Leveraging Digital Technology for Supply Chain Enhancement

The world’s supply chains have faced various challenges over the years, including trade disputes, cyberattacks, and fluctuations in commodity prices. The COVID-19 pandemic exacerbated these issues, bringing supply chain management deficiencies to the forefront.

In a 2021 survey conducted by the Economic Intelligence Unit among 400 senior supply chain and procurement executives in the US and Europe, businesses experienced reputational damage and financial losses. Supply chain disruptions, on average, cost them between 6% to 10% of their annual revenues in the years leading up to 2020.

In 2020, the top priority for addressing supply chain issues was improving analytics and information management, as reported by The Hackett Group, a management consultancy. This encompassed the utilization of digital tools to analyze and visualize data, assess demand patterns, optimize sourcing and production, and evaluate warehouse and logistics performance.

Brian Higgins, leader of KPMG’s supply chain and operations business in the US, pointed out that there was excessive reliance on manual processes that could have been automated or enhanced by technology.

Three years after the onset of the pandemic, increased inflation, more frequent natural disasters, and geopolitical tensions, such as the Russia-Ukraine war, have underscored the necessity for modernization and technology upgrades in the supply chain. The demand for supply chain transformations has never been higher.

Today, emerging supply chain technologies encompass automation with artificial intelligence, machine learning, and robotic process automation (RPA), the integration of the internet of things (IoT) in data-driven manufacturing, and the implementation of blockchain technology for tracking goods across companies.

When considering the adoption of these technologies, company leaders, including CFOs, should be prepared to address new challenges and opportunities. These technologies not only enhance the flow of goods and data but also offer advantages in financial forecasting and reporting that can strengthen the entire organization.

Here’s what five experts in finance and technology had to say about the digital transformation of supply chains.

Four Steps Towards Supply Chain Transformation

Companies have recently increased their investment in supply chain enhancements. The role of supply chain executives has been elevated, and they are receiving more resources to manage their organizations effectively. These resources are being put to use in addressing significant challenges, including the recruitment and retention of a high-quality workforce, rising input costs and fees, and the demand for business continuity and supply chain resilience.

To tackle these challenges, consider the following four steps:

1. Ask Questions and Understand Your Needs: Before making any significant investments, it’s essential to assess your organization’s supply chain strategy. Taking a short- and long-term view can help ensure that investments are aligned with actual needs. Communication with suppliers and stakeholders is crucial to understanding key measurements and information requirements.
2. Consider Basic Upgrades First: Start with foundational improvements that address forecasting, planning, spend management, contract management, and inventory visibility in the supply chain. Basic upgrades can also streamline transaction processes and improve integration into ERP and analytics systems.
3. Examine Next-Generation Technologies: Beyond basic upgrades, explore next-generation digital technologies, such as IoT sensor networks, machine learning, and blockchain. These technologies can provide deeper insights into supply chain patterns and enable a more autonomous supply chain.
4. Test-Drive New Technology and Monitor Performance: Implementing new technology should be preceded by a proof of concept to measure the return on investment. Ethical considerations and periodic progress checks are essential to ensure the success of digital supply chain transformation projects.

The adoption of these steps can help companies navigate the complexities of modern supply chain management and unlock substantial benefits in the long run.