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8 key elements of supply chain digitization

The digitization of the supply chain is no longer a future vision but rather an ongoing transformative event, and those that put off the adoption of digital tools are likely to fall behind their competitors. (Photo: Shutterstock)

Economies around the world are embracing Industry 4.0, and that means supply chains must as well. The third industrial revolution saw the introduction of computers and automation. 4.0 takes that a step further by connecting a myriad of data points and using machine learning to take automation to new levels.

“If the vision of Industry 4.0 is to be realized, most enterprise processes must become more digitized,” wrote Stefan Schrauf, a partner with PwC Strategy in Germany, and Philipp Berttram, a principal with PwC Strategy, in a recent white paper outlining the digitization of the supply chain. “A critical element will be the evolution of traditional supply chains toward a connected, smart, and highly efficient supply chain ecosystem.”

The authors noted that today’s supply chain is a “series of largely discrete, siloed steps taken through marketing, product development, manufacturing, and distribution, and finally into the hands of the customer. Digitization brings down those walls, and the chain becomes a completely integrated ecosystem that is fully transparent to all the players involved — from the suppliers of raw materials, components, and parts, to the transporters of those supplies and finished goods, and finally to the customers demanding fulfillment.”

To realize the potential of Industry 4.0, though, companies need to understand that the digital supply chain is more than a collection of technologies — it involves finding skilled labor, managing culture shifts and transforming the way businesses think, Schrauf and Berttram said.

“The digital supply chain, as we envision it, consists of eight key elements: integrated planning and execution, logistics visibility, Procurement 4.0, smart warehousing, efficient spare parts management, autonomous and B2C logistics, prescriptive supply chain analytics, and digital supply chain enablers,” they wrote. “Companies that can put together these pieces into a coherent and fully transparent whole will gain huge advantages in customer service, flexibility, efficiency, and cost reduction; those that delay will be left further and further behind.”

Two seismic shifts are influencing the digitization of the supply chain: One is the introduction of big data, analytics and the internet of things, and the other is growing customer demand for quicker shipment deliveries with more transparency into that process.

For businesses in the supply chain, especially brokers, carriers and shippers, these demands are leading to increased costs and more complexity to move freight. But that isn’t inevitable. In fact, smart stakeholders are able to find greater efficiencies and cost reductions the more they adopt digitization, and managed transportation service (MTS) providers are helping them achieve this.

One of the key benefits of a digital supply chain is unparalleled levels of transparency. Connected digitally, brokers, carriers and shippers are able to efficiently and quickly conduct transactions, schedule shipment pickups, route those goods, and trace the progress of those goods from source to end customer.

“Companies with highly digitized supply chains and operations can expect efficiency gains of 4.1 percent annually, while boosting revenue by 2.9 percent a year,” the PwC whitepaper noted.

Taking advantage of this, however, requires an added level of expertise and technology investment. For brokers, carriers and shippers, digitizing the supply chain results in streamlined operations, more collaboration among parties and increased cost efficiency.

Streamlined operations

A digital supply chain allows all parties involved in transactions to interact on a near real-time basis. Managed transportation services (MTS) which incorporate a best-in-class transportation management system (TMS) are essential for driving supply chain digitization . An MTS is able to utilize advanced technology to connect the disparate systems of all parties, enhancing communication and speed to decision making.

Digital tools are eliminating many of the manual processes that bog down freight transactions, cause unnecessary delays and add cost. For instance, shippers and/or brokers are able to automate the bid and selection process; carriers can access loads and see relevant details — including price — and accept those loads with a single click of a button. No longer does a sales representative have to wait for someone to get to the office before pushing out a bid request or wait for a callback to confirm a deal. This transaction now takes place seamlessly and at any hour of the day. Digitization creates additional value by facilitating optimization, consolidation and digital freight matching (DFM), with the potential to further reduce costs and improve efficiency.

Additionally, the vast amount of data and information available allows shippers, brokers and carriers to make more informed decisions with near real-time data and market pricing. Shippers can use data to streamline loading and unloading processes, which cuts down on detention time — a major plus for most carriers.

Increased collaboration

As PwC noted, the siloed approach of previous supply chains will not work in an Industry 4.0 environment. All parties need to communicate and interact with one another, and more of that relationship is moving to the cloud. MTS providers enable this fast, efficient method of collaboration with robust technology offerings that dig through siloed approaches and create a more transparent environment. Data around product demand, supplies, even on-road congestion, is communicated automatically and electronically among parties, allowing each to adjust their individual business needs accordingly.

“By integrating data across the entire supply chain, in real time and often without human intervention, delivery lead times can be significantly reduced and freight and inventory management optimized,” Schrauf and Berttram wrote. “The rapid exchange of information also boosts the agility of the entire chain, while enabling much closer integration with customers — always a good thing when the goal is to effectively ‘lock in’ those customers through an efficient supply chain platform, excellent service, and a compelling customer experience.”

Increased cost efficiency

Whether it is the redeployment of resources, the elimination of paper processes or the standardization of processes across the business, digitization is leading to reduced cost. MTS providers are adding to these levels of efficiency with their access to the latest technology that can be configured and scaled according to each customer’s unique needs. Shippers that work with managed transportation providers gain an added benefit of not having to make large upfront investments in technology. According to some estimates, the digitization of the supply chain has led to savings of 30% in administrative costs and 20% in freight rates.

The supply chain is evolving at speeds never seen before. For any business to keep pace with this evolution, it takes resources in terms of time, money and, most importantly, skilled professionals. Managed transportation service providers have made many of these investments and are now helping businesses transition their operations into the supply chain’s digital future.

F3: Future of Freight Festival


The second annual F3: Future of Freight Festival will be held in Chattanooga, “The Scenic City,” this November. F3 combines innovation and entertainment — featuring live demos, industry experts discussing freight market trends for 2024, afternoon networking events, and Grammy Award-winning musicians performing in the evenings amidst the cool Appalachian fall weather.

Brian Straight

Brian Straight leads FreightWaves' Modern Shipper brand as Managing Editor. A journalism graduate of the University of Rhode Island, he has covered everything from a presidential election, to professional sports and Little League baseball, and for more than 10 years has covered trucking and logistics. Before joining FreightWaves, he was previously responsible for the editorial quality and production of Fleet Owner magazine and Brian lives in Connecticut with his wife and two kids and spends his time coaching his son’s baseball team, golfing with his daughter, and pursuing his never-ending quest to become a professional bowler. You can reach him at [email protected].