What Is Supply Chain Digitization & Why Is It Important? 

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The emergence of new supply chain technologies has been fueling the digital transformation of logistics and supply chain processes.

Online brands of all sizes can effectively implement the latest logistics innovations, such as geolocation tools, warehouse management systems, drones, autonomous vehicles, and advanced automation platforms.

With the rapid digitization of the supply chain landscape, it’s important for ecommerce businesses to catch up to this transformation to remain competitive.

In this post, we take a closer look at what supply chain digitization is, how it works, and how ecommerce businesses can benefit from it.

What is supply chain digitization?

Supply chain digitization is the process of replacing manual or analog processes throughout the ecommerce supply chain with digital solutions.

Digitization involves implementing advanced digital products and services into different aspects of the supply chain to streamline operations, improve management, and increase visibility. 

How does supply chain digitization work?

The digitization of the supply chain is a form of supply chain transformation with a focus on incorporating digital technology into different supply chain activities.

Essentially, it helps optimize the supply chain by addressing key challenges and bringing about a “supply chain 4.0” that’s faster and more accurate, efficient, and flexible. 

While the specifics vary for each business, supply chain digitization often involves three primary areas: data management, process integrations, and the use of digital tools in physical process execution.

Digitized data management

Supply chain management tools are designed to collect large volumes of data promptly and accurately.

For instance, inventory management software is used to automatically receive orders placed on an online store, process them for fulfillment, update stock levels, and provide real-time inventory counts.

Additionally, sales records and customer information are recorded and analyzed to improve processes such as demand forecasting and distribution methods.  

Better process integration

The use of different supply chain technology is designed to integrate with one another for an end-to-end supply chain solution, from first-mile delivery tracking to shipping orders.

Process integration creates better transparency and coordination between different players in the supply chain. 

Use of digital tools in physical process execution

Supply chain digitization also impacts the execution of different physical processes. Data on inventory location helps to improve picking paths and allows increased efficiency.

Additionally, warehouse robots are leveraged to transport items in the warehouse and assist with retrieving items for fast fulfillment.

Benefits of supply chain digitization

Digitization can help improve supply chain execution and planning, which results in a number of benefits.

Better financial management

Digital inventory is a vital element in supply chain digitization, providing you with real-time visibility into inventory activity. This can subsequently help you manage your financials better.

For instance, with the right system in place, you can get automated notifications when it’s time to reorder inventory so you can avoid high stockout costs.

Additionally, you can plan inventory replenishment more accurately to reduce inventory carrying costs and the risk of dead stock.

Minimized lead times

By bringing real-time visibility throughout your supply chain, digitization allows you to minimize lead times and improve supply chain velocity.

For instance, integrating your fulfillment software with your ecommerce store allows you to automatically receive orders and get them ready for fulfillment. 

Digitization eliminates the manual work across departments, which helps speed up different processes.

“We are very impressed by ShipBob’s transparency, simplicity, and intuitive dashboard. So many 3PLs have either bad or no front-facing software, making it impossible to keep track of what’s leaving or entering the warehouse.

On the supply chain side, I just throw in what we placed at the factory into a WRO in the ShipBob dashboard, and I can see how many units we have on-hand, what’s incoming, what’s at docks, and so on. I can see all of those numbers in a few seconds, and it makes life so much easier.”

 Harley Abrams, Operations Manager of SuperSpeed Golf, LLC 

Improved decision making

With advanced tracking and analytics capabilities, the right supply chain tech stack can provide valuable insights for better decision making.

For example, by tracking historical sales data and consumer buying behavior, certain technology solutions can make accurate predictions on future demand.

This can help you plan inventory levels and how much inventory to have in each distribution center to improve delivery times and save on costs.

Difference between traditional and digital supply chains

Although traditional supply chains also use technology to some extent, there are significant differences between the two.

For a start, traditional supply chains use standalone systems whereas digital supply chains use integrated technology systems that work seamlessly together. This eliminates silos and creates better transparency between different players in the supply chain.

In traditional supply chains, the rules rely on historical inputs whereas digital supply chains leverage real-time information updated automatically. This allows for timely responses, enabling businesses to spot issues or risks well ahead of time. 

Traditional supply chains also tend to have longer lead times because they involve a lot of manual physical processes throughout the supply chain.

On the other hand, supply chain digitization offers digital warehousing solutions where advanced warehouse management systems are implemented to provide real-time data exchange and speed up the fulfillment and shipping process.

Some of these smart warehousing solutions include wearables and automated guided vehicles speed up different warehousing and fulfillment tasks.

Since the field of supply chain digitization is evolving quickly, it’s important to stay on top of the latest trends shaping the landscape.

Here is an overview of the latest supply chain digitization trends to be aware of.

Curated data communities

The increasing use of technology and the Internet of Things (IoT) in the supply chain has resulted in curated data communities.

This makes for advanced supply chain analytics as businesses get more visibility across different supply chain processes and access more comprehensive data to improve supply chain strategies, from warehouse receiving to distribution.

