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How Can Digital Supply Networks Help COOs Diversify Their Supply Chain?

Jun 19, 2020
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The COVID-19 pandemic exposed a fatal flaw of the traditional linear supply chain: the entire chain shuts down if one of its components fails. To create a more resilient supply chain, dynamically optimized digital supply networks (DSN) that can integrate multiple suppliers into the supply chain are critical. A DSN allows different partners to exchange and analyze information via active communication. This way, once an anomaly occurs, companies can swiftly adjust their material supply, production, and logistics to keep manufacturing up and running. Because of their high flexibility, DSNs improve supply chains through decentralization and increased agility, but this requires real-time information from each supply chain party in the network. This means that companies with real-time capabilities will have an edge in becoming a part of a DSN.

The key to the success of a DSN lies in the ability to integrate a variety of information through the IoT. To avoid information silos, data for things like production orders and order fulfillment must be incorporated with R&D/production/procurement processes. This consolidation of internal and external data, departmental processes, and systems can create a transparent network among enterprises, suppliers, and outsourced manufacturers. When combined with artificial intelligence (AI), a DSN can provide optimized demand forecasts and prevents material shortages by maintaining stock levels. For example, one of our customers, a leading global home appliances company, created an interconnected factory by connecting customers’ orders with manufacturing processes. This formed an instant connection between customers, products, machines, and production lines. By increasing production flexibility, production can be arranged according to demand even if there are disruptions in the supply chain. Orders can be reliably fulfilled by shifting production to different factories and suppliers while still meeting the need to customize products for different regions or customers.

However, to become qualified DSN suppliers, companies must take serious steps to establish and build their IoT capabilities. The crucial first step is to build real-time data connections that can handle data exchanges between systems. A common approach for IoT early adopters is to digitalize production equipment with the assistance of experienced OT edge connectivity solution providers who can help acquire real-time data from OT machines through various protocols.

With real-time data, building a secure and reliable network is the next step to connecting all the information from different devices and systems. Production capacity can be estimated through real-time data analysis, and production lines can be adjusted in response to changing market demands. You can then consider incorporating information about operations, supply chains, and product lifecycles of external suppliers or outsourced manufacturers. At this point, the benefits of a DSN and a more resilient, diversified supply chain are within your grasp.

Through a gradual digital transformation, a traditional mass-production and cost-oriented supply chain can transform into a mass-customization and demand-oriented DSN, giving your company the competitive edge to tackle whatever challenges the future may bring.

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