Ashish Dass, is one of the most prominent and respected technology evangelists in the Middle East, and he spoke to CNME Editor Mark Forker, about the positive impact digital supply chains are having in terms of driving new growth and increasing efficiency in key industry verticals.
We know that a combination of the COVID-19 pandemic and Geopolitical issues has placed huge strain on traditional global supply chain processes. Can you outline to our readers how the digital supply chain offers a remedy to the headaches facing many businesses in relation to shipping and receiving goods and products?
The COVID 19 pandemic and the geopolitical issues, has created a major impact on the global supply chains which has affected our day to day lives adversely.
The disruption in supply chain has led to customer dissatisfaction, inflation going over the roof, primarily due to a simple imbalance created between supply and demand. It’s simple economics.
Let’s take an example of automobiles. You would be seeing a major imbalance in the region between the delivery of new cars and their wait time.
Whether it’s an EV car or a normal gasoline car, it does not matter. The way it works is that a car manufacturer either makes the car based on parts they manufacturer themselves or outsource them to 3rd party vendors which are then finally used to assemble and make your car ready.
Any delay in this chain creates a ripple effect in the full supply chain delivery and things start to fall apart. The result being price fluctuation, inflation, dissatisfaction in the customers resulting in economy being adversely affected. This is true for most industries.
The war in the Ukraine has placed a lot of stress on the availability of wheat and engineering products from Ukraine.
Many countries were heavily dependent on them. However, those organisations who did their sourcing using Digitally agile systems, were able to find alternatives in Australia or Argentina and much faster.
A large flour milling business in Nigeria was a sitting duck when Ukraine stopped supplying Wheat, however its Wheat Purchasers were able to quickly route Argentinian wheat through the Wheat network they had subscribed to.
Similarly, when a Ship ran aground in the Suez Canal a few years ago and blocked the Shipping lanes for weeks, many suppliers were caught off guard, there were other alternatives that quickly opened up, like shipping across the Bearing straights via the Siberian coast.
Those with good online visibility could negotiate and get the deals sorted.
A digital supply chain provides cost effective alternatives to each bottleneck that we come across, faster and cheaper than others.
Hence, optimising the supply chain has become a hot topic for every CEO of every company. It has reached a stage that business continuity is now given more importance than just cost alone.
Statistics say that 85 % of CEO’s think that digitalising the existing supply chain will enhance cash flows and drastically reduce DSO (days sales outstanding)
So, what is digital supply chain? Simply put, digital supply chain is automating all your analogue supply chain processes to a seamless digital way.
This means automating your data entry to your current ERP systems whether its inside your organisation or data coming from outside your organisation (Like markets trends and fluctuations). Simply put, this basically means automating your planning side, manufacturing side and the logistics side.
There are a lot of interdependencies in supply chain and automating them itself is a challenge and needs to be taken one step at a time.
Imagine a world where you can predict your customer demand based on trends of the past (internal data inputs from historical data) and future (external data inputs), plan your sourcing or planning your manufacturing to address the demands and fluctuating trends of the market.
In the logistics & Shipping industry, timely decision making is critical and establishing a balance between demand and supply is key because the volumes are high, and demand and supply fluctuates which has an adverse effect to your cash flows, inventory carrying costs and eventually the bottom line.
Analysing massive amounts of data and predicting the right balance is key. Some of the systems and functions used to automate supply chain are advanced Forecasting, Predictive analysis, demand and supply planning, intelligent logistics and warehousing, advanced MES systems and advanced asset management systems which use IOT (Internet of things), Advanced Robotics, Machine learning & advance analytics to name a few.
Logistics from over last 30 years is moving from just an operational function to an independent supply chain function and many companies now have a dedicated leader called chief supply chain officer whose job is to make the chain more efficient and reliable.
We live in a fast-paced digital economy, that is being constantly disrupted by nascent technologies. If we learned one thing from the pandemic, then it is the need to be ‘agile’. How does the digital supply chain improve efficiency for enterprises in our complex and evolving marketplaces?
