How Manufacturers Can Benefit from Digital Transformation

The analog supply chain model is outmoded and inefficient. Here’s how digital transformation is reinventing manufacturing.

Highlights:

Manufacturers are increasingly adopting artificial intelligence and machine learning technologies.
The traditional analog supply chain model is unable to compete with digital disruptors in a volatile market.
Digital transformation empowers manufacturers to create sought-after personalized experiences for buyers.

Digital transformation isn’t just the latest buzzword in supply chain circles. It’s an ongoing trend that’s revolutionizing manufacturing and supply chain efficiency. According to a recent report from Accenture, 78% of CFOs are spearheading initiatives to improve efficiency through adoption of digital technology.

Digital transformation empowers manufacturers to meet the evolving demands of a customer base with rising expectations for customer service. The digital technologies that are emerging today offer analytics that are vital for forecasting and understanding how to shift the balance of supply and demand.

3 ways that the analog supply chain model is outdated

Supply chain management expert Frank Meerkamp writes, “The traditional supply chain is a tapestry built on an outdated analog network – yet it exists in a digital world.” The difficult truth is that in today’s climate of rapidly shifting market demands and an increasingly interconnected world, manufacturers must embrace digital transformation or be left behind.

Before we look at how digital transformation can benefit manufacturers, let’s take a moment to examine the challenges presented by an outdated analog supply chain.

1) Market volatility

Today’s markets move at a breakneck pace. Thanks to a constantly shifting geopolitical landscape, changing regulations and sanctions, and the unpredictability of cost and supply, manufacturers face market volatility, uncertainty, and a high level of risk. The analog supply chain model leaves companies without the agility to respond and pivot quickly and to operate efficiently on a global or regional scale.

2) Competition from digital disruptors

Perhaps the most powerful example of the way in which digital disruptors are challenging legacy leaders is the Amazon effect. Amazon has effectively situated itself as an innovator and easily has outpaced rivals in multiple sectors. Companies that continue to embrace an analog supply chain model simply cannot compete with those that have fully embraced digital transformation.

3) Rising customer expectations

While it can be tempting for B2B companies to bury their heads in the sand, believing that digital marketing is purely a B2C necessity, the reality is that supply chain companies must embrace digital marketing as part of their digital transformation. Buyers expect hyper-personalized experiences, as well as customized products, and the kind of execution that’s impossible for manufactures to deliver within the analog supply chain framework.

4 ways digital transformation addresses today’s challenges for manufacturers

As the complexity of the supply chain increases, embracing digital transformation is the clearest path to success for manufacturers. While companies that cling to an outdated analogue model struggle with eroding margins and an inability to compete, those that establish “a data-driven supply chain,” writes Meerkamp, “can gain advantages in increased forecasting accuracy, identifying and resolving issues in real time, creating new segmentations, and delivering on consumer requirements with speed, specificity, and scale.”

In short, digital transformation uses data to drive visibility and agility for manufacturers, allowing them to operate efficiently and profitably.

1) Establishing visibility and centralized control

The AI and machine-learning technologies available today enable manufacturers to meet the challenges presented by an increasingly complex supply chain. Massive sets of data can be captured and processed, providing invaluable real-time visibility. Not only that, but manufacturers can leverage this visibility to centralize data and decision-making.

2) Creating new performance engines

Thanks to the ability of AI technologies to process enormous quantities of data, digital transformation enables “powerful resolution engines, based on real-time root-cause analyses, to automate the execution of supply chain functions, and optimize transactions to meet strategic objectives,” says Meerkamp. These technologies facilitate the forecasting and immediate decision-making necessary for manufacturers to operate efficiently.

3) Facilitating agility

Today’s marketplace moves faster than ever, and market forces are constantly shifting. Agility has never been more important for companies to compete. Intelligent technologies allow supply chain companies to establish a management model that is collaborative, data-driven, and platform-based. Digital transformation enables the sharing of qualitative information as well as real-time data and implications. This in turns enables agile management, ready to meet the shifting demands of the marketplace.

4) Developing personalization and flexibility

One of the biggest challenges manufacturers face today is the increasing buyer expectations of personalized experiences. AI technology enables the creation of segmentation strategies, addressing buyers’ personalized needs based on various factors, including channel, location, and service level. Real-time visibility into market data also leads to greater insight into buyers’ needs and how to meet them.

Organizations that embrace digital transformation are empowered to create personalized experiences for their customers and operate with the agility, visibility, and centralization necessary to compete in today’s marketplace.