Traditional vs. Modern (Digital) Supply Chain Management (2024)

What is a Supply chain?

A supply chain is a global network that ensures the delivery of products and/or services domestically and internationally. A supply chain ensures product delivery from raw materials to the final customers using a definite structure involving an efficient network and productive information channel. The primary supply chain of any product involves raw materials, producer, distributor, retailer, and the customer.

The traditional supply chain involves several, but simple, steps:

• Collection of raw materials:The first step involves collecting the raw materials required to make the final product. The raw materials concerned could be of a single type or may include several other products to be collected from various sources.
• Collection of material from the suppliers:The manufacturers must acquire all the required raw materials to produce the ultimate finished product.
• Manufacturing:The manufacturer then initiates and completes all the processes required for producing the finished product. Various procedures may be, and different equipment may be used for each operation.
• Distribution to the customers:A process where the finished product is distributed to the retailers.
• Consumption by the end customers:The last step is purchasing the finished products by the customer. In this example, the book may be used for various purposes by different people.

This is how the traditional supply chain system works.

On the Other hand, today's supply chain is not a chain at all but rather a flexible, agile value network designed to deliver instant choice and hyper-personalization across various fulfillment channels and an expanding range of digital enablers. The traditional model of producing large volumes of the same product to retailers and distributors has become a thing of the past.

Today, companies are changing their methodologies in how they manage their supply chains. In the maturation of supply chain management, the processes to get goods and services from one company to another were a mix of manual and computer-driven routines. The only means of accomplishing this was through manual intervention and Excel spreadsheets up and down the chain. In the days of shorter life cycles for new products, this is becoming too slow.

The demand for ' Faster, Cheaper, Better ' is causing a move towards an inflection point on how a company responds to its customers' supply chain demands. Companies are looking for a way to automate the purchasing process and increase their time-to-market performance. Moving to a wholly digital environment not only improves a company's time to market but drives up quality, improves cost reduction activities, and heightens customer satisfaction.

Today's supply chain is a supply network designed to deliver instant choice and hyper-personalization across several fulfillment channels and an expanding digital enabler range. Shifting from a traditional supply chain to a supply network creates room for growth, optimizes operations, and improves service while reducing costs and working capital. At the same time, this new model introduces greater complexity levels as organizations must now manage the flow of materials, products, and data between and amongst a growing number of ecosystem partners, all of which must be coordinated to maintain stability in the network.

A successful supply network leverages data-driven intelligent automation applications like artificial intelligence (AI) and machine learning (ML) to enable ongoing planning capabilities and automated responses to pre-determined scenarios. These capabilities lead to shorter planning cycles and the ability to respond more quickly to demand and supply dynamics; more importantly, the system can be trained to distinguish between inconsequential shifts and situations that require re-planning. Developing an autonomous planning capability and self-driving supply network should be an essential long-term goal for every consumer-products organization. To achieve this vision, businesses must focus on establishing the following foundations:

• Data integrity
• Digital operations
• Concurrent planning
• Culture

Moving towards a digital supply chain, Application Program Interfaces, commonly known as APIs, give better visibility into suppliers' systems to make computer-driven solutions. With this technology, a customer's software can retrieve real-time data, such as stock and pricing information. This real-time data helps make a decision comparing their needs with a supplier's ability to satisfy them. A digital platform that becomes the beginning of the Supply Chain of Things (SCoT). Companies can gain exponential advantages in their processes by exploring and adopting some of these methodologies.

The disadvantages In traditional supply chain management:

1.Limited visibility throughout the supply chain.

2.Lack of real-time data update.

3.More expected delays.

4.Cannot adapt or less responsive to changing market conditions.

5.Increased inventory.

6.Higher COGS.

The Advantages of digital supply chain management:

1.Agility.

2.Lower COGS.

3.Higher Traceability.

4.Higher product safety.

5.Lower and more customized inventory.

Here are the key differences between traditional and digital supply chain:

• Traditional supply chain focuses only on production and provision, whereas Modern (digital) supply chain focuses on the needs of the customers in general, also aims to improve the value of the product delivered to the customer, rather than just focusing on the aspect of distribution.
• The modern (digital) supply chain allows any business organization to experience the value in creating a partnership, whereas the traditional supply chain allows listed companies to follow a single pathway.
• The organizations operating under the modern (digital) supply chain create value for the final customer's product. In contrast, the traditional supply chain has no such strategies to improve the finished product's value.
• Modern (digital) technologies and strategies are incorporated into the Modern (digital) supply chain. At the same time, the traditional supply chain follows the old methods.

• The modern (digital) supply chain allows faster progression than the traditional supply chain. Modern (digital) supply chain enables the companies to use highly advanced and integrated technology systems to ensure the expansion of the customers' portfolio, which does not happen with the traditional supply chain.
• The modern (digital) supply chain also utilizes logistics management, a system that plans, implements, and controls the forward and reverse flow of goods. It ensures the process is effective and efficient and also provides the safe delivery of the goods. Unlike the modern (digital) supply chain, the traditional supply chain does not use any logistics management tool.
• The modern (digital) supply chain focuses more on building partnerships, alliances, and collaborations. With improved relationships with the suppliers, companies can build trust leading to long-term relationships.

The digital approach can make the traditional supply chain even more effective.