The 4th Industrial revolution also called Industry 4.0 is the movement from manual processes to using computers and automation to start making the operations more efficient and business more predictable.
The supply chain today is a series of largely silo based business functions which are loosely connected to each other, primarily due to a lot of manual inputs.
Right from planning, forecasting, marketing, product development, manufacturing, and finally delivering to the customer.
Digitisation this brings down those silos and the chain becomes a completely integrated ecosystem which is transparent to all involved right from suppliers to manufacturers to the distributors and hence improves efficiency.
One of the concepts that have come from the Digital Supply Chain is called the “Digital Twin”. It’s nothing but a virtual model of a physical product or a process.
This technology enables the business to make a “digital copy” of its supply chain and use it to model what-if scenarios. In an example of a product A one vendor might cost 20% more than from another, but meeting demand will require product from both (or more).
Buyers might be able to ask, “what if we drop our three most expensive providers” and the model will predict if demand will still be met. Machine-learning algorithms allow the technology to perform predictive modelling and make recommendations on how to respond to changing conditions.
A digital twin simulates the processes in a manufacturing Unit and can predict when something will fail or what are the consequences.
If modelled well, maintenance and repair costs can be substantially lowered. A digital twin can also be used to improve safety, as certain hazardous scenarios can be avoided if we simulate it first.
A study by a leading management consultancy firm Bayne & Company says investments made to enable more resilient supply chains deliver several benefits:
- Accelerate Revenue Growth between 40% and 60%.
- Customer satisfaction increases by as much as 30%.
- Inventory turns increase 10% to 40%, cutting costs and increasing cash flow.
- Lead times are significantly reduced while costs stay under control.
What are the fundamental key characteristics that you need to in a functioning ‘digital supply chain’ – and what are the main differences between a digital supply chain and a traditional supply chain?
The key difference in traditional supply chains and digital supply chain is that in traditional supply chains, humans are making decisions based on machine inputs, while in digital supply chains, machines are driving the decisions with human oversight, thus getting the best of breed.
A supply chain network is across multiple suppliers and customer chains, in-fact a series of them. With Digital Supply Chain, information flows from each level of supplier to the next Customer through the interlinked system, thus reducing surprises, errors and bottlenecks.
Some main characteristics of a functioning supply chain are intelligent planning, accurate forecasting, Product Life cycle management, product development, intelligent manufacturing, and intelligent logistics that finally deliver to the customer
“Sourcing” a key functionality of Supply Chain, has been drastically altered with greater visibility, and more agile options with Digital Supply Chain.
Supply Chain managers can now source products and services across much larger Geographies and markets than before, much greater access to newer products and cheaper products due to availability of technology.
Can you tell our readers what are the main risks associated with the digital supply chain – and how can businesses better protect themselves when using a digital supply chain?
Because it leverages new technologies and “turns on” systems on the shop floor that were never meant to be connected to the Internet, for all its promise, the digital supply chain can introduce risk like any other new venture or technology that you use.
One area of focus is the potential for Internet of Things (IoT) security issues. Part of the real promise of IoT lies in the so-called industrial IoT realm, in which assets and machines share data via sensors and software that enable advances, like predictive maintenance.
Sensors can monitor the temperature of a machine, its noise level or how much it vibrates. Increases in any of these factors could point to an imminent failure. Accurate monitoring lets maintenance teams fix issues before they become critical.
In the manufacturing process, this is a keyway to reduce downtime. Yet because of the increased connectivity this digitisation necessitates, risk can propagate across the supply chain network all the way through to — or from — the customer.
Bad actors ranging from overly zealous competitors to criminals seeking to hold processes hostage could corrupt data or even instruct machines to operate unsafely. Shipments could be misdirected, or orders could be intercepted.
Bottom line is that everything in life comes with a risk; the wise thing is to look at the risk and plan the mitigation.
There are enough mitigations available in the digital supply chain function which if planned well can reduce and eliminate the risk. Hence adoption of digital supply chain functions should always be done a step at a time.