The realization that digitization is necessary is finally sinking in. “While there was always recognition that organizations needed to do more (concerning digitization), the coronavirus pandemic pushed them over the edge,” says Mahesh Veerina, CEO of ParkourSC, a real-time supply chain operations platform provider based in San Jose, California.
“We’re now seeing a three- to five-year acceleration or more of digital initiatives,” in spite of all the current supply chain disruptions, he says.
The right data and insights inspire better decision-making, he says. “How do you source this data and harness it to get better insights on such factors as to the location of your goods, their condition and whether they arrive to their destination on time? Or how much inventory do I have in the network? All this is data. That's why I think there is no stopping digital now.
According to Statista, global spending on digital transformation is expected to reach US$2.4 trillion in 2024. As of March, eight in 10 surveyed respondents reported they have deployed a hybrid cloud system, Statista reports.
However, Stamford, Connecticut-based global business consultancy Gartner says that about half (53 percent) of organizations it has surveyed “remain untested in the face of digital challenge, and their digital transformation readiness (is) therefore uncertain.”
The Challenge of Integrating Existing Systems
How an organization embarks on digitization depends on the maturity of its supply chain cycles, Veerina says. Some start with basic visibility — such as looking into truckload movement and truck location, he says, while other already have basic visibility and are adopting more advanced intelligent solutions, applying tools and rules-based systems to understand insights before disruption occurs. A third level is more automation and network-wide collaboration, he says.
“This is not a simple process. This is not a simple wave of a magic wand and problems are fixed,” he says.
One challenge is integration: Many companies have dozen or more different ERP systems, which may or may not integrate with each other, Veerina says: “I spoke to a company that has 70, and I asked how it got so many. The reason? Through mergers and acquisitions over the years.” Each unit runs a different system, he says, and the systems don’t talk to each other.
It takes a massive investment to integrate all the systems, Veerina says. “Many companies gave up on it because it's time and money, which they don't have,” he says. “All the (legacy) systems are still important; they are systems of record and systems of transaction. You run your business with that.”
Modern digital technologies allow organizations to build a digital overlay layer horizontally across all of these systems. “You can stand up this capability without a massive IT investment by using the cloud,” Veerina says. “You are integrating all the digital data from operations, and you start the journey there and then slowly expand across.”
An up-and-coming technology is the digital twin concept, in which a virtual model is created of a supply chain network. “Data flows from the real world into this digital twin, making it a live representation,” Veerina says. “At any given moment, for example, you know exactly where everything is and how much inventory you have. Then, you apply intelligence and algorithms to give you insights based on data and trends.”
Such technology also enables collaboration across the network of suppliers and users to help manage disruption. “You’re able to anticipate what’s likely to happen in real time — disruption happening as it's happening,” Veerina says. “You get visibility, and you can intervene and do something” to manage a disruption.
“Or as you accumulate data, you can predict a disruption, for example, realizing you don't have inventory to meet demand forecasted over the next three weeks,” he says, and you can then develop an alternate plan.
The road to digitization is a long process — and its implementation and use depend on a company’s maturity level, Veerina says. Companies that don’t adopt a digital strategy “risk competitive disadvantage and even failure,” he says.
In addition to digitization, supply management is evolving in other ways. “I think there will be lot more change coming for supply management organizations,” he says. “There is a big debate about whether globalization will suffer. I don't believe it will. There are a lot of benefits. But given the current geopolitical tensions, the model we're used to will shift quite a bit.”
Veerina concludes, “It's not going to be an easy shift. There will definitely be lot more regionalization and nearshoring. And how would supply chains have to behave in light of that? We'll have to readjust for sure.”