The Advantages of Digital Supply Chain Optimization

Digital supply chain optimization offers substantial benefits, including improved speed and quality of procurement, risk reduction and enhanced innovation. © ipopba – stock.adobe.com

By Misha Govshteyn, CEO of MacroFab

In recent years, the upheaval caused by disruptions including increased geopolitical tensions, the pandemic and natural disasters has highlighted the critical role of digital optimization in the manufacturing supply chain. The 21st-century industrial revolution —a.k.a. Industry 4.0 —  is undeniably digital, marked by a rise in data and connectivity, analytics and automation.

Industry 4.0 has been reshaping manufacturing, promising heightened efficiency and productivity across operations – including an advanced supply chain. Prioritizing the digitization of core transactional processes improves efficiency and accuracy and establishes a strong digital foundation. This foundation is pivotal for leveraging advanced analytics, resulting in informed business decisions.

The benefits of a digital supply chain

Digital supply chain optimization offers substantial benefits, including improved speed and quality of procurement, risk reduction and enhanced innovation. In the past, supply chain management often dealt with disorganized data sources and manual processes, resulting in delays, errors and operational inefficiencies. AI, Robotic Process Automation (RPA), blockchain, and IoT all contribute to manufacturers’ capability to automate manual tasks and access comprehensive, up-to-date information spanning every facet of their supply chains in real-time. This change allows organizations to make preemptive decisions based on accurate insights, helping to identify potential bottlenecks, anticipate disruptions and respond quickly before they escalate into critical issues.

A digital supply chain enables strategic sourcing to become predictive, transactional procurement to be automated and supplier risk management to be proactive, leading to more efficient operations and cost savings.

Improved inventory management, demand forecasting and supplier collaboration are key components of this strategy. These practices enable businesses to optimize inventory levels, lower carrying costs and negotiate favorable terms with suppliers. This increase in profitability, in turn, empowers companies to reinvest resources into innovation and growth initiatives, fostering continuous improvement.

Automated inventory management

The convergence of inventory and supply chain tracking has transformed the manufacturing landscape, providing transparency for Contract Manufacturers (CMs) and Original Equipment Manufacturers (OEMs) alike. CMs can now trace materials and components from their origins to the factory floor, while OEMs can seamlessly monitor product movement from the CM’s premises to their own doorstep.

Amplifying this transparency is the ability to continuously monitor the environmental conditions– like temperature, humidity, vibration, airflow and even the proximity to other objects – in which these materials or products are stored. Maintaining materials within specific temperature-controlled and humidity-controlled environments is vital. Such diligent monitoring can mitigate potential concerns related to storage degradation over time, ensuring materials and electronic components remain in their optimal state.

It is also possible to enhance customer service by tracking inventory in real-time: being able to forecast potential shortfalls in deliveries due to inclement weather or other unforeseen shipping issues allows manufacturers to make amends quickly. Goods and products are now recovered enroute, saving money and time that would be spent in replacing them.

Automating inventory management begins with real-time inventory and material tracking, commonly achieved using radio frequency identification (RFID) tags. The technology is both straightforward and cost-effective. Importantly, RF transmission rarely interferes with other wireless communication protocols.

The ability to pinpoint the exact location of inventory offers significant benefits to CMs and OEMs. Gone are the days when supplies and products languish on a shelf while people desperately try to retrace their steps to locate them. Modern sensors monitor local environments for motion and changes in position using Wi-Fi, Bluetooth, or other transmission standards to determine when inventory moves. These sensors relay data to gateway nodes which undertake preliminary processing before sending the information to the cloud or a centralized processor.

The overall operational knowledge gained by implementing RFID tracking and smart sensors is the largest single driver – the more you know about how your business and/or facility runs, the better your chances of reaching peak efficiency. By tracking inventory and materials along with utilizing sensors to monitor the health of equipment and devices, manufacturers can predict potential issues at every stage from supply and material procurement to product delivery and head them off at the pass – and the benefits will be realized by both the manufacturer and the OEM.

The rise of digital procurement

The trend toward modernization and efficiency through digital procurement technology is steadily on the rise. The manufacturing sector is at the forefront, with the majority of its companies harnessing digital procurement to streamline their operations. Digital procurement is the amalgamation of technology and procurement processes, leveraging tools such as e-procurement platforms, Supplier Relationship Management (SRM) systems, procurement analytics, and collaboration software.

These tools are integral components reshaping the procurement landscape in electronics manufacturing. For example, McKinsey reports that companies with digital supply chains can expect efficiency improvements of 3.2 percent annually and procurement costs to decrease by 3.4 percent.

Automating manual tasks results in significant time savings and reduced error occurrence. The capability to assess and compare suppliers and products based on price and quality assures optimal cost management. Digital procurement tools streamline operations and create opportunities for strategic decision-making and cost savings.

Conclusion

Working closely with outside partners, including suppliers and tech providers, is key to making supply chain optimization work well. By teaming up and sharing information across the whole supply chain, manufacturers can create a network that’s flexible and ready to handle whatever the market throws at it.

Overall, companies embracing the “advanced manufacturing” / Industry 4.0 approach, from the factory floor to digital supply chain optimization, find themselves better equipped to navigate disruptions, making their supply chains more efficient and work more productive. This digital transformation will continue, with new advancements to come, and it is evident that the success of advanced manufacturing hinges on the adaptability and sophistication of its supply chain infrastructure.

About the Author

Misha Govshteyn is the CEO of MacroFab. MacroFab’s co-founders sought to redefine the contract manufacturing industry by developing a software-driven approach to make it faster and easier than ever to bring new electronic products to market. Learn more at www.macrofab.com.