Understanding digitalization in supply chains 

Digitalization in supply chains goes beyond implementing flashy technologies; it’s about creating an ecosystem where information flows freely, and processes are optimized. At its core, digitalization is the transformation of supply chain operations by leveraging technology to integrate data, automate tasks, and enhance connectivity among stakeholders. 

Supply chain ecosystem often includes managing complex networks of suppliers, distributors, retailers, and customers. In this environment, digitalization provides the tools to streamline workflows, improve decision-making, and enhance customer satisfaction. 

Let’s break down the key pillars of digitalization in supply chains:

Data integration: The foundation of a supply chain

A supply chain is only as strong as the data that supports it. Data integration involves connecting disparate systems, platforms, and stakeholders to create a unified view of operations. With the right integration tools, supply chain managers can access real-time data on inventory levels, supplier performance, transportation schedles, and customer demand. 

Why it matters: 

• Improved Visibility: Integrated data provides end-to-end visibility, empowering managers to identify bottlenecks and inefficiencies quickly. 

• Enhanced Decision-Making: A centralized data system enables accurate forecasting and informed decisions based on real-time insights. 

• Collaboration: Integration bridges the gap between departments and partners, fostering better communication and coordination. 

Example in action: Imagine a retailer using integrated data systems to monitor supplier inventory levels and automatically adjust order quantities based on customer demand trends. This level of synchronization ensures that shelves are stocked without overloading warehouses.

 Reducing manual efforts with automation

Automation is one of the most tangible benefits of supply chain digitalization. Replacing repetitive manual tasks with automated workflows not only saves time but also minimizes errors and frees up human resources for strategic activities. 

Why it matters: 

• Efficiency gains: Automated processes streamline operations, from order processing to inventory management. 

• Cost savings: Reducing manual intervention lowers operational costs while increasing productivity. 

• Scalability: Automated systems can handle increased workloads without compromising accuracy or speed. 

Example in action: A distribution center equipped with automated pick-and-pack systems can process thousands of orders per day with minimal human intervention, ensuring faster delivery times and reduced labor costs.

Building a collaborative ecosystem with connectivity

Digitalization is fundamentally about connectivity—connecting systems, people, and processes to create a seamless supply chain network. Connectivity ensures that all stakeholders, from suppliers to customers, are on the same page, leading to improved collaboration and transparency. 

Why it matters: 

• Real-time updates: Connected systems provide instant updates on shipment status, inventory levels, and production schedules. 

• Customer satisfaction: Enhanced connectivity allows for faster response times and better communication with customers. 

• Resilience: Connected networks are better equipped to adapt to disruptions, ensuring continuity in the face of challenges. 

Example in action: A supply chain manager utilizing IoT-enabled tracking devices can monitor the exact location and condition of shipments in transit, making adjustments as needed to avoid delays or damage. 

 Why digitalization is crucial for supply chains 

In the rapidly evolving world of supply chain management, staying competitive requires more than adopting AI or robotics. Digitalization offers a holistic approach to transforming operations by focusing on the integration of data, automation of processes, and connectivity among stakeholders. It enables supply chains to: 

• Respond faster to market changes. 

• Reduce costs while maintaining high service levels. 

• Foster collaboration across the supply chain ecosystem. 

Taking action: How to begin digitalizing your supply chain 

1. Assess your current systems: Identify areas where data silos, manual processes, or connectivity gaps exist. 

1. Invest in scalable solutions: Choose technologies that grow with your business, such as cloud-based platforms and IoT devices. 

1. Train your team: Equip your workforce with the skills to leverage digital tools effectively. 

1. Collaborate with partners: Work with suppliers, distributors, and technology providers to create a unified digital ecosystem.
   

The future of digitalized supply chains

As supply chains become increasingly global and complex, digitalization will continue to play a pivotal role in shaping the industry’s future. Supply chain managers who embrace digitalization today will be better positioned to thrive in a world where agility, efficiency, and collaboration are key to success. 

