What are Digital Technologies and the Digital Supply Chain?
April 29, 2020
At its foundation, the optimal supply chain of a manufacturing company relies on an advanced, flexible Enterprise Resource Planning (ERP) solution.
When I initially considered writing about the digital supply chain, all manner of wild thoughts about advanced AI and robots, machine learning algorithms, and vast amounts of data came to mind. I think when people hear the word "digital," they get a little excited, and certainly, I was not immune. There is a tendency to wax on in atmospheric terms about what digital means. Some examples include:
? A company's "digital strategy"
? Chief Digital Officer
? The coming Digital Future
According to the Oxford dictionary, the definition of digital is, "Involving or relating to the use of computer technology." A further, more specific digital technologies definition can be found with the Australian government: "Digital Technologies are electronic tools, systems, devices, and resources that generate, store, or process data."
And the definition of Supply Chain?
"The sequence of processes involved in the production and distribution of a commodity."
So, if you put the definitions together, "The digital supply chain is the sequence of processes involved in the production and distribution of a commodity; with the processes using electronic tools, systems, devices and resources that generate, store or process data for – wait for it – establishing an airtight and ever-advancing supply chain." Or: "The supply chain that uses computer technology to be good, and get better."
So, now that we have a good definition of the digital supply chain, let's talk about all the tools manufacturers have at their disposal to make their supply chains better.
Manufacturing Tools and Solutions for Improving Supply Chains
At its foundation, the optimal supply chain of a manufacturing company relies on an advanced, flexible Enterprise Resource Planning (ERP) solution. This ERP solution contains production, part and supplier data. Once a company runs Material Requirements Planning (MRP), it must communicate with its supply base. The company establishes connections to the supply base through the use of digital toolsets, including everything from .xml document exchange, to EDI, supplier portals, and other communication methods. These connections allow the company to communicate demand and additional pertinent information to a supplier so that they know what to ship and when.
The supplier ships goods to the customer, so the customer must then track those goods by receiving them into the system, and compare them against the ASN. When those receipts are captured, the system can have an Evaluated Receipts Settlement (ERS) Solution that enables payment to the supplier automatically based on the schedule agreement and receipt data.
OK, so are we digital now?
According to the definition, we are. But, the tools I've mentioned have been available for 25 years or more. What about the cutting edge stuff that companies can take advantage of right now?
Continuous Improvement: Digital Supply Chains and Digital Transformation
The Chief Supply Chain Officer for McDonald's in North America Marion Gross, said, "The only time that supply chain even sort of hits anybody's radar is when something goes wrong."
So by making our supply chain digital, by using the latest advanced technologies, we can hopefully keep things from going wrong and keep our system continuously improving, so that nothing goes wrong in the future. In the same article, Gross quotes a former board member who said the successful supply chain at McDonald's was a "daily miracle."
In my opinion, to make the miracle a daily reality, companies need to employ modern digital transformation toolsets beyond just systems, devices, and resources. Here are a few that they should consider:
? Robotic process automation
? Artificial intelligence
? Machine learning
? Deep learning
? Data lakes
? Visualization tools
These recent technological advances and others can help drive waste out of the supply chain process, shorten lead times and ensure delivery accuracy. Many automotive companies are stuck in a quagmire of outdated thought and cost-cutting methods to even think of employing these toolsets. Many of the core supply chain systems for Automotive OEMs were implemented in the 1990s. Would you use a phone today from 1995? Would you go home at night and power up your 1998 computer and go to work? You wouldn't.
Mitigating Supply Chain Disruption with Demand Planning and Supplier Management
So, let's attack this "something going wrong" situation with the supply chain first. I wrote a blog about the mitigation of disruption with blockchain a couple of years ago, but let's leave the technology aside for a moment. Disruption can severely affect a supply chain, just as we see in today's turbulent times. Disruption is constant – whether it is a pandemic, earthquake, flood, civil unrest or other supply problems – disruption will always rear its head. The supply chain of a global automotive company is incredibly complex, and there are many pieces of data to keep track of.
Now apply the technology: What if I had a tool that tracked every location of every vendor in my ecosystem, and then was able to heat map that against geographic visualization tools and demand management systems? So, if I had a vendor with a location in Thailand, and there was a flood, the system could immediately find this and alert me. There would be a continuous poll for disasters by using machine learning to scan news articles, weather feeds, and United States Geological Survey (USGS) or other appropriate data, and I could identify any compromised locations and all parts in my Schedule Agreements, POs, and Bills of Material that were subject to this type of situation. We can do this today.
If we see the use of blockchain and tools like Hyperledger penetrate further into the supply chain, or if ideas like an actively maintained index take hold, I will be able to see heat maps of the supplier locations of my suppliers' suppliers that might also be affected by the disaster or event.
Using demand planning software, I can potentially measure and mitigate these events by redirecting my supply to alternate locations, or look to find another source for my supply. With inventory visibility tools I could check the availability of my supply base to determine what I could produce, and on what schedule, and then advise my suppliers and customers accordingly.
When I am working in the prototype stage with my supply base, I can use integrated supplier portal and quality management solutions to exchange data with suppliers to vastly improve accuracy and quality in the supply chain even before SOP.
Using Real-time Data for Actionable Insights
Imagine the concept of a Supply Chain or Business Operations Center. Using data lake technology and AI, I can continuously scan my own data, both structured and unstructured, as well as data from external sources, and continuously glean real-time data that affects my supply chain for actionable insights – from the shop floor, to EDI, to Human Resources actions, to legal contracts and force majeure data, to online social media, internal quality data, shipment data, supplier financial records, stock market movements and news articles – anything. I can scan and automate alerts for anomalies or other situations that might affect the good I am trying to produce. And I would continue to tune and maximize the capability of my supply chain by employing all of the tools in my arsenal.
Implementing Successful Digital Supply Chain Practices for the Future
Today's digital supply chain can employ all the tools I've discussed to maintain that very carefully constructed daily miracle. Automotive companies – OEMs, Tier Ones, anyone involved with auto – will need to deploy these technologies rapidly just to keep pace, let alone to push forward. Adaptive ERP systems that can quickly be deployed in acquisitions or green fields, and are flexible enough to deploy additional functionality through no code / low code platforms must be implemented, or companies will fall behind because of the inability of monolithic, elephantine, and aging systems to evolve to meet today's requirements. Success now and in the future won't be just coming up with the next great automotive product in the EV or ACES space, it will be the combination of that product and a highly enabled digital supply chain delivering it that will allow companies to flourish.