A guide to digital supply chain management

The emergence of tools and techniques that facilitate digital supply chain management has opened up brand new possibilities for companies looking to make the most of their supply chains. Here’s everything you need to know about it.

A company’s supply chain consists of the entire chain of activities involved in creating a product, from sourcing raw materials to delivering finished goods. Supply chain management (SCM) is integral to many of a company’s core operational functions, such as inventory and cash flow management. It’s also intrinsically connected with the overall performance and profitability of the business.

Improving your approach to supply chain management can, therefore, benefit your business as a whole, and adopting a digital supply chain management strategy can help you do that.

What is digital supply chain management?

Digital supply chain management involves the use of technology to gain real-time visibility over the health and efficiency of a supply chain. By using technology to monitor supplier performance, inventory levels, and customer spending patterns, businesses can make better use of resources, protect against disruption, and promote deeper, more collaborative supplier relationships.

Although traditional supply chain management may include the use of technology, it still largely relies on time-consuming and inefficient manual processes. Digital supply chains, in contrast, employ integrated systems that can work together seamlessly, increasing transparency and breaking down silos between different parts of the supply chain.

Traditional supply chains tend to be linear, static, and prone to human error. On the other hand, effectively digitalized supply chains are network-based, dynamic, and highly adaptive.

Key digital supply chain features

Virtually all aspects of supply chain management can be digitalized. That said, there are three areas that are most often prioritized in digitalization projects: supplier management, inventory management, and the accounts payable/receivable functions.

Digital supplier management

The primary goal of supplier or vendor management is to keep the supply chain operating smoothly by overseeing and nurturing supplier relationships and minimizing risks. This process can be digitalized by adopting a centralized solution that covers all aspects of supplier management and streamlines communication with suppliers.

By capturing and collating important data about their suppliers, businesses can speed up the onboarding process and monitor and analyze performance.

Companies can also harness supplier self-service and automated validation tools to minimize mistakes, build trust with suppliers, and avoid – or rapidly resolve – any disputes.

Digital supplier management solutions can also include digitalized procurement, whereby purchases are tracked from a central purchasing dashboard and measured against a variety of procurement KPIs.

End-to-end inventory management

Digital inventory management tools can provide end-to-end inventory visibility, allowing businesses to track goods and materials throughout the supply chain. By embracing end-to-end inventory management, companies can also use techniques like vendor-owned inventory, whereby suppliers retain ownership of their inventory while it is located at the buyer or retailer’s premises.

In other cases, long lead times can make it difficult to estimate future inventory levels against forecasted demand. One option is to adopt inventory management solutions that can take ownership of warehoused or in-transit goods to give businesses access to nearby safety stocks.

Supplier management features can also make it easier for companies to respond promptly to adverse circumstances, such as the failure of key suppliers, and rapidly reconfigure their supply chains by switching to backup suppliers.

Digitalized accounts payable/receivable

Companies can increase their visibility over upcoming cash inflows and outflows by digitalizing accounts payable (AP) and accounts receivable (AR). This, in turn, can lead to greater control over cash flow and a more accurate view of the company’s financial health. Companies can gain further cash flow benefits by taking advantage of solutions such as supply chain finance, dynamic discounting, and accounts receivable financing.

By reducing the need for human input, AP and AR automation can help companies reduce costs, increase accuracy, minimize accounting errors, and free up staff to perform more strategic tasks. AP and AR automation can also help to digitalize the cash flow forecasting process by reducing the need to obtain data manually from different sources. As such, it can result in more accurate and useful cash flow forecasts.

The benefits of digital supply chain management

Digital supply chain management can result in a number of benefits, including:

• Faster, more accurate fulfillment: Digital inventory and supplier management tools such as RFID (Radio Frequency Identification) and IoT (Internet of Things) sensors can track inventory levels in real time, ensuring that the business maintains the optimum level of stock. The more streamlined a company’s supply chain, the better placed it will be to absorb any supply chain disruptions and ensure that orders continue to be fulfilled.
• Increased flexibility/adaptability: In traditional supply chains, identifying potential issues can be laborious and time-consuming. With digital supply chain management, companies can anticipate problems quicker and respond in a more flexible way. As such, companies can adapt more rapidly to changes in the economic landscape and maintain their focus on core business goals.
• Improved supply chain efficiency: The automation involved in the digitalization of SCM can increase supply chain efficiency in two important ways. For one thing, automation results in more accurate information, which reduces the need for manual input as well as the risk of human error. In addition, digitalization can speed up activities such as supplier communication and dispute resolution. This results in less frequent disputes, and when they do occur, they are likely to be resolved faster and more satisfactorily.

Avoiding digital supply chain risks

Although digital SCM can directly benefit businesses by giving them much more control over their supply chains, there are associated risks to be aware of.

The most critical is that a digitalized supply chain naturally increases the risks presented by cyber threats, giving potential hackers access to more sensitive information. However, businesses can minimize this additional risk by choosing a reputable software provider, setting stringent access control limits, carrying out regular cyber risk assessments, and investing in cyber security training.

On another note, companies may need to address any potential reluctance from suppliers when it comes to being onboarded onto new systems. This can be achieved by communicating the change clearly and effectively to suppliers long before the switch actually happens to explain the benefits of their chosen systems, such as reduced manual processes and shorter cycle times.

While it’s important to be aware of these risks, they’re balanced against the significant potential benefits of digital supply chain management. Choosing a centralized, intelligent, and transparent platform such as Taulia can offer all the benefits of digital SCM while minimizing the risks.