Digital transformations in warehousing and supply chain

Digital technologies have launched a new era of efficiency and optimization of warehouse operations, leading to improved overall supply chain performance. This article provides an in-depth look at the ways in which digitization is impacting warehousing in supply chain management, exploring concepts such as warehouse tracking systems, synergies between warehouse management systems (WMS) and transportation management systems (TMS), and the different types of operational management systems that drive digital transformation in supply chain management.

How does digital transformation affect Supply Chain in the transportation?

In the complex landscape of supply chain management, the integration of digital solutions has brought transformational changes that are significantly impacting performance. One of the key elements in this area is the role of warehousing. Warehouses play a key role in the supply chain ecosystem, acting as the interface between storage, distribution, and inventory management.

Digital transformation has had a significant impact on warehouse and supply chain performance, bringing innovation and improvements in key areas:

• Real-time tracking of goods,

• Process automation,

• Data-driven decision-making,

• Improved supply chain visibility,

• Efficiency and responsiveness to customer needs.

In addition to the digitalization trend, there are many other factors that continue to affect supply chain performance. For instance, globalisation has led to longer supply chains, resulting in complex networks that increase the risk of interruption by geopolitics. Environmental and social sustainability have become important concerns for stakeholders, requiring supply chain managers to adopt more sustainable practices. Therefore, changing customer preferences require supply chains to be more flexible and agile to respond well to market dynamics. [1]

Embracing the future: supply chain digital transformation in 2023

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What are the challenges of digital transformation for the transportation recently?

Moving through digital transformation in the supply chain brings many challenges to organizations that require strategic foresight and adaptability. These barriers can be turned into opportunities for growth, innovation and help create competitive advantage. 

Here are some of the key challenges facing organizations entering their supply chain digital transformation:

Comprehensive end-to-end transformation

Successfully executing a seamless digital transformation across an organization's supply chain requires a cohesive strategy that connects different departments and functions. The challenge is to break down silos and cultivate collaboration to ensure a unified and comprehensive approach. [1]

Adaptation to supply chain goals

The success of digital supply chain transformation depends on a tight alignment between technological advances and overarching supply chain goals and KPIs. Achieving this balance ensures that digital innovations translate into measurable value and tangible results. [1]

Optimal allocation of resources

Accurately allocating resources to the right transformation areas is of paramount importance. Organizations must prioritize investments that will have the greatest impact on supply chain performance, customer satisfaction, and overall expansion. [1]

Resource acquisition and budgeting

Digital transformation in the supply chain requires a financial commitment that includes technology, training, and infrastructure. Effectively acquiring these resources while remaining fiscally responsible remains an ongoing challenge. [1]

Shifting from legacy technologies

Distinguishing between technologies that optimally serve different functional aspects of the supply chain requires rigorous evaluation. Organizations must differentiate between solutions that streamline operations, meet specific requirements, and reduce unnecessary complexity. [1]

Forecasting transformation trends

Staying at the forefront of rapidly changing digital transformation trends and opportunities requires constant vigilance. Organizations must consistently monitor developments to take advantage of emerging innovation opportunities. [1]

Incorporating outside experts

Being open to sourcing knowledge from outside an organization's industry can bring fresh perspectives and innovative solutions. Organizations using diversity in talent acquisition can leverage unique insights to strengthen their digital expedition. 

How to improve global supply chain performance?

The most precise illustration of agility is the context of the economic changes resulting from a global pandemic in 2019 and geopolitical disruption in Eastern Europe that occurred since 2022. Real examples of logistics companies able to cope with the global crisis can be found among companies such as UPS SCS, which have managed to adapt to these changes and even increase their economic strength (in 2021, UPS earned US$8.9bn in operating income, up 58% more from the same period in 2020).