Remember, digitalization isn’t just about adopting AI or robotics – it’s about creating smarter, more connected supply chains. By focusing on data integration, automation, and connectivity, supply chain managers can unlock the true potential of digitalization and drive their operations toward a more resilient and efficient future. 

But what are the actual cost savings we’re talking about?

In our experience, automated order processing cost savings are a multi-million-dollar opportunity for many organizations. While your competitors may still be burning resources on manual processes, automation gives you the operational edge to reinvest those savings into growth, better pricing or enhanced customer service.

Improve visibility with speedier data flow

Replacing manual order processes with an automated EDI solution enables quicker data flow, so you’re aware of any order issues sooner.

By automating orders with your suppliers, you’ll know:

• If your order was received
• If the vendor can fulfill it (completely, partially or not at all)
• If there are any issues with the order details
• When the shipment is on its way to your dock or customer

Visibility into each of these order touchpoints is key. Timely, accurate information is crucial to get your supply chain working like it should.

Reduce inventory with order automation

One of the quickest ways to remove waste from the order management process is with better inventory management. When you know which items are coming in and how they’re selling, you don’t need to carry so much inventory.

Your savings result from:

• Reducing order lead times.
• Increasing fill rates.
• Reducing excess store and warehouse safety stock.
• Providing consistent in-stock levels.

Empower staff by cutting manual processes

Eliminating manual tasks and replacing them with an automated solution frees your staff to focus on more important priorities.

The impact of automation is felt across receiving, planning, expediting, customer service, sales and accounts payable teams, giving them more time back in their day to work on driving business growth.

Your savings:

• Speed up the receiving process by knowing exactly when to expect a shipment and what is being delivered
• Reduce staff time in managing orders by up to 20% through order exception management
• Minimize customer service requests on order status (for drop-ship orders)
• Reduce the number of touch point contacts with suppliers

Optimize open-to-buy budgets

Every time open-to-buy funds are held up in orders that will never (or only partially) be fulfilled, it’s a missed opportunity. Because the money is tied up, buyers can’t use it to grow their category or order from new suppliers, and subsequently sales are lost. And when fill rates drop, you risk having empty shelves and unhappy customers.

With optimized open-to-buy budgets, you can:

• Recover money each year in unused open-to-buy dollars
• Increase customer satisfaction by reducing out-of-stocks

Increase invoice accuracy

Automated data exchange enables retailers and distributors to confirm order details such as pricing, item number accuracy, delivery date and even some insights like potential fill rate—before the order is received.

This saves the accounting team time and eliminates errant payments. As a supplier invoice electronically moves through the payables process, you can automatically validate that the invoice information is accurate and approved.

The result: time savings for staff with efficient scheduling and timely payment of invoices.

Hold vendors accountable

You don’t want to be left wondering if your vendors are doing their part. To keep products moving and customers happy, fill rates must stay high, and ship dates cannot vary.

Solutions like the SPS Commerce Supply Chain Performance Suite are designed to help you be proactive and work more productively with your suppliers.

When you capture and pay attention to performance metrics, retailers can gain a good understanding of which suppliers are solid, collaborative partners, and which are less reliable and need attention. Key metrics to track include:

• On-time and in-full (OTIF) – The percentage of complete orders delivered on time
• Fill rates – How often suppliers fulfill your entire order in one shipment
• Lead times – Consistency in delivery timeframes from order to receipt

Often, just knowing that a buying organization is carefully watching these numbers will improve fill rates and shipping, both of which save a retailer time, money and headaches.

The savings? Mid-market retailers taking advantage of automation through our Supply Chain Performance Suite have seen up to:

• 5% sales lift
• 10% reduction in operating expenses
• 3% margin improvement

Boost supply chain performance, get higher profits

When you invest in the automation of trading partner data, the payoff is not only in dollars and cents, but also the building of more transparent, proactive relationships with trading partners. With the right technology, you can transform your supply chain, scale your growth and reap the rewards every day.

Is there room for improvement in your processes? Take our five-question Supply Chain Health Vitals Checkup and get instant results, resources and more, or reach out to our team for a one-on-one conversation today.