The supply chains of today have become very complex and consist of extensive logistics chains that serve the entire value chain, from raw material extraction through processing to the end consumer. Supply chain management therefore describes all processes that are necessary to supply customers or markets with products, goods or services. In comparison to basic logistics, it also includes accompanying processes such as order processing or cash flows.
Within a supply chain, huge amounts of data or information arise that are of great importance for all involved parties in order to create the most efficient possible supply chain. However, there is often the problem that this data does not leave the company and is not available to the other participants in the supply chain. Sharing this data would make the entire supply chain much more resilient and it would be possible to react more quickly to problems or unforeseen events (such as fluctuations in demand). In addition, a larger amount of precise, high-quality data also enables better corridor planning.
In order to obtain high quality data it is important to link as much data as possible. This is just as important within the company as it is within the entire logistics network. One challenge is that there are internal company systems such as SAP or Oracle that make it easy to interlink and analyze the data, but for a network of different companies a similar system still creates obstacles.
Goal: digitization of the supply chain
Digitization of the supply chain (Supply Chain 4.0) is currently the primary goal for many companies. Although the logistics industry is a pioneer, there is still enormous potential for optimization in this area. A survey by the logistics expert Hermes shows that many companies have not yet recognized the economic benefits of the Internet of Things (IoT: click here to read more about it) and cloud services. But these developments are essential for making the supply chain transparent for all parties involved.
Many different companies such as transporters, storage companies, shipping companies and distributors work together within a supply chain. Many of them have different IT systems that are not interlinked with one another and do not exchange data. For this reason, there is no uniform view of the overall process, and communication via telephone or email means that everyone involved can only see a small section of the overall picture. These different levels of knowledge often lead to problems. In addition, handwritten documents that are later transferred to electronic systems often lead to media disruptions that encourage errors.
Examples of problems are: Customs information that is not automatically available and has to be searched for by hand, delays in the delivery route (e.g. due to storms), theft, environmental influences such as heat that damage the product, etc. The recipient is not informed about all these things and this results in delays for subsequent processes, which usually cause high costs.
This could be avoided in a digitized supply chain that uses IoT and cloud services. Companies would be informed promptly about problems and could react to them in advance or within a short time. By networking the IT systems of all parties involved, communication would take place via a central platform and everyone would have the same level of information. One could e.g. track its components on the delivery route and react to possible delays in production, sensors in containers could control the temperature and freight documents could be automatically fed directly into the system. When the product arrives at the destination, the recipient receives a confirmation, which is incorporated into the ERP system and forms the basis for the invoice.
In order to create transparency across the entire supply chain, companies naturally face major challenges. Not only the internal processes but also those of the other parties involved have to be digitized. This requires a high level of coordination effort, which in the end is worthwhile for everyone.
This networking can be implemented via shared cloud platforms. You can find out more about cloud computing in our next news article.
Cf. DB Schenker, Supply Chain: Wer Daten teilt, hat mehr davon, accessed 09.09.2020
Cf. Hermes Supply Chain Blog, Trends im Supply Chain Management, accessed 09.09.2020
Cf. Gabler Wirtschaftslexikon, Supply Chain Management, accessed 09.09.2020
Cf. Computerwoche.de, Großes Potential ist noch ungenutzt, accessed 09.09.2020