DIGITIZATION ON SUPPLY CHAINS

SHIBASHIS GANGULY
PGDIM 26
1902214
The digitization of supply chains is one of the most important concepts in the 21 st century. What is
digitization? It means using the improvements in Information Technology in your supply chain so as
to maximise supply chain surplus and minimising costs. I shall put forward the following points on
digitization of supply chain:

 To understand the use of digitization in a supply chain, let us break the supply chain into
different components: A supply chain typically has 4 cycles, the procurement cycle, the
manufacturing cycle, the replenishment cycle and the customer cycle
 In the procurement cycle, we can use digitization to have better tracking of suppliers and
better information flow between suppliers and manufacturers. Also, with varying demand,
we have procurements to be dynamic. An example that we can cite here is that of Gateway
which is one of the first companies to start selling customized computers, way back in 1996.
Because they were selling customized computers, they needed proper inventory
management and tracking so that accordingly raw materials can be ordered as per customer
demand. Digitization can help in this, as we can see Walmart who have kept live tracking of
products in stores, so that they can track variable customer demand and can order
accordingly.
 Coming to the manufacturing cycle, one of the biggest issues that hinder progress in any
supply chain is “BullWhip Effect”. BullWhip effect tells you how the demand keeps on
increasing down a supply chain and leads to inventory being excess than is required. Let us
take into account that there is customer demand for a particular variety of laptop.
Accordingly the retailer asks for that many products from the warehouse. The warehouse
thinks this product is in demand, and accordingly asks for higher inventory from the
manufacturer so that they remain ready in case the demand increases further. The
manufacturer similarly asks for an even higher number from the suppliers so that they are
ready to replenish warehouse demands. What that leads to is that, at the bottom of the
chain there is an inventory surplus which goes to waste. Digitization can help us track real
time data of customer buying products, and as such demand based on expectation of sales
can be mitigated. Therefore their won’t be inventory surplus as replenishment will be as per
rise in demand and will be stopped when sales stops. Further in manufacturing, shutdown
times can be limited by better maintenance of machinery which can be done by digitized
tracking of machinery lifecycle, as well as tracking movements of workers for efficient
utilization of human power.
 Next comes the replenishment cycle, where a very important part is logistics. Logistics
becomes an issue as transportation costs can be high if you are keeping warehouses at large
distances from retailers, and in an unconsolidated market like India, where retailers are
usually not storing in large numbers, there is a need of multiple replenishment, and thereby
operational costs can be high. Live tracking of transports using GPS can be very helpful in
this phase, as that serves as an order tracking mechanism. Also storage if inventory
information as well as flow of the same can be very helpful to give prior information to
warehouse regarding replenishment of inventory and they can be dynamically replaced. A
 very good example can be that of Masy’s which specialise in MOR products. They have to
replenish the inventory multiple times a day depending on customer demand, and that is
effectively done. Even in paint industry, which optimized itself by making the mixing done in
retail shops itself, customer responsiveness can be improved if forecasting of customer
demand can be improved and retailers are ready with products.
 Next comes the most important cycle, which is the customer cycle where digitization can
come to good effect. A good example can be the live order tracking that inline retailers have
used. That helps customers track their orders and customer have more confidence in the
retailing firms. Also customer variety is a very important part of any supply chain. Putting
things online helps retailers maintain that variety without maintaining actual inventory of
the same product in large numbers. An example can be when Amazon acquired a major
show manufacturing concern, they had to upload more than 2.5 lakh pictures in their portal.
But maintaining such dynamicity in the actual inventory can be troublesome. An example
can be that of Borders which had sales of around $459 million in 2001. But they slowly lost
out to Amazon which was providing higher variety of books online, and they could not
maintain that inventory manually.
 Customer responsiveness can also be improved by digitization. Also demand planning uses
various statistical and predictive analytics models to effectively get demand. An example can
be that of Unilever which used predictive modelling to increase business in South East Asian
countries and Africa.

These are a few points of use of Digitization in SCM. There can be further improvements
especially when it comes to use of Analytics, real time data tracking and IoT.