Digital Supply Chains: Everything you need to know

DIGITAL SUPPLY CHAINS | THE RISKMETHODS BLOG

If you look in the mirror, what do you see? An exact, real-time copy, which exists only as a reflection. Similarly, digital supply chains mirror information and processes virtually. And using such data-based models empowers supply chain professionals to optimize supply chain performance. Let’s explore:

1. What is a digital supply chain?

Digital supply chains employ digital technologies to design, manage, and control supply chains, ideally from end-to-end. This includes all the steps needed, from sourcing materials, through to manufacturing and distributing products to customers.

Digital technologies enable companies to more efficiently manage their supply chains, and to regulate production and delivery. By providing data on the source of materials or the progress of a shipment, digital supply chains also make greater visibility possible. Such visibility is important for cost control, but also increasingly significant for transparency requirements.

2. Traditional vs. digital supply chains

Traditional supply chains are characterized as a linear process, where the steps follow one another like, well, links in a chain. With digital technologies, on the other hand, information flows in multiple directions, including from customers back to manufacturers. Digital supply chains combine traditional processes with digitization, but go a whole lot farther.

But first, let’s look at the language of digital supply chains. The terms digitization, digitalization, and digital transformation are similar. Usually they are used to differentiate between data, processes, and strategic operating models:

Digital supply chains

  • Digitization: Converting information into digital form. In other words, data.
  • Digitalization: business activities around digital technologies. The focus here is on processes.
  • Digital Transformation: Developing strategies that include digitization and digitalization. Using digital technologies transforms how businesses operate.

Through supply chain digital transformation, procurement and supply chain professionals can make data-driven analysis and decisions, which in turn, enables them to develop proactive strategies.

3. Managing digital supply chains

Then what is digital supply chain management? It’s managing the entire supply chain, including communication and administration, through digital technologies. Using integrated models and processes that exchange data gathered is sometimes referred to as Supply Chain 4.0.

Supply Chain 4.0 relies on technologies that characterize industry 4.0, including internet of things, big data analysis, automation, and robotics. And, in case you’re wondering, 4.0 refers to four stages in the evolution of manufacturing and industry processes:

  1. First industrial revolution (development of machines and steam power)
  2. Second (use of assembly lines and mass production)
  3. Third (introduction of electronics, IT, and automation)
  4. Fourth (growth of virtual, interconnected, and “smart” devices and processes)

Similarly, Logistics 4.0 employs digitization of information (by using bar codes on packaging, for example) and digitalization of processes (such as automated sorting and wireless tracking). All of these technologies improve efficiency and optimize processes in supply chains.

4. Risks of digital supply chains

As with all things digital, digital supply chains come with risks. The most prominent are lapses in data security and the risk of cyberattacks. Suppliers who access your system through online platforms for global tenders may unknowingly open the door to cybercriminals. And software becomes outdated, users become careless, or threat actors more aggressive.

Being a leader or early adopter of a new technology can be risky, of course, but it provides a wealth of benefits. Among these are gaining access to data and an innovation mindset. Not adopting new technology is risky, as well. Manual processes are time-consuming, labor intensive, and difficult to scale.

By not digitalizing supply chain processes, businesses miss out on efficiency gains, for example. And speaking of risks, managing supply chain risk efficiently relies on automating processes and systems through a cloud-based solution powered by artificial intelligence.

5. The future of digital supply chain risk management

Through automation and digitalization you can monitor, identify, assess, and mitigate supply chain risk. Digital supply chain risk management reduces time-to-decision and increases business agility. It contributes to better collaboration internally, and with business partners. The future of digital supply chain risk management is here today. Here are a few things a digital solution can do:

Digital supply chain: How digital risk management looks like

  • Create a digital twin. By mirroring your supply chain on a world map, it lets you immediately identify all risk objects (suppliers, sub-tiers, transport hubs, your company sites), and dependencies. 
  • Rely on the power of artificial intelligence. You receive automated alerts in real time, and only data that is relevant to you without the “noise.” 
  • Gain sub-tier visibility and collaborate with suppliers. Get transparency to detect n-tier threats. Encourage partners to share information and collaborate on a common platform. 

Advanced digital capabilities make your risk management more comprehensive: 

  1. Use instantly available risk scores. These enable strategic decisions such as risk management integrated into supplier evaluation, or risk assessment and due diligence prior to supplier onboarding.
  2. Allows you to combine risk intelligence and assessments. With digital processes, you automate threat collection, and combine automatically populated risk scorecards with supplier risk assessments.
  3. Employ advanced analytics and mitigation tools. This allows you to analyze risk impact and create plans in advance. Have standardized formats for risk data to make reporting easier and more efficient.

6. How supply chain digital transformation leads to resilience

Digital transformation in procurement, sourcing, logistics, and supply chain management goes hand in hand with digitally managing supply chain risk. With the holistic risk management approach based on The riskmethods SolutionTM, you:

  • Enable transparency and risk ownership. Efficiency of risk communication improves. You can share data and coordinate actions, so everyone knows what to do.
  • Embed risk data into sourcing and procurement processes. Get a total view of risk by covering all risk types: financial, man-made, geopolitical, natural hazard, reputational, cyber.
  • Make risk information pervasive. Teams can access the solution on mobile devices, and be empowered to make data-based decisions before risk events occur.
  • Move beyond reactive to preventative. Using advanced analytics, you can identify negative patterns within categories, or across supply chain sections, so you can act faster.

Efficiency gains are joined by savings. With rapid integration of risk management tools, procurement teams quickly see value, such as through reduced emergency and mitigation costs. Protect your margins, be faster than your competition, improve business continuity, and strengthen supply chain resilience. When it comes to your digital supply chain twin, virtual reflections show real benefits.

Digital Procurement World 2022

Amsterdam (Netherlands) on September 21-22, 2022

Join us in person. Let’s discuss your current supply chain risk management challenges, and explore the optimal strategy for your organization.

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