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• In many companies, customer-facing activities have been digitized much faster than supply chain operations. The procurement of maintenance, repair, and operation items for manufacturing enterprises and inventory for trading companies can benefit immensely from digitization.
• Other functions such as financial analysis, human resource management, and customer service have improved massively from the insights that the centralization of data and its analysis brings.
The Benefits of Supply Chain Digitization
The first benefit of supply chain digitization is the ability to automate redundant tasks and allow employees to focus on strategic and tactical level duties. Removing duplication of efforts results in significant savings on the cost of labor. In addition, companies can streamline their inventory, delivery, and warehousing processes to minimize wastage. The automation of processes also increases accuracy in things such as demand projections.
However, the success of any digitization efforts relies heavily on the ability to obtain sufficiently clean data from the supply chain operations. Clean data gives an accurate depiction of resource usage, costs, and overall performance. It also reveals instances where there is a duplication of efforts from the team. Clean data can also be used to power artificial intelligence and machine learning models which can deliver greater machine uptime through predictive maintenance.
Still, when you consider the trends, digital supply chains face a myriad of challenges across different organizations. Here are 3 of the top challenges and ways to combat them in your organization.
1. Poor Visibility Due to Outdated Information
Supply chain digitization is meant to improve the speed and accuracy of decision-making. When this happens, the organization is agile and can respond to new opportunities and challenges in a timely manner. However, this requires that the organization puts together a method of collecting, cleaning, and storing data, ready for querying and analysis.
It’s not an easy process because data may need to be sourced from many sources. For instance, data on pricing from different sources may need to be collected routinely and cleaned. It may be in different currencies and may require transformation before any comparisons are made. Another example would be data on contract expiry dates and license renewals. A digital supply chain requires that all such data is easily visible to decision-makers so that they can begin negotiations on time.
2. Use of Unauthorized Software
What happens when employees use software to run company tasks without approval by the management? Shadow IT.
Shadow IT results in massive wastage because the employees are not using the software that the company has spent money to buy or lease. According to CIO.com, 37% of all software spending in organizations goes to waste. However, employees are not always to blame. Sometimes, spending on procurement software does not match the training given to employees, leading to a mismatch between technology and employee skills. In other cases, it’s simply an aversion to change because of being used to a certain way of things. There may also be a resistance to giving up control to automation.
Unauthorized software use gets in the way of efforts to create visibility and to collect data in a central repository. Such software also puts company information at the risk of leaking, especially when the application is cloud-based.
Eliminating the use of unauthorized software in your organization requires that the supply chain is visible to every user in the organization. This will remove the need to use other solutions.
3. Disjointed Systems
Another major challenge for digital supply chains is when the supply chain is managed using fragmented systems. Less than one in every 100 organizations has seamless integration across its different functional activities. Most times, ticketing, ordering, contract management, and delivery are siloed.
The run-on effect of siloed operations cannot be understated. For instance, if a user needs a renewal of a certain software license, they may be required to write to a different department for spending approval. If this takes too long, the user might result in using unauthorized software to continue delivering their work.
In addition, the lack of integration between departments leads to a lack of coherence in procurement strategy. For instance, the overall organization may be working to reduce the total number of vendors and work with a few reliable ones in order to negotiate bigger contracts with improved terms. However, this is unlikely to work when each department carries out its own procurement strategy. This may cause the organization to miss out on cost-saving opportunities it could have otherwise benefitted from greatly.
Overcoming Digital Supply Chain Challenges
The single most important step in overcoming supply chain challenges is instituting measures to ensure proper visibility into the supply chain. The organization must decide on what data decision-makers need to have. The next step should be deciding on what tools to use to support these efforts. When deciding on software for the various procurement functions, the organization should consider the ease of integration with other applications that already exist in the organization.
Companies also must invest in proper upskilling of the workforce. This will ensure that they can use the technology that the organization acquires to deliver maximum value. Proper training will combat aversion to new technology solutions. The company will also reduce wastage from unused software.
If your organization is seeking to invest in the right software for a digital supply chain, consult ProcurePort for guidance on the right architecture. ProcurePort helps companies to streamline their procurement operations through world-class customizable e-procurement tools.