What is a Digital Supply Chain and why is it necessary to stay competitive?
In order to understand a digital supply chain, we need to first speak of what it would replace or improve upon which is an Analog Supply Chain. An Analog Supply Chain is one where tasks and information are moved in non-digital ways like a paper invoice in the mail, or manually typing in inventory counts. For the building materials industry, the current state is still largely analog, being supported by some automation and digital tools, but still dependent on a lot of paperwork and human labor.
The Digital Supply chain is where tasks and information are automated and moved electronically between parties. For example, let’s assume you are a distributor and you invite your customer, a local truss manufacturer, to view your available inventory, online. The buyer at the truss manufacturer logs into your website and finds a truck of 2×4 16’ and buys it; simply by entering a PO number and choosing a delivery location. That immediately takes that product out of your inventory and puts it into the truss manufacturer’s inventory with a status of “on-order”. Notice there was no phone call, no need for you to write up a sales order, no need for the truss manufacturer to write up a purchase order, no need to allocate or manually remove inventory from your system, and no need to add that inventory to the truss manufacturer’s system of record. This is a digital supply chain experience and it takes about 1/100th of the time for the transaction to complete vs how things operate in many businesses today. Without error and at the convenience of everyone involved.
How does a Digital Supply Chain work?
Technical innovation has enabled us to effortlessly exchange information between systems substantially reducing the manual intervention/entry of data once necessary. Information can flow from company to company thanks to seamless integrations and data exchanges. Many industry leaders agree substantial operating costs stem from manual, paper-intensive jobs. The overhead of people chasing down, entering, and reviewing documents and information. The majority of this cost is eliminated with a Digital Supply Chain.
The key technical advancements that allow a Digital Supply Chain to operate
As defined by Cloudflare, “The Cloud” refers to servers that are accessed over the Internet, and the software and databases that run on those servers. Cloud servers are located in data centers all over the world. By using cloud computing, users and companies don’t have to manage physical servers themselves or run software applications on their own machines.
The Cloud has enabled powerful innovations that significantly reduce the cost of technology for individual companies. Costs are distributed amongst many companies allowing for an increase in speed and capacity and a reduction in physical hardware and support costs. Accessibility and connectivity are maximized in the cloud.
In addition to the operational efficiencies, one of the most exciting parts of the cloud is the ease of access. Since Cloud-based solutions are connected via the internet it means you can access them from any device anywhere in the world and at any time. With recent events around COVID-19 and a global remote work movement, this is no longer a convenience. It is a necessity for business continuity.
To learn more about the cloud: https://www.cloudflare.com/learning/cloud/what-is-the-cloud/
API’s (Application Programming Interface)
As defined by Wikipedia, an application programming interface is a computing interface that defines interactions between multiple software intermediaries. It defines the kinds of calls or requests that can be made, how to make them, the data formats that should be used, the conventions to follow, etc.
Think of APIs as a common language that allows systems to talk to each other. For example, if your ERP uses APIs to communicate with other systems, you can use this technology to trace a railcar. Your inventory management system “trace” functionality sends a request to SteelRoads to trace a specific car number. SteelRoads’ system will in turn send the current location back to your inventory management system and display the car is currently in Chicago as of 10:00 AM local time this morning.
This is what is known as a triggered API call which means you the user has to take an action (or, in this case, click the button) to gain this information. What is even more powerful are APIs that programmatically trigger events. You can tell the system to trace every railcar every morning at 6 AM local time and display that information in your inventory management tool. Then, you can have the system highlight any cars that are delayed or will be late for your review. These are very basic examples but you can start to see the power of automation. Combined with smart algorithms, your digital supply chain becomes exponentially more powerful.
Wikipedia defines an algorithm as a finite sequence of well-defined, computer-implementable instructions, typically to solve a class of problems or to perform a computation. Algorithms are used as specifications for performing calculations, data processing, automated reasoning, and other tasks.
Algorithms play a key role in automation by making systems smarter and processes faster. They also support users by giving them the means to accomplish tasks faster with shortcuts or insights. In the building materials space, we do this in our head. When a salesperson calculates board footage of a truckload of lumber, then divides a freight rate by the board footage to give a customer a delivered price quote, they have done a mathematical calculation. That outcome, in this example a delivered price, algorithms can do by the millions, in milliseconds, and without human involvement.
What if your ERP system told you that because of a delay in a rail shipment your customer’s truck delivery will be delayed? What if the system told you that a particular customer normally buys a truck of OSB every other week and it has been two weeks since their last PO? Furthermore, it suggests to you a truck of their favorite mill available at your closest reload with a delivered price? Or, an even more direct and useful piece of information – based on historical trends and forecasted sales, your inventory is lower than normal and it might be time to buy?
These proactive advancements are now a reality and are already helping sales professionals accelerate their earnings more efficiently than ever before.
How does the building materials industry benefit from a Digital Supply Chain?
Complete adoption of a digital supply chain would eliminate the need for paper-intensive operations, countless hours of data entry, and the constant chasing of information. Redundant phone calls and missed opportunities are effectively eliminated with real-time information available at your fingertips (literally on your phone) 24/7/365 from anywhere in the world.
The real power here is for the first time untethering your growth from human capacity. In reality today your revenue potential is based on the time in the day for your sales staff and the number of phone calls they have and order they get. But with a digital supply chain, you are no longer limited by this which enables you to grow 200-300% or more with the exact same headcount. So not only can you accelerate sales but at the same time do so with bigger margins. It is a game-changer – plain and simple and the companies that adopt this earlier than their competition will gain market share and increase their competitive advantage.
The key benefits of the Lumber Digital Supply Chain
Better Customer Service
As Amazon has clearly proven, customer service is king. The better you make a customer’s buying experience the more of their business you will earn. Increasing your market share and buying power. If done effectively, you can dominate a category as Amazon has done to retail, now owning more than 50% of all retail transactions in America and outperforming companies with a century headstart.
We are all consumers, so our Amazon expectations don’t end at buying golf clubs or groceries. We bring those expectations into work as well. Your customers want to buy on-demand – not when you can take the call. Your customers want to know what you have for sale right now. They want to track their own shipments (or better yet, be told when trucks are arriving) and they want you to tailor the experience to their preferences and conveniences.
A digital supply chain helps your business provide these customer expectations. Investments into better customer experiences improve customer engagement; therefore driving customer loyalty and ultimately becoming your competitive advantage.
Digital Supply Chains drive higher margins for building supply companies in a number of ways. Instant and reliable accuracy helps the organization make better buying decisions. This coupled with detailed reporting and analytics help you optimize sale prices and identify and communicate internally market changes faster. The power of the system also substantially reduces your operating cost as the manual work is removed and efficiency increased enables you to grow without the need for any new headcount.
Fueling growth with the Digital Supply Chain
As the building industry’s infrastructure matures, it will evolve from pen and paper workflows to ever-connected, mobile eCommerce. Maintaining a competitive advantage, however, will always remain in the commodities trading space. Incorporating technology and new talents will take place and the speed of adoption can dictate a company’s success or failure.
Executives need information faster than ever to make better, more profitable business decisions. Reliability and accuracy are bar none. No longer can the building materials industry rely on operating only during traditional working hours and dated pricing. Digital transformation is an ongoing process and digitizing the supply chain is a leap forward in the race to success.