B2B Payments

The Limitations Of Tech In Supply Chain Digitization

Digitization inevitably means technology adoption, a truth that extends into the realm of supply chain digitization. Corporates looking to streamline, enhance visibility of and safeguard their global supply chains face new pressure (and opportunity) to implement technologies that can offer connectivity with partners, and the sharing of essential data to make necessary improvements.

The supply chain digitization transformation doesn’t stop at adopting the most cutting-edge tools, however. In a recent interview with PYMNTS, Harish Iyer, VP of industry and solutions marketing at supply chain solutions provider Kinaxis, pointed to the importance of organizations understanding just how much supply chain digitization will impact their firms as well as recognizing that changes must occur beyond technology adoption for efforts to yield results.

One of the biggest requirements for successful supply chain transformation, he said, is collaboration. After all, implementing a technology to digitize a supply chain isn’t just going to affect a single business disruption will touch everyone participating in a supply chain.

“Digitization [within] the four walls of an enterprise is necessary, but not sufficient,” Iyer said. “As companies embark upon or expand their digitization journeys, collaborating with supply chain partners is needed to align on objectives, synchronize their supply chain, minimize supply chain risk and, ultimately, maximize supply chain success not just enterprise success.”

Supply chain digitization technology is enjoying an innovation surge today, thanks to technologies like artificial intelligence (AI) and blockchain promising to transform global trade. At the heart of many of these solutions is the promise to connect trading partners and other players in supply chains, from logistics players to banks to customs officials.

That interconnectivity is essential for organizations to maintain regulatory compliance, assess third-party risk, accelerate payments and reduce errors in trade. However, according to Iyer, technology isn’t the end-all solution to tackle these issues.

He offered blockchain as one example of a tool that vows to provide a single source of truth to all players within a supply chain. While that achievement is certainly valuable, he said, the technology does not offer a replacement for a trusting buyer-supplier relationship.

“Trust between partners is often discussed when building partnerships,” said Iyer. “Blockchain-based solutions hold great promise in reducing the need for trust, or even completely eliminating it. However, as any seasoned supply chain practitioner will tell us, when it comes to key supply chain partners, trust is critical and irreplaceable.”

The key to effectively digitize supply chains is to adopt technologies that don’t aim to replace that trust, but rather facilitate the continued building of corporate relationships and supply chain partners. According to Iyer, despite the influx of supply chain technologies rolling onto the market today, it’s actually quite rare to find solutions that can facilitate stronger partnerships — whether it be through streamlined data sharing, digital communication or strategic joint planning between parties.

For this reason, he added, it is essential for businesses to be able to choose which innovations will be most beneficial to their supply chains, and that means the difficult task of “distinguishing between the hype and reality.”

Falling into the hype trap is one of many pitfalls that companies can struggle with in their supply chain digitization journeys. Iyer warned that not all technologies can add value to an organization, and those that fail to define “value” for their firms can often be shortsighted when it comes to supply chain technology adoption.

Businesses today struggle with accepting that supply chain transformation must also come with a culture change within the organization  another area that cannot be fixed by technology.

“Supply chain digitization inevitably comes with business process change,” he said. “It is important that businesses consider the culture shift that comes with this change, and create an environment that helps people embrace it.”

Finally, he noted, organizations must acknowledge the power of human talent in transforming their supply chains. However, they often struggle with a talent gap when technologies like AI promise to do jobs better than humans  or replace them outright.

The pressure to improve supply chain management procedures weighs heavily on international companies today, as global market volatility is at an all-time-high. While supply chain digitization and technology adoption is part of the process toward improvement, technology does not guarantee the level of transformation and efficiencies that organizations are after.

Iyer pointed to merger and acquisition (M&A) activity, rising customer expectations, increasing cost pressures and risks ranging from natural disasters to cyberattacks all creating a sense of urgency for organizations to achieve that transformation. Rather than throw money at hyped-up technologies, he recommended another approach to manage the pressures of supply chain volatility: collaboration.

“An enterprise’s success is increasingly dependent on its supply chain partners, especially due to the unprecedented levels of risk and uncertainty,” he said. “The more you can connect the data from and collaborate with your suppliers, customers, distributors and manufacturers, the more you reduce your risk and better track performance.”

——————————–

Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 Pay Advances: The Gig Economy’s New Normal, a PYMNTS and Mastercard collaboration, examines pay advances – full or partial payments received before an ad hoc job is completed – including how gig workers currently use them and their potential for future adoption.

TRENDING RIGHT NOW

To Top