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With terms such as ‘digitalization’, ‘Industry 4.0’ and ‘digital supply chain management’ on everyone’s lips, how can we be sure of what sort of technologies fall under these broad terms and more importantly, how are they going to change the management capabilities that are at our disposal? Digital supply chain management can span multiple technologies and include a plethora of ‘buzz words’ but is it more than just hyperbole? Well, yes actually.
According to MHI’s 2017 annual survey on next generation supply chains, 80% of respondents said that they believed the digital supply chain will be the predominant model within the next five years. So, it is without question that the dawn of digitalization will revolutionize our supply chains, but understanding how exactly this will play out is what needs to be refined. Breaking down what can be digitalized and how is our starting point.
Before we can start to digitalize the supply chain, it is worthwhile to spend time understanding your ecosystem. The practical reason for this is that any digitalization effort will take time to implement. With possibly hundreds of suppliers, multiple manufacturing locations, hundreds of customers and thousands of SKUs, we need a place to start.
An end-to-end analysis of your supply chain can provide the necessary guidance, especially if take some time identifying your greatest risks. Often, these are hidden. They do not come from your top ten suppliers because these are usually big and resilient, have multiple manufacturing locations, use different shipping lanes and have an army of engineers that can come up with replacement products quickly.
What you will take out of this.
- How can we be sure of what sort of technologies fall under these broad terms and more importantly?
- How are they going to change the management capabilities that are at our disposal?
- Digital supply chain management can span multiple technologies and include a plethora of ‘buzz words’ but is it more than just hyperbole?
Example for tracking points in the supply chain
Usually, the risks come from small, even benign parts, that nobody pays attention to. For example, Ford identified that a small O-ring posed an unusually high risk due to its usage in multiple engine designs in multiple product families but coming from a single source supplier.
While it is not always necessary for the digitalization question to exactly calculate the revenue impact of possible disruption at every node, we encourage you to think beyond just your big suppliers. The same is true for your shipping lanes and transportation partners. Ensure you understand the weak points in your ecosystem on the inbound/upstream and the outbound/downstream side.