your inventory and how it’s moving through the supply chain at any one time.

Enhanced Transparency in Product Flow

Transparency is an important part of the digital supply chain. Digital supply chains have end-to-end transparency to improve efficiency and maintain quality control.

9 Risks Associated With Digital Supply Chains

Although digital supply chains have many positives, they also come with some downsides. You will want to consider the following risks:

Cybersecurity

Since the digital supply chain is often kept online, there is a risk of viruses and other kinds of cyberattacks causing problems for it. With these interconnected systems, it’s necessary to have a strong cybersecurity practice in place.

Unprepared Professionals

It may be difficult to find qualified professionals who can work with a digital supply chain, particularly as technology advances. Businesses will need to invest in ongoing training.

Data Privacy Issues

Since the digital supply chain can collect customer data, there is a risk of privacy issues rearing their head. As a part of digital supply chain management, your business must adhere to data privacy laws and regulations.

System Downtime

In the case of power or internet failure, the digital supply chain may fail, and operations may stop. Your business should consider backup options to ensure downtime can be mitigated without a significant impact on your operations.

Complexity and Integration Challenges

Within a supply chain, several kinds of technology and software need to be used together, but that can lead to compatibility issues. It’s important to choose technology designed to work together and to work with professional teams of developers or other IT professionals to ensure proper integration.

Lack of Visibility and Transparency

While the digital supply chain can help all digitized information be more transparent, there is also a risk that the digital tools won’t make every aspect of the supply chain more visible. And when there is a lack of transparency, there can be quality control issues, errors, and delays.

Supply Chain Vulnerabilities

Like a traditional supply chain, a digital supply chain can also be vulnerable to significant disruptions in the form of political instability, natural disasters, problems with suppliers, and other issues. Your business needs to identify potential vulnerabilities and make a plan to handle them if they occur.

Vendor Risks

Sometimes, your digital supply chain could rely on a third-party vendor. But you have to remember that third parties can be vulnerable to issues such as cyber-attacks or financial problems. They could also work with programs that aren’t compatible with your systems or offer poor service quality that affects your business negatively. Be sure to identify multiple vendors you may want to work with and to vet them. See if they use systems that will be compatible with your company’s current software, and check reviews to ensure they’re a good fit.

Cost and Resource Allocation

Going digital can be a big expense. You will need to balance the need for greater transparency and more technology with the cost of implementing and maintaining them over time.

Track Your Inventory With Podium AI Employee

Keeping track of your inventory is a key part of managing your digital supply chain. You don’t want to reorder products too late or order too many products unnecessarily—either one could negatively impact your business.

With Podium’s AI Employee, you have a helpful partner that can track your inventory and give you updates. Watch a demo and see how Podium’s AI Employee keeps your inventory on track.