Supply Chain Digital Transformation Trends to Watch in 2022

Supply Chain Digital Transformation Trends to Watch in 2022

Digital transformation is the driver of the new economy, taking industries into accountable, productive, and collaborative environments. Procurement and sourcing are just some of the sectors experiencing colossal growth. The market for this segment is expected to reach 20 billion CNY by 2022.

Governmental Initiatives

This is, of course, due to new public-sector initiatives, as outlined by the National Development and Reform Commission, in April of 2020 . In their New Infrastructure scopes, the NDRC had outlines several priority areas:

• Infrastructure to support scientific research
• Innovation and education
• Incorporated infrastructure leveraging AI
• Big Data to support the transformation of traditional infrastructure such as transport and energy
• Information infrastructure, computing, and communication facilities – 5G, IoT, Satellite tech

This push for digital transformation has since been placed into greater focus, as the State Council of the PRC highlighted as recently as March 2021. There, they highlighted their focus on pushing forward with the digitalization of state-owned enterprises.

Challenges

Digital transformation presents opportunities destined to facilitate modern enterprise. These must address the short and long-term considerations and scenarios that pose threats to new or established businesses.

COVID-19

Of the most significant events of our time, the COVID-19 pandemic has placed supply chain vulnerability into the spotlight. Namely, the weakest link in this essential infrastructure has been a lack of flexibility in the face of sudden disruptions caused by the knock-on effects of the pandemic. A survey conducted by QIMA with 200 market-leading retailers revealed that, as of July 2020, two-thirds of respondents highlighted the pandemic’s push for supply chain digitalization . This includes the use of remote inspection tools, CRM, or SCM systems.

E-Commerce Disruptions

Supply chains had already begun to reorganize based on the influx of web-based retail, particularly in the Chinese market. The pandemic had exposed the fragility of the global supply network and its performance considering these events.

Digitally Minded Processes

Consumer behaviors are shaped around new freedoms of choice and personalization in their digital experiences. Smartphones, for one, have evolved the retail landscape with unprecedented convenience and simplicity. Businesses have understood this through consumer targeting and digitalizing their business operations and supply chains. This in turn has ensured a full view of supplier production, product quality, and regulatory compliance.

Cyber Security

While the Internet of Things and other digital systems begin to form the backbone of front and back-end business processes, they become vulnerable to compromise by malicious actors. Ransomware and other cyberattacks have prevailed throughout the pandemic period, extending to logistics, retail operations, and transportation networks. The International Maritime Organisation and CMA CGM are among the organisations citing recent interruptions.

The 3 Major Pillars

Of the forces behind the initiative to transform your business operations, digital transformation relies on a three-pronged route. Ultimately, these envelop changes on a technical, organisational, and humanistic level.

Technical Transformation:

Facilities must adapt to reflect a business-centric information infrastructure. In this case, data should always remain the foundation of all operations and applications. This commitment will complement business processes and personnel at your organisation.

Organizational Transformation:

In practice, such evolution must regard production factors, resource allocation, and business modeling, which would shift toward intelligent processes. This requires a transformation from traditional manufacturing, marketing, and service models into their digital counterparts. These respective processes would be smart production, digital marketing, and data-driven service models.

People-Based Transformation:

The stakeholder, employee, and end-user should remain at the centre of every business operation. Therefore, the employer must encourage and foster a change in the mindset of thinking to reflect a data-driven mindset that unlocks problem-solving, business, and technical skills. Collaborative, data-centric company culture is key to achieving this.

Case Studies

A wholesale approach to sourcing digitalization has enabled the most prominent Chinese and international enterprises to face growing challenges and demonstrate successes in their business disciplines.

Jingdong

A 15.5 million sq. m warehouse capacity spaced out over 600 facilities had presented challenges from an efficiency perspective. The retailer and logistics chain had additionally been plagued with relentless competition regarding the customer shopping experience, particularly in order management, delivery, and product returns.

To remedy these responsibilities, JD.com had launched its Supply Chain Innovation Centre, hosting a supply chain platform, incorporating big data, smart replenishment, and algorithms powering forecasting of sales and inventory models. This resulted in 37 fewer days of inventory turnover days, with a 23% reduction of invalid runs. The delivery performance experienced a 25% improvement, with a subsequent 10% cost reduction. Nestle, in particular, cited an improved demand forecast accuracy in its partnership with the platform to a total of 85%, with lead times dropping to a 2–3-day range.

Unilever

The consumer goods giant cites over 1500 suppliers with 1600 brands in over 270 production bases across 6 continents. Among its 300-plus retailers, it retails over 80,000 sales channels, involving complex operations with high purchasing frequencies and complexities in identifying its consumer demographics.

Unilever employed solutions to answer purchasing prediction difficulties involving a range of organizational transformations. The first involves 16 individual brand analysis divisions for specialized predictive models. The second had been a technical initiative integrating the clients’ POS and distributor inventory system. The third, however, had been a supplier-side and management evaluations enabling digitalized processes that provided actionable datasets.

Ultimately, Unilever cited boosts to its market efficiencies, with insights and performance improvements. Among the most noted were optimized supplier management processes, enabling closer collaborations among stakeholder groups using real-time data synchronisation.

Lego

Digital gaming competition and misinterpretations of market demand have led to diminishing market share and profitability for the Danish toy manufacturer.

To combat these difficulties, Lego has engaged in data-first initiatives to obtain more compelling consumer insights. This includes online sales channel development, digitalization in communications, and online crowdsourcing. It has also engaged with video gaming and social networking to expand its product ranges.

These initiatives have gradually expanded Lego’s market position, awarding its social networks with over 1 million active users, 20,000 product design ideas, and 28 new product lines. Its digital initiatives have powered a shift toward a C2C model, pioneering the connection between its consumers and its manufacturing branch. These initiatives alone enabled a 21% revenue increase in 2020, with a 19% increase in year-on-year profit from the preceding year.

Opportunities for Supply Chain

Digitalization benefits have streamlined production, logistical, and consumer-side operations among leading retailers in China and worldwide. With data-driven processes, it has been possible for producers to adopt a more predictive, systematic, and proactive approach to face our time’s commercial and societal challenges.

As we overcome the post-Covid world’s challenges, digitalization will feature more prominently as companies strive for operational efficiency, cost optimisation, and market competition. E-sourcing itself offers up to 20% in cost reductions, contrasted with 60% improvements in efficiency levels – when leveraging the power of data.

In 2022, businesses should undertake digital transformation to open the benefits for sourcing automation, shipment and payment automation, globalisation and localisation, supply chain performance insight, and a decisive advantage in value and added services – enlightening customers and ensuring a consistent efficiency level. Digital challenges will remain, yet its benefits outweigh the considerations and paint the way for a stronger market position than ever once-traditionally envisioned.

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