What is Driving the Digitalization in Supply Chain Management and Logistics?
The face of logistics has changed over the last three decades. Order fulfillment has transformed from a purely operational function concerning inventory stocking and package delivery into a sole industry that delves into advanced inventory planning, customer behavior and satisfaction, and sales and marketing integration.
Through different supply chain innovations, logistics has become faster, more flexible, more granular, and more accurate.
The pandemic and the resultant global crisis have significantly disrupted eCommerce sourcing and supplier management but hastened the supply chain’s rapid shift towards digitalization. Thankfully, available technological advancements have helped soften the blow for online retailers.
The 2020 crisis was a harsh lesson in adaptability and agility. Digitalization is no longer optional. To thrive within the “new normal,” it is in companies’ best interest to build and maintain a digital supply chain. In a Gartner report, businesses are racing towards digital transformation, yet 53% of the organizations surveyed are not ready for the challenges; hence their readiness is uncertain. If your company is still contemplating digitalization, then read the rest of the article.
What is Digitalization?
Though used interchangeably, digitization and digitalization are two different parts of the same technological breakthrough. Digitalization is made possible through the digitization of a company’s assets into digital format.
Digitization is concerned with doing away with analog forms of data to optimize processes, enabling a company to reduce costs and boost efficiency. On the other hand, digitalization entails a shift in the business model through digitized assets. It goes beyond the change from analog to digital and aims to impact operational processes, customer interaction, and revenue streams.
Digitalization or computerization is instrumental in bringing the business towards the 21st century. All industries need to do it, and that includes eCommerce and supply chains. It has become even more critical in the light of the pandemic. The pandemic restrictions and strict health protocols crippled most supply chain operations—businesses with supply chains that have yet to move away from face-to-face impacted manual supply chain transactions. In digitizing information and using these digital assets to usher in digitalization, a company’s supply chain can affect its success both during and after the onslaught of COVID-19.
Examples of Digitalization in eCommerce
Digitalization in eCommerce comes in many forms. Most of the digitized solutions are a product of using data-backed information to implement better operational processes.
- Better Security Measures Through Data Privacy
The pandemic has seen an increase in data breaches and cyberattacks. More than 36 billion records got exposed during the first half of 2020. Data privacy technologies such as call-bridge facilities with number masking ensure customer data protection and minimal chances of a data breach, misuse, and fraud.
- Improved Customer Interaction Through Automated Communication
Digitalization of communication channels can vastly improve customer satisfaction and loyalty. Technology-based solutions provide eCommerce retailers a means to communicate to their customers proactively, such as automated communication of order status, email alerts on sale items, and more.
- Service Personalization Through Big Data eCommerce
Analyzing big data helps retailers provide customers with personalized service. Through automated product suggestions and the optimization of the delivery process, adopting big data technologies can significantly improve customer relationships and the order fulfillment process.
How Retailers Can Embrace Digitalization in Supply Chain Management and Logistics
Adopting digital technologies need to fit supply chain requirements and vary from retailer to retailer. An ideal digital supply chain can monitor inventory in real-time, check customer product interactions, and optimize order fulfillment performance based on available data.
An effective digital supply chain is achievable through technology-based solutions. At present, companies utilize innovations such as GPS tracking, RFIDs, smart labels, or wireless sensor networks to digitalize their warehousing and storage operations. Likewise, cloud-based web solutions tackling inventory visibility and management collaboration serve as complementary technologies that optimize the supply chain.
The Benefits of Going Digital
The pandemic proved that the move to digital is no longer optional: it is a business imperative. There are plenty of benefits to adopting new logistics technologies for supply chains.
- Digitalization Improves Productivity
Manual processes, including time-keeping and inventory management, take valuable resources and are prone to human error. New technologies allow the automation of several functions within the supply chain. Automation cuts processing times from inventory management, order sorting and packing, and processing returns.
- Digitalization Optimizes Lead Times
The length of the supply chain depends on the type of products an eCommerce retailer offers. For those that process raw materials, the lead time from sourcing unprocessed stock, producing inventory, packing products, and shipping out deliveries can be time-consuming. Digitizing critical aspects of the supply chain can hasten the process by automating raw material deliveries and adapting technologies that aid in inventory sorting and storage. For instance, automation can automate more than 50% of repetitive work, so the workforce can focus on providing high-value work such as solving complex problems and finding new revenue sources.
- Digitalization Improves Cash Flow and Revenue Generation
The faster the supply chain, the less capital is tied down to the inventory. Faster movement means more growth and opportunities to scale. Companies that utilize digital technology can potentially get higher revenues (+10%) and be more profitable (26% on industry average).
The Challenges of Digitalization in Supply Chain Management and Logistics
As with all paradigm shifts, initiating digitalization is not without its challenges. Below are a few roadblocks most operations come across in the transition towards a digital supply chain.
- Finding the Right Solutions
Not all digital solutions are created equal. Different operations call for customized solutions. More often than not, companies find difficulty in choosing the right technologies to adapt. When it comes to digitalization, it isn’t one-size-fits-all. Retailers should expect a level of trial and error, especially at the onset.
- Costly Initial Investments
Digital solutions do not come cheap. As with most cases, it takes more than one upgrade to transition a supply chain operation from analog to digital truly. The benefits outweigh the costs; however, it is a relatively significant investment that requires preparation.
- Failure to Communicate Digitalization Plans
Communication is at the heart of digitalization in supply chain management and logistics. Companies should have the buy-in of their employees but also top executives for the transition to be successful. Failure to communicate the adoption of new technology can potentially waste the investment or, at the very least, delay implementation.
The pandemic emphasized the importance of incorporating digital solutions to supply chain management. Digitalization is not the next step but the only step in scaling eCommerce operations to greater heights. It is not a simple task. Digitalization is complex. It involves plenty of moving parts and requires a partner with the expertise and solutions to implement it successfully.
If you are ready to take your eCommerce operation into the digital age, you need ZhenHub’s technology-based logistics solutions. With our help and expertise, we can help you grow your company and scale to the next level. Sign up today, and let us take you through this challenging transition!