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Supply Chain News: Where Do Companies Stand on Supply Chain Digitization Initiatives?


Is Digitization Really Just a Collection of Disparate Technologies?

March 7, 2018
SCDigest Editorial Staff

Digitization remains very hot, with many surveys showing going more digital is high on the priority list of many CEOs.

Supply Chain Digest Says...

Despite the apparently high interest in both categories of digitization, we are clearly at the early stages of adoption, DHL's survey found.

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Major consulting firms are touting the benefits. For example, McKinsey research estimates that companies that aggressively digitalize their supply chains can expect to boost annual growth of earnings before interest and taxes (EBIT) by 3.2% and annual revenue growth by 2.3%.

That sounds good, but SCDigest continues to ask one key question: what does going digital really mean?

Most analysts and other pundits seems to define digitization as simply a collection of newer age supply chain technologies, from robotics to blockchain and lots in-between.

A new report from DHL takes a look at the digital supply chain, and quite reasonably divides digitization into two main vectors: physical/mechanical and information/analytical.

The report is largely based on survey responses from nearly 350 supply chain and operations professionals in the five major regions of the world.

On the physical side of the digitization ledger, "robotics" in manufacturing and distribution easily tops the list of five technologies respondents were asked to consider, with 63% of companies saying robotic technology would be very or extremely important over the next 1-3 years, well ahead of the 40% which viewed autonomous vehicles as that important, as shown in the chart below from the report.



Source: DHL

We've had robots in distribution and especially in manufacturing for decades, so why are they now considered a digital technology? That's a fair question, and the response would probably be that it is software that is really opening up new supply chain applications for robots, in some cases using artificial intelligence. For example, a number of companies are developing robotic technology for "piece picking" in distribution, almost all using some form of AI to improve the robot's performance over time.

On the information/analytics side of the digitalization landscape, "big data analytics" won the vote for the single most important technology, with 73% of respondents viewing this technology as significantly important. That was 10 percentage points above number 2 "Cloud-based application (63%). Those two technologies were followed by third place "Internet of Things" at 55%, as shown in the graphic below.


Source: DHL

(See More Below)



But despite the apparently high interest in both categories of digitization, we are clearly at the early stages of adoption, DHL's survey found. Just 5% of respondents for both physical and analytics forms of digitization say they are currently in the most advanced "transformation phase" of adoption, as shown in the graphic below.



Source: DHL

Meanwhile, 51% characterize themselves as in either the developing or early stages of adoption for physical digitization technologies, with an even larger share (59%) say they are in the same stage of deployment for information/analytic digitization.

The report contains several other data points, and consludes with what may be the most important question in the end: "Three years from now, it will be interesting to see whether these technologies live up to the hype and fulfill McKinsey's prediction of delivering real growth in earnings and profitability."

The full report can be found here: Digitalization and the supply chain: Where are we and what's next?

Any reaction to this DHL survey data? How do you define "digitization?" Let us know your thoughts at the Feedback section (email) or button below.


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