“Inventory management through ShipBob is also incredibly simple, and very helpful. I use Shopify, which can easily get inventory out of sync when you’re assembling and packing orders yourself.

ShipBob integrates with Shopify directly, and automatically syncs my order and inventory data in real-time, so all I have to do is load Shopify, then ShipBob. Now I can see how many units of each product have been sold and how many I have left without having to count stock myself, which is a huge time saver.”

Nakisah Williams, founder of Craft Club Co. 

Shorter product lifecycles

Digitization improves supply chain forecasting and allows for better inventory planning.

Businesses can access vast amounts of data and analyze them in near real-time to accurately forecast future demand or changes in the supply chain.

This has led to the trend of shortened product lifecycles, helping improve supply chain agility.

“We don’t always know exactly when our inventory shipments will arrive from our suppliers, and other 3PLs told us they would reject our shipments if they didn’t arrive on a certain time and date.

ShipBob is a lot more flexible because of their technology, and our representative helped explain how receiving works, which was a big plus.” 

Adelina Zotta & Connor Westby, Co-Founders of NutriPaw

How to digitize the supply chain

The process of digitizing the supply chain starts by looking at your current supply chain management operations and understanding how to implement digital solutions throughout.

Additionally, you’ll need to think of what digital solutions should be implemented throughout your supply chain.

There are two ways to bring about digitization: building the software in-house or working with a company.

Building software in-house

Supply chain digitization is all about ensuring that different supply chain tools work together to optimize process integration.

This involves bringing accurate data and processes together under one unified platform to provide end-to-end visibility. 

Many businesses choose to build their supply chain software in-house. However, this can be challenging as you may have existing systems that you’d want to continue using.

That means your software would have to properly integrate with those legacy systems and cause minimal disruptions.

Partnering up with a company

Alternatively, you can partner with a logistics partner that provides you with the latest supply chain management technology to integrate with your existing systems.

Rather than building a technology stack from scratch, a logistics company can provide supply chain solutions that easily integrate with other ecommerce systems, from your online store to your returns management software.

This enables easy implementation and more visibility while helping you automate significant portions of your supply chain.

In other words, partnering with the right company will let you manage different aspects of your supply chain in one place.

ShipBob can help you digitize your supply chain

Businesses looking to digitize their supply chain can leverage ShipBob’s fulfillment solution for end-to-end supply chain visibility and better process integration.

The proprietary software seamlessly integrates with existing systems and eliminates the need to build software in-house. This helps to streamline the ecommerce supply chain and improves supply chain efficiency.

Data-backed purchasing decisions

The ShipBob software comes with advanced analytics to inform purchasing decisions in the small business supply chain.

By leveraging historical sales performance and consumer behavioral data, it makes accurate predictions on future demand while providing automated reorder notifications.

This helps you make smart decisions on procurement, allowing for timely reorders and lower stockout costs.

“I love ShipBob’s analytics tool. I like being able to look at the last seven days of shipping costs. It’s so nice to see exactly what the average shipping cost is and make sure the number that my Shopify store has customers paying matches what’s in the ShipBob dashboard.

As I grow my business, I’ve realized how important little details like analytics and insights are. If I can’t go in and see that information like I can in ShipBob, it’s going to hinder my ability to grow the business. Ultimately, we left our old small fulfillment center because everything ShipBob offered blew them out of the water.”

Nichole Jacklyne, Founder of Slime by Nichole Jacklyne

Digital fulfillment solution

ShipBob offers integrated technology and a network of fulfillment centers to provide best-in-class digital fulfillment solutions.

The full tech stack includes a merchant-facing platform, which is used across all ShipBob warehouses. ShipBob’s web-based platform acts as your back office for all-things logistics, so you can easily implement an omnifulfillment solution for your online store.

ShipBob’s proprietary fulfillment technology lets you manage, edit, and customize orders, track real-time stock levels from any location, and receive automatic notifications when you need to reorder inventory — all at no extra cost for unlimited users.

For a more robust solution, ShipBob can easily integrate into your existing tech stack and also offers Developer API for a more custom solution.

To learn more about ShipBob’s fulfillment platform, contact ShipBob today.

What’s the difference between digitization and digitalization?

Digitization refers to the process of transforming physical information into digital data whereas digitalization involves using technology to improve business processes.

What is supply chain digitization?

Supply chain digitization is the process of replacing manual or analog supply chain processes with digital solutions and unifying external and internal data to give a comprehensive view of the entire supply chain.

What are the benefits of supply chain digitization?

Digitization in the supply chain enhances different processes to facilitate better financial management, improve decision making, and minimize lead times.

Why is digitization important to supply chain management?

Digitization optimizes supply chain management by bringing better visibility across supply chain processes and enabling teams to make informed decisions and improve coordination.

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Written By:

Meredith is a Content Marketing Specialist at ShipBob, where she writes articles, eGuides, and other resources to help growing ecommerce businesses master their logistics and fulfillment.

Read all posts written by Meredith Flora