In 2017 much is said and written about supply chain digitalization and digitalization in general, but the actualization will still need to follow. The average supply chain digitization level lag behind any other functional area and only by exception a focus point of corporate digital strategies. For SMEs, a key pillar to global economic community, one can only assume an even lower supply chain digitalization level.
Supply digitalization is hindered for many reasons or excuses?
Where digitization is the conversion of manual, analog activities into a digital, digitalization is a next step where business models are changed through the use of digital technologies and providing new value-producing opportunities (Gartner).
At 43%, the logistics industry sees a particular low digitalization level in comparison to other sectors (McKinsey, HBR). These low digitalization levels are blamed on limitations to legacy databases, the lack of (qualified) resources and the complexity of using multiple technologies (CIO.com).
The same McKinsey article states that the only with the latest technology internal and external cross-functional data can be combined and linked and allow for companies to transform their supply chains operations.
SMEs are the oxygen for supply chain ecosystems
Aside from the value of digitalizing supply chains that can reap – at least 3.2% in earnings – a critical factor to consider is the network connectivity or the ‘ecosystem’ of supply chains.
Supply chain is not an isolated function and consists of a network of many service providers, suppliers, and customers, of both small and large companies. This network is typically as strong as the weakest link in the ‘chain’. Digitalization of parts of the supply chain will therefore leave the manually operating or disconnected parties exposed and at risk.
Digital disruption has had a main focus on old and large industries. However, SMEs are a key driver and contributor to the GDP across various economic regions. In both the EU, and ASEAN SMEs represent 95-99% of the all entreprises. For ASEAN, a major hub of manufacturing and trade the contribution to exports ranges from 10 to 30%.
SMEs typically being more flexible, less complex and more adaptable then large companies, also have fewer resources and a limited skill range to tap into. Digitalization has therefore not been a key agenda point for many. However, SMEs will still need to innovate, otherwise be subject to similar disruption as we have seen with major companies (SAP blog), or a simple replacement with a competitor who operates more digital and interconnected.
Digital supply chain ecosystems
Digitalization and supply chains see a commonality of being ecosystems, where connectivity between partners is critical. With a progressive amount of supply chain organizations taking on digital transformation programs, there is an increased need for digital connectivity between supply chain partners including the SME segment.
Both the EU and ASEAN have singled out SMEs as a strategic pillar for economic development, and even have special programs to strengthen and help them adopt digital solutions. Singapore has defined supply chain & logistics as a key focus area, allowing SMEs to grow and globalise by enhancing productivity and innovation, and transforming their business model.
Driving supply chain digitalization forward
Today only 37% of the small business in the US have adopted cloud computing, 2 million businesses in the UK don’t even have a website, costing them an estimated £ 343b. Further digitization and eventually digitalization will enable SMEs to continue to play a relevant role in global supply chains.
For SMEs to be more competitive is to have tighter control over their costs. The right technology can help to give comprehensive visibility and management of material flows, warehouse work and product costs across the supply chain. Inventory is a major asset and effective management, including the related inventory movement transactions, can impact SMEs bottom lines.
Companies like Oracle and SAP traditionally focused on large enterprise solutions, also recognize the need for SMEs to digitize and digitalize. They now offer cloud solutions to accelerate decision-making, integrate processes and provide real-time information.
As for MNCs, SMEs can also set out the digitalization journey by adopting digital logistics solutions to manage freight, inventory, sourcing and manufacturing. Numerous solutions are available, some more mature then others and upon evaluation the integration capability should be considered.
Note: This article originally appears on Annemieke Gelder’s blog on supplydirections.com.