Why Is Digitization Occurring Now?
A finely tuned supply chain is not enough to manage today’s continuing disruptions — whether black swan events like the coronavirus pandemic, or shorter-lived events like Suez Canal blockage. Organizations must ensure they are agile and resilient — and prepared, says Mahesh Veerina, CEO of ParkourSC, a real-time supply chain operations platform provider based in San Jose, California.
“It's crazy with this disruption,” he says. “How are you prepared? If the shocks become frequent, you need to minimize impact and recover from these shocks fast enough to keep going.”
Organizations are turning to digitization and technology to give them greater visibility into supply chain risk so they can be prepared and recover more quickly from such shocks, he says.
Three Dominant Drivers
Three trends are dominating current supply chain disruption — and are behind the shift to digitization, Veerina says.
Circular or continuing disruption. Before COVID-19, consumer behavior changed — consumers began to expect same day or next day delivery, disrupting the last mile delivery industry. While some companies, like Walmart, successfully changed their delivery model, Veerina says, “95 percent of the brands still don’t have that figured out.” Other circular examples: Geopolitical concerns and labor shortages.
Pandemic-induced impacts. Over the past 20 years, supply chains have been architected as a finely tuned, optimized global networks he says. They haven’t been set up to handle the disruptions of recent years, he says, and don’t have sourcing alternatives or alternative suppliers.
While the just-in-time model keeps supply chains in balance in the past, agility and resilience are needed now, he says, and such dynamics as sourcing transparency and environmental, social and governance initiatives, have become an imperative for companies, especially as they become more important to investors, customers and consumers.
Direct business impacts. “In the past 18 months, we saw more frequent disruptions,” Veerina says. “Faster recovery means you need agile supply chains.”
Supply chain visibility is key — but it is only a part of the answer, he says: “Visibility improves the situation, but it's not enough. That's where digital is kicking in heavily.” One area seeing implementation is automation.
Going Beyond Planning
Having a plan to mitigate risk and manage disruption is top of mind for supply management professionals. Planning is a common solution, Veerina says, “but even with the greatest plan, a plan alone is not enough.”
Planning typically deals with S&OP cycles every month or quarter — but disruptions and challenges occur in real time. How do companies understand those disruptions and even predict them? That’s where data, particularly operational data, comes into play — and where digitization is making headway, Veerina says.
“Cloud-based systems are enabling organizations to optimize and glean insights from the multitude of data, which is coming from many sources,” he says. “While it can be difficult still to predict black swan events by having ample data — and the right data — organizations can start predicting potential ripple effect supply chain disruptions,” he says. “The cloud is enabling all this, to process this and give insights as things are happening, so that while a shipment is going to get delayed, you have time to react and find a solution.”
He continues: “One thing the pandemic did is bring supply chain awareness to the board and C-suite level. It's no longer a backroom function supply management has a seat at the table — because there is a direct impact on your revenues and profitability and operational efficiencies.”
Digitization is helping companies achieve that, he says: “That's why companies are jumping on the digitization bandwagon.”