The Digital Transformation Of Supply Chain Management

A host of digital innovations have hitherto been put in place, to help address the growing pressure of the coronavirus pandemic, and to increase overall efficiencies while minimizing risks within a rapidly evolving supply chain.

Lux Research categorizes the supply chain into six distinctive parts: planning and forecasting, purchasing and procurement, inventory, warehousing, transport, and supply chain platforms. From the report, warehousing and transport have the most innovation activity, while digitization of supply chain platforms it discovers to facilitate highly dynamic processes that will shift priorities in planning and forecasting and beyond.

“Supply chain management risks have been making headlines recently with the disruptions caused by the coronavirus,” says Jonathan Melnick, Ph.D., Director of Research at Lux, adding, “Its challenges come from all directions; upstream, internal, and downstream.”

The report, ‘The Digital Transformation of Supply Chain’, elaborates that digitization is being used in purchasing and procurement in two key ways. To understand product quality and detect genuine from counterfeit products, and to lower transaction costs through increased pricing visibility.

“Companies are facing internal pressures to be more efficient, integrated, and agile and to meet new consumer expectations of increased visibility into products. This is causing a shift in how vendors are evaluated and sourced to meet those expectations,” Melnick adds.

Traditionally, companies would source preferred vendors at the expense of efficiency and transparency. But as more data around vendors and their products become available, digitization gives companies greater insight into better and more dynamic vendor selection. This enables for sourcing on-demand, where new vendors are brought in rapidly, reducing trust and long-standing established vendor relationships.

“Supply chains are becoming increasingly complex and interconnected, which has made managing risk more challenging. Digitization allows companies to effectively manage this increasing challenge and risk,” Melnick explains.

Lux predicts that multiple variables, such as supplier risk, lead time, and variability, will work together to create a dynamic pricing market. But these advancements notwithstanding,  companies and supply chain solution providers will need to integrate previously siloed areas of supply chain management, increasing value, and leading to a more optimized and autonomous supply chain.

Melnick adds that as companies move towards a zero-inventory manufacturing model, it’s expected that the role of supply chain management will change to include the supervision of digital assets along with the physical ones. This, in turn, will lead to the ‘death of supply chain management’.

For more on supply chain management predictions, download the Lux report on www.luxresearchinc.com