Supply chains function both for manufacturers and service providers. The supply chain simply makes sure a firm can coordinate its operations from product design and development, assembly of raw materials, supplies, and personnel, manufacturing, marketing, distribution, and sales to the end customer. Regardless of the product, ensuring this process goes smoothly is crucial to success.
In an ideal world, each step works smoothly, and the company produces the goods and services customers want; they neither over- nor under-produce. The ability to transport materials and goods is part of the process.
But this is not an ideal world. Sometimes one link does not communicate effectively with another. In other situations, the forecasting and marketing teams misjudge the market. Raw materials may not be available at a given time.
This is where digitization can help.
Digitization of the Supply Chain
Digitization is not simply the use of computers to support operations at each link in the supply chain. Digitization refers to the use of technology to create an integrated system, ensuring the smooth functioning of each step as well as transparency between them. Everyone, therefore, will know what is taking place within the supply chain.
This integration creates an ecosystem where operations take place. Factors which can affect the entire system are known throughout. Sudden changes in demand, raw materials scarcity, fires, and shutdowns will happen, but, in a digitized ecosystem, everyone can plan around those disruptions.
In addition, the digitized environment allows the gaming of various “what-if” situations to help with future developments and needs.
A digitized supply chain, therefore, can provide efficiencies, growth, and customer satisfaction to give a company a competitive edge.
One key component of the digital ecosystem is big data. Big data allows an in-depth and thorough analysis of all aspects of a supply chain’s operations. These activities generate massive amounts of information. For example, the big data for one flight from New York to Los Angeles produces 240-terabytes of information about the plane’s performance.
The performance of an individual component can be tracked and analyzed, and that performance information can be compared to other, similar components, as well as contribute to an aggregate understanding of the entire supply chain. The analysis may reveal usage patterns and other insights, leading to greater efficiencies throughout.
One analogous example comes from education. In some rural communities, many families engage in hunting. On the first day of hunting season, many of their children do not attend school. Some school districts, using this simple analytical example, decided to close on that first day, rather than work through the inefficiencies caused by extensive absenteeism. The use of attendance data leads to decisions increasing efficiency.
Big Data’s Edge
The use of big data can provide a competitive edge. First, digitizing currently non-digital data will increase its accessibility and, therefore, utility. In addition, finding the varying patterns of operational flow can help increase efficiency. Companies can also tailor products and services to narrower, more personal, customer segments. Finally, the decision for the near- and long-term will help enhance current delivery and future developments.
Big data, for example, can provide significant value in transportation. Using smart routing through GPS technology, time, and fuel savings by 2020 is estimated to be $500 billion globally.
The Internet of Things
The Internet of Things (IoT) is a technology which, by its nature, is fully integrated into the operations of the user, whether in the home or at the business. The connection of devices—thermostats, crock pots, coffee makers, lights—to the internet will bring a revolution in home living.
It will also provide a notable change in the supply chain and help establish the supply chain ecosystem. The IoT obviously links your equipment, raw materials, and facilities to provide big data for your operations.
In addition, however, the IoT allows for direct and on-time management of operations. Anticipating repairs, varying production quantities, and maximizing storage utilizations also happen through the connectivity of your systems.
The IoT can lead to better products for the customer. The connection of products can benefit both the customer and the manufacturer. The maker receives information on use and can track potential issues. The customer can track use also, which leads to better decisions both with current and future use and replacement.
3D printing is becoming a powerful technology for the digitized supply chain. As of spring 2016, over 2/3 of manufacturers had adopted the technology in some aspect of business, and over half expect it to be used for high-volume manufacturing in the next half decade.
3D printing increases competitiveness in several ways. The more efficient and quicker production of prototypes leads to a shorter time to market for a given product. The ability of the supply chain to respond to immediate needs will grow; the mechanic who needs a part can get it in an hour, rather than days.
In addition, obsolete parts and products can remain available to customers. Focusing on customer needs benefits the business, and the ability to keep older equipment running provides good will, at the very least.
As the range of printable items increases, economic advantages accrue to the adopters of 3D printing. Customization, variability, and flexibility all provide better value to the customer. Each product can meet specific needs. The technology allows items which once were made up of many parts (for example, a jet engine fuel nozzle) to be printed as one item, saving assembly and cutting the cost of manufacturing by 75%.
Augmented Reality (AR) blends virtual reality with the real world. The ability to use the power of virtual reality to analyze and imagine the real world—or changes to the real world—provides great flexibility.
One application in your supply chain is the ability to plan and envision a new warehouse plan. Using AR to arrange the storage racks, assembly and shipping areas, and other features for the warehouse will speed the design and construction of the facility. Different users can contribute to the plans.
AR can also assist in manufacturing and distribution. Using AR markers on equipment and materials allows the ability to follow the process from raw materials to finished product. It can ensure that shipment will happen efficiently.
Value from Digitizing the Supply Chain
The net result of digitization is increased efficiency and boosted revenue. One estimate indicates efficiency will increase by 4.1% while revenue is boosted by 2.9% per year. Achieving efficiency and revenue increases allows a focus on future product development. Decision makers can worry about the next important thing, rather than what’s going on now.
And that’s the key competitive edge.