Collaboration and integration have become indispensable pillars for efficient supply chain management. Better collaboration between different stakeholders in the supply chain as suppliers, manufacturers, distributors and retailers, bring these values to business:

• Provides better coordination. Various facilities and extensive networks can be supported by clear communication channels and real-time updates. [2]

• Increases productivity. The company can streamline workflows with maximized resource allocation and reduced bottlenecks. [2]

• Creates potential for cost savings. Direct process optimization can be more focused on day-to-day operations to reduce overall expenses related to fuel costs, required working hours, etc. [2]

• Standardization of processes and systems. Businesses can consider integration with embedded functions of common logistics platforms that unify processes and systems across the supply chain. [2]

• Facilitates better communication. Logistics companies can embed in their operations digital collaboration tools that enable transparent information sharing and open communication channels. [2]

• Enables effective data sharing. Companies can implement interoperable data formats that secure platforms and data availability while enabling effective sharing. [2]

• Supports informed decision-making. Through increased access to accurate and up-to-date data and analytical tools, company can get automatic updates that support informed decision-making. [2]

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Digital supply chain inventory management

In today's logistics networks, the goods have multiple stages from the warehouse to the customer, including both delivery and dispatch from the warehouse. The integration of all tasks into single warehouse transactions is important for optimizing product processing steps.

Efficient warehouse operations contribute to cost reduction across the entire supply chain. A company's strategic objectives often revolve around reducing warehousing costs, which is key to improving overall efficiency.

In the context of modern supply chains, the implementation of digital technologies in the warehousing environment brings a number of benefits, allowing operations to be more efficient. [2]

Here are examples of digitalization in the supply chain and how to get there:

Benefits

Solutions

Execute operations efficiently on a smaller scale

Implementation of task automation and robotics systems, optimizing workflows for faster and more accurate processes. This can include the use of automated picking systems, sorting solutions, and efficient route planning algorithms. [2]

Process and handle larger volumes of products more effectively

Adaptation of advanced warehouse management systems (WMS) that use real-time data and analytics. The use of technologies such as RFID and barcode scanning can improve inventory accuracy, while dynamic inventory allocation strategies help optimize storage with various requirements. [2]

Better align goods and services with customer requirements

Integration of customer relationship management (CRM) systems with warehouse operations. Utilizing demand forecasting and personalized order processing algorithms can help tailor offerings to specific customer preferences. [1]

Facilitate a more comprehensive product returns system

Implementation of advanced return system strategies to streamline the reverse logistics process. This can include setting up a dedicated returns portal for customers, optimizing return inspection and restocking procedures, as well as using data analytics to identify recurring product issues. [1]

Manage the increased flow of international orders, both inbound and outbound

Implementation of Transport Management System (TMS) and Warehouse Management System (WMS) that helps navigate complex customs regulations as well as import/export procedures alongside with internal warehouse operations for storage, inbound and outbound (EDI system). [1]

These advances not only improve operational efficiency but also enhance the company's ability to meet customer expectations while optimizing costs across the supply chain. 

Digital focus in warehouse and supply chain operations

In the high-tech supply chain area, the transformation of supply chain and warehouse operations is being driven by a strong emphasis on digitization. This shift toward digitization is changing the way companies manage their logistics and inventory. Fundamental to this transformation is a set of key technological drivers, including: 

Warehouse operating systems

Systems have become vital tools for optimizing the flow of goods in warehouses. These systems seamlessly integrate various aspects of warehouse management, from inventory tracking to order processing. They facilitate real-time decision-making, enabling companies to respond quickly to changing requirements. [2]

Top-of-the-line supply chain software solutions (out of the shelf or customized)

The best supply chain software solutions include a range of functions that address different needs in the supply chain ecosystem. These solutions are transformational, streamlining processes such as demand forecasting, order fulfilment, and transportation management. They increase operational efficiency by providing data-driven insights. The solutions are often fully customizable to meet individual operational needs. [2]

Warehouse management systems

Central to the digital transformation in this arena is the Warehouse Management Information System (WMS), a cornerstone of modern warehouse operations. It orchestrates the movement of goods, optimizing tasks like receiving, storing, picking, and shipping. This integration ensures accurate inventory management, reduces errors, and improves overall efficiency. [2]

ERP inventory management

The synergy of ERP systems and inventory management modules enables companies to synchronize inventory levels with demand and supply dynamics. This will minimize losses, reduce surplus inventory and improve resource allocation.  [1]

A digital approach to warehouse and supply chain operations is setting the course for modern business transformation. Integrating innovative technologies such as warehouse operating systems, supply chain software solutions, WMS, TMS, ERP inventory management, and real-time inventory management software improves supply chain efficiency, accuracy, and agility. This digital transformation not only optimizes operations but also enhances the customer experience and enables companies to expand in an ever-evolving global market. [3]

