Evolution of Digital Technology in Supply Chain Management

Ankur Mittal, Vice President, Digital Technology, Target India

Over the last century supply chain has evolved significantly from a simple, but a very labor intensive process to managing a global network and increased assortment.

In the mid 19 century, organizations were more focused on using mechanics to optimize labor, workload and space by using pallets, racks and better design of warehouses. By the Eighties, organizations and executives began to realize the complexity and the need to build a better supply chain network, and started to introduce concepts of operational research. They believed that this could improve process efficiency and create significant value to the top-line and bottom-line. The Nineties saw a significant amount of investment going into building and implementing ERP systems. By early 2000, almost all companies had ERP systems implemented for better data accuracy, digitization of records, data availability and, planning and integration with partners or other applications.

Despite these significant changes, the supply chain continues to be largely reliant on localized processes and the delivery of case pack and pallets to mass merchandisers. The digital era with the evolution of e-commerce, mobile commerce or machine commerce, and social media has empowered customers and can have a greater impact on supply chain aspects.

This is being fueled by:

1. Changing customer expectations: The new generation expects a higher control on what, when and how they buy. They expect a broader assortment with greater choice and personalisation. They want to control when goods get delivered to them, whether it is in one hour,the same day or on a predefined day and time.

2. Product complexity and life-cycle: Almost all products (not just personal electronics) are becoming much more complex, and have a shorter life-cycle. Customers expect new features and enhancement on the product almost every year. To enable this, supply chain has to become faster to capture the demand as soon as it arises.

3. Globalization: The globalization of sourcing and manufacturing has increased the complexity of supply chain. There are almost no borders for goods to move. This is making supply chain complex with the need for organizations to be able to cope and take quick decisions during natural disasters or political uncertainty.

In order to meet the aspirations of the customer and create a differentiating supply chain, one needs to think about digital as well as smart supply chain. Organizations are looking at few of the following aspects:

IoT devices and supply chain: There are several IoT devices that can add immense value to the supply chain:

1. Automated warehousing with the use of robots to move, pick and ship products.

2. RFID tagging on products and shelves to locate inventory in store and fulfillment centers for better accuracy

3. Use of GPS for vehicle tracking on a real-time basis to have better visibility of inventory moves, arrival and delivery

Analytical tools: To move products from one node to another node with optimum costs, organizations need to invest in data analytics and data science. This is critical and by doing so organizations will be able to plan the network, which can support the delivery promise of the organization. They will also be able to optimize inventory placement to reduce cost of replenishment or direct-to-customer fulfillment. It is of utmost importance to understand and assess data regarding customer demand, changes in weather patterns and the best route to take. Data analytics and data science can help fully realize the potential of a smart supply chain.

New generation in/out warding station in buildings and transportation: Some of the new technologies that are in use include:

* State-of-the-art docks with LED consoles that help guide the in/out-warding process

* Quality control and machine learning inputs for frequently in-warded Stock Keeping Units (SKUs) that evolve over a period of time and are customized specifically to meet the organization’s needs.

* Ease of capturing various dimensions of SKUs to optimize pallets, racks and space as well as data,which can help creating machine-learning algorithms over a period in time to evolve and get better.

* Driver-less trucks, temperature-controlled vehicles are other segments that are catching up to meet the future demand.

Organizations need to start thinking about supply chain as the key influencer of business strategy while gauging the need for digitization. The immediate benefits will be the speed and accuracy of data and product movement, and the reduction of labor costs. In the long run,retailers who constantly reinvent in the area of supply chain, will get ahead of competition in facilitating efficiency in supply chain processes, hence driving greater profits and value to business.