Supply chain management is the backbone of many businesses and their operations. That’s why it has to evolve with the trends of the market and the common customer/client needs and wants. Digital transformation is no longer an option for supply chain management, but a necessity.
Supply Chain Management Evolution
Since businesses began operating, the evolution of supply chain management began. Where there was demand forecasting, sourcing and purchasing, planning of requirements, planning of production, and manufacturing inventory, we had materials management.
Where there was goods inventory, distribution planning, order processing, transportation, and customer service, we had physical distribution. There were three more factors that along with the mentioned ones became something we know as logistics.
These were warehousing, materials handling, and packaging. Logistics evolved into supply chain management with the integration of information technology, strategic planning, marketing, sales, and finance.
Supply chain management began evolving with automation in the 2010s and has continued to do so till today. Integrating digitalization into supply chain management fostered major benefits for businesses across the globe, and it helped identify and deal with main supply chain management challenges.
Major Challenges in Supply Chain Management
Every business part or process has challenges that need to be overcome. These challenges are often associated with the current state of the business, or the current state of the business branch. In the case of supply chain management, major challenges include:
- Long lead times: Unforeseen delays are something that increasingly keeps happening because of port congestion, general traffic congestion, and customs. Digital transformation plays a major role in organizing lead times and increasing delivery efficiency.
- Demand forecasting: The volatile market makes forecasting demand quite difficult for businesses, and this is where companies can benefit from digitizing supply chain management to acquire data and perform research to improve their forecasts.
- Quality control: Because of the evolving needs and wants of the customers, the quality can be difficult to control. However, every serious business has experts assigned to quality control posts so that it may provide a quality product to customers. Nevertheless, a human error in the supply chain can negatively affect quality. A good CPG supply chain management solution helps resolve these errors.
- Different time zones: Communication issues due to time zone differences can occur almost always. With a supply chain management system, time zones are taken into account, and tasks are organized in accordance with them.
- Language barriers: Even though businesses are becoming global at a very fast rate, language is still a huge barrier. Instead of translating documents and performing calls to complete supply chain processes, digital transformation evolved supply chain management and automated these processes.
- Customer service quality: Another major challenge is providing the appropriate quality and quantity of the product to the customers. This is where demand forecasting also comes in, and the digitization of supply chain management has made customer expectations easier to fulfill by meeting the demand for quality and quantity.
How Digitalization Improves Supply Chain Management
Supply chain management digitalization helps with all the mentioned challenges, and it accounts for automation, innovation, better distribution, easier decisions, etc. The most important thing is that digitization offers:
- JIT: In manufacturing, there’s a term “Just-in-time manufacturing.” This is a convenient way to save money and improve the decision-making process. With the digitization of the supply chain, it’s fairly accessible, a production model that cuts costs at the corners because everything manufactured is manufactured to meet a certain demand.
- Accessibility: Tools and software used to keep track of all supply chain operations store most of the data in an easily accessible database. This means that businesses no longer need to keep track of everything separately, but rather integrate it into a larger compact tracking system.
- Improved finances: Because of all the aforementioned benefits, the finances are easier to track, and it’s easier to save money. This is quite important in the world of evolving customer demands.
- Shorter lead times: Finally, the most important improvement digitalization offers to supply chain management is shorter lead times. Even though the ports might be congested, and there might be traffic jams that disrupt freight, there are tools that foresee and account for these providing a good estimation of the final lead time.