Going forward with supply chain digitalization

Exploring the logistics and supply chain digitization field, there are distinctive factors that have brought companies to the forefront of this evolution. Across the spectrum, companies involved in logistics and supply chain operations showed a willingness to assess their digital progress while remaining uncertain about their next steps. Here are the steps that help move forward with certain steps in  supply chain digitalization [3]:

A unified vision for digital logistics

Successful transformation requires a collective understanding of how digitally transformed logistics and supply chain works. This involves recognizing the fundamental shift from traditional practices to knowledge-based strategies where digitization goes beyond simply automating processes. [4]

An adapted maturity model for logistics

 Leadership should develop a maturity model tailored to logistics and supply chain processes, identifying key digitization milestones relating to these areas. Progression should be intentional, developing digital competencies across functional and regional aspects of the supply chain. [4]

Separating solutions from supply chain capabilities

A key lesson is to distinguish between acquiring "solutions" and developing "capabilities" within logistics and supply chain operations. While operational goals are clear, few have systematically considered the digital capabilities required to achieve those goals. [4]

Strategic roadmap for digital transformation

Successful digital transformation in logistics and supply chain requires a strategic roadmap that considers core initiatives and complementary technologies. This roadmap ensures the coordinated success of related technology initiatives, especially within cross-functional and semi-autonomous logistics operations. [4]

Cooperative leadership coalition

Driving logistics transformation and supply chain digitization requires a collaborative approach. Forming a coalition of representatives from different logistics functions ensures the efficient allocation of resources and a unified vision. [4]

Customer focus in supply chain transformation

In the context of logistics and supply chains, organizations should prioritize capabilities that resonate with customers and differentiate them from competitors, providing a competitive advantage and aligning with business objectives. [4]

A holistic approach to logistics and supply chain transformation

Recognizing the symbiotic relationship between people, processes, and technology is essential for logistics and supply chain. Planning for organizational and talent changes as technology advances is integral to success. [4]

Continuous plan updates

Given the dynamic logistics and supply chain landscape, frequent plan updates are essential. An opportunity-oriented plan, with its stability, proves valuable. It is necessary to regularly review and adapt strategies to emerging logistics trends, technological advances, and market changes. [4]

Final takeaway

The emergence of digital technologies has ushered in a new era of increased efficiency in warehouse operations, resulting in an overall increase in supply chain performance. Analyzing the implications of digitization on the complexities of warehousing in the supply chain management field, we highlight aspects such as online warehouse management systems (WMS), the harmonious synergy between advanced software solutions such as transportation management systems (TMS), and the diverse spectrum of operations management systems driving digital transformation in the supply chain management arena.

The infusion of digital solutions has transformed the supply chain management landscape, fundamentally changing its outlines at the center of this shift in warehousing, which functions at the center of distribution and inventory management within the vast supply chain ecosystem. 

Footnotes:

[1] Madas, M.A. (2019). "A Study of Digital Transformation in Supply Chain: A Systematic Literature Review Approach." School of Economics M.Sc. of “LOGISTICS AND SUPPLY CHAIN MANAGEMENT”. Retrieved from: https://ikee.lib.auth.gr/record/310867/files/GRI-2020-26523.pdf

[2] Cherian, T.M., & Arun, C.J. (2021). "Transformation in Supply Chain Management: A conceptual framework for construction industry." Retrieved from: http://www.ashwinanokha.com/resources/v20-3-66.%20Tisha%20meriam.pdf

[3] Harvard Business Review Analytic Services (2022). "Digital Transformation, Refocused: New Goals Require New Strategies." Retrieved from: https://www.redhat.com/rhdc/managed-files/so-hbr-ditigal-transformation-refocused-analyst-material-f31628-202205-en.pdf

[4] Sanders, N.R., & Swink, M. (2020). "How to Build a Digital Supply Chain: Focus On Capabilities." Retrieved from: https://www.ascm.org/contentassets/68a05e01e80b4747a31281fa055fb5be/final-research-report---how-to-build-a-digital-supply-chain.pdf