Benefits of supply chain digitization

Logistics are experiencing a new industrial revolution, driven by the latest technologies and innovations. While globalization and urbanization are significant factors of the transformation of the economy, one of the most relevant and interesting factors of change is technology. Even though it is expected a series of radical implementations for achieving the desired change, experts predict that countries like Germany or Japan would have already assimilated a digitalized supply chain production in the next decade. In twenty years, the term “smart factory” will be another common word of the daily language.

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One of the elements that drives the supply chain transformation is the digitization of the retail sector. The advent of eCommerce has been a huge change in supply chain and logistics. Some of the innovations introduced by eCommerce are the main cause of the increase in international transactions. This is absolutely beneficial for logistics, because it places it at the forefront of retail, as the gap between chain stores and shops dissipates.

The digitization of the supply chain has been determined by a general desire for more transparent and clean production processes. This desire has led to a transformation of the business world in order to control all movements online. Several corporations around the world have already implemented digitization for controlling their inventories and for improving every process in different departments: product development, sales, marketing and distribution. Thanks to digitization, the odds of losing raw materials and documents decreases considerably, just like the rate of re-processing and irregular records.

“Although many are doubtful about the excess of trust in digital technologies, it is a fact that costs go down and productivity increases. It is a positive transformation from any point of view”, says David Kiger, founder and chief executive officer of Worldwide Express. One of the fundamental aspects of digitization of the supply chain is the general transfer of all processes to online handling. Of course, it includes hiring, negotiations with suppliers and customers, billing, approval cycles, logistics, marketing and payment procedures. If all these tasks were developed in the cloud, digitization would be complete… and it will be.

Related: Five Lessons Learned from Retailed Digitalization

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Image courtesy of Steve Jurvetson at

New technologies and changes in purchases over the Internet have made Logistics one of the cornerstones of any successful digital business. Amazon is an interesting example of digital shopping market worldwide. This enormous company is aware of the importance of good service in distribution and comprehensive cost control, and it has ensured the success of their business. Why? Well, if a consumer orders a book online, and the book is apparently in stock, but the delivery is delayed three months and its costs exceed twenty-five percent of the initial value, any user would be very upset with his purchase. Amazon knows it, and, therefore, they take care of every supply chain detail, from warehouse management to deliveries.

Consumers buy products online because they seek greater comfort and agility in service. Prices are accessible and every day they have more difficulties in buying what they need in stores. Because of it, every eCommerce company should consider the benefits of digitization in their supply chain with the aim of adapting to the new logics of the global market. Amazon has done it through its long tail strategy: The company offers consumers a wide range of references with little rotation which are difficult to find elsewhere; they win the fidelity of customers thanks to their excellent service and product delivery, so the average basket purchase of every consumer increases each time.

On the other hand, there are three significant digitalization elements that bring benefits to supply chain management: (A) the big data, (B) internet of things and (C) robotics.

The main advantage of Big Data in Supply Chain is the improvement of a company’s visibility. It allows a great transition: from a supply chain based on production to one based on consumer demand. Not using the Big Data will probably mean a huge disadvantage for any business because logistics providers must be able to submit flexible offers all the time, and a Big Data digitization makes it possible. But the benefits of Big Data go beyond. Its implementation helps to reduce stocks and to increase the replacement of inventories much faster.

Internet of Things drives tremendous developments for logistics: the availability and the price reduction of semiconductors, sensors, controllers and transmitters. Also an increased availability and capacity of networks, excellent improvements in storage management and the control of every delivery.  Internet of Things is an integrating element by definition.

Finally, the strength of robotics is clear: automation. Of course, the benefits are innumerable in terms of logistics: workforce dependence reduction, cost savings, increased productivity, accuracy… In fact, worldwide annual sales of industrial robots have increased by an average of seventeen percent between 2010 and 2014 and is expected that global stocks of industrial robots also rise in the next decade.

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