Digital-First Supply Chains Are Critical

What they are, and why you should care

Published: Monday, January 10, 2022 - 13:03

It’s common to hear about how the Covid-19 pandemic has disrupted supply chain operations. Supply chain leaders are navigating one of the most difficult periods in recent history, and it’s impossible to foretell an end to global disruptions. What many don’t realize, however, is that the pandemic exacerbated issues in our global supply chains that have already existed.

Global supply chains are the most complex they’ve ever been, and the lean, just-in-time model of traditional supply chain management has left little room for error when disruptions do occur.

Companies today, such as global consumer brands, depend on vast networks of external partners to produce and package new products. The advantages of this approach are increased diversification, specialization, and cost-effectiveness. However, the disadvantage of decentralized control leads to increased exposure to disruption. A catastrophic event in one region now has the potential to affect a supplier or brand halfway across the globe.

The way to foster resilience and increase agility in this complex arena is not to hope for a return to pre-pandemic normalcy. Instead, companies must invest in digital-first supply chains that increase collaboration, transparency, and innovation across the board. But before diving into what a digital-first supply chain is, it’s important to understand why that is the best way forward.

Supply chains are interconnected communities

Supply chains today are interconnected communities consisting of many different stakeholders. The largest retailers and brands work with thousands of suppliers, all of which have their own dependencies and partnerships. On one hand, interconnected supply chains allow brands to outsource critical functions to external partners that have more specialized capabilities and resources. On the other hand, managing a vast network of external parties can be unwieldy, opaque, and cumbersome.

In a world in which customer demand can surge or plummet overnight, having such complex, interrelated supply chains can be problematic. Disruption or volatility can ripple out quickly and hinder a consumer brand’s ability to deliver high-quality goods on time and at a reasonable cost.

So, what’s the solution?

We must reimagine and upgrade supply-chain management strategies to enable flexible exploration, innovative problem-solving, and efficient operation. The only way to do this, given the global nature of modern supply chains, is by digitizing analog processes that have been long considered the status quo.

The modern supply chain is digital

The tides of supply chain management are shifting once again. Beginning in the early 1990s, many companies started approaching their supply chains with a cost-savings mindset that led many to move critical supply chain operations overseas. In the process, brands gave up some control and had to trust their external partners to fulfill service obligations with limited oversight.

The relationships we see today between brands and external suppliers still reflect this dynamic. Brands and suppliers operate independently on a transactional basis, only sharing information as needed to complete orders and keep customers satisfied. But this way of doing business is no longer feasible in our fast-paced, ever-evolving global economy.

Disruption, volatility, and uncertainty are difficult to navigate when external supply chains lack transparency and collaboration. Both brands and their external partners—such as contract manufacturers and co-packers—require more insight into what is happening in each other’s operations so that they can work together to solve tough problems, innovate around disruption, and respond to unanticipated developments. This data-driven insight comes through digitization.

We need digital tools and platforms that streamline communication and data-sharing across organizational boundaries. Supply chain planners must be able to work in tandem with their contract-supplier counterparts to make better decisions in real time. Conversely, contract suppliers benefit from more transparent data access to their brand customers by being able to anticipate customer needs more effectively and offer differentiated services. By replacing monolithic enterprise resource planning and analog record-keeping practices with digitally enabled platforms, brands can create these collaborative ecosystems for all to leverage.

Building fault-tolerant supply chains

Going digital is the key to building the resilient supply chains companies need to thrive going forward. The last 18 months revealed the fault-intolerant nature of our global supply chains. Too many companies carry too much risk and baggage to make quick, informed decisions to mitigate the consequences of disruption.

The most efficient and effective way to clear bottlenecks, accelerate innovation, and empower teams throughout the entire supply chain is to enable multi-enterprise collaboration powered by digital transformation. No brands can fully insulate themselves from chaos in the global economy, which is why the way forward should prioritize agility instead of forecasting precision.

Today’s most sophisticated multi-enterprise supply chain platforms facilitate this agility by bringing all trading partners across the supply chain together without requiring each to overhaul their IT infrastructure or adopt a new, burdensome application. Brands and their external partners can break through barriers that have long kept both sides from working more closely together and reimagine outdated processes that don’t respond well to disruption.

As we begin 2022 and look beyond, it’s clear that the next evolution in supply chain management is here. It’s digital-first supply chains that will be able to handle whatever challenges the world puts forth in the coming years.

About The Author

Jason Tham

Jason Tham is a co-founder, CEO and brand ambassador for Nulogy. He is focused on corporate development, executive leadership, and understanding the evolving landscape of Nulogy’s clients. Tham is also on Nulogy’s board and is a frequently requested speaker at industry events. For more than a decade, Tham has led industry thought leadership with speaking engagements for the Contract Packaging Association, the Gartner Supply Chain Symposium, the Council of Supply Chain Management Professionals (CSCMP), among many others.