The Path to Supply Chain Digitalization: Accelerators and Speed Bumps
By Chintan Sutaria, CEO of CalcuQuote
The electronics supply chain has been making progress towards a digitally connected future. While this progress is made possible by the efforts of visionary leaders and organizations, it is not immune to the effects of what happens in a macro level across the industry.
These macro level factors that happen TO the industry as opposed to BY the industry can have both accelerating and decelerating effects. Here are five of each based on the current climate.
Thanks to COVID, the days of stopping by a colleague’s desk, or a chat around the water cooler are past their prime. They are being replaced by virtual meetings with agendas and time boxes dictated by online calendars. People also expect to work asynchronously in a more flexible blend of work and personal life.
With opportunities for social business engagements moving to Zoom, people are placing more focus on efficiency, and less on building relationships. This compels businesses to reframe the way they view both their customers and partners, and to devote more resources towards online engagement.
Rising Cost of Labor
The cost of labor is increasing globally. Digital solutions like software, web portals and data feeds are cheaper than labor. Transferring manual positions to digital automation allows businesses the opportunity to generate revenue around the clock without proportionally increasing costs.
The sheer quantity of data from a multitude of sources that goes into an effective decision-making process has grown exponentially over the years. If a business doesn’t take these complex inputs into consideration, it will be a tremendous struggle to remain competitive in the market. If a business is doing so, but manually, they’re losing valuable time they need to stay ahead of the curve, again, preventing them from being competitive.
Customers Expect Speed
Sometimes referred to as the “Amazon Effect” – B2B customers are influenced by the pace of their B2C experience. Response time is key when providing customer service. With a variety of choices available to your customer’s on-demand, they expect quick movement without sacrificing quality. Doing things the old fashion way will sacrifice both speed and agility, and customers may move on to another organization embracing new methods instead.
We Have Hit Critical Mass
The industry as a whole has moved past debating whether digitalization is necessary. This is very different from the debates even five years ago. With this new found consensus, people are focused on when and how.
Sometimes, improving the sales process is a necessary requirement from customers to help transition to the digital realm. Other times, suppliers provide financial incentives to reduce the cost of selling. Regardless, all competitive businesses are seeing the same trends – those that do not digitalize will be left behind.
Managing through allocations and shortages can be tricky. Sometimes, it helps to have a personal relationship with suppliers so you can call in a favor. Or, if not with a supplier, it helps to use your network to find creative solutions for missing parts.
Calling for change when times are good, and no one sees an imminent need is incredibly difficult. Many distributors are experiencing all-time highs at present, and don’t see the value in investments to upgrade their processes while they are still on a high wave.
Perfection is the Enemy of Progress
If a self-driving car gets into an accident, questions arise regarding responsibility, and if technological advances are really “for the best.” The fallacy in this type of thinking is that human drivers make mistakes every day, but because they are human, those mistakes are accepted. The standard for perfection is much higher for automation.
Similarly, if getting supply chain data via an automated API feed, then any error is looked at through a microscope. This ignores the countless times human errors and delays have caused much more significant problems.
Most traditional EMS companies do not have digitalization-friendly positions. Typically, there is not a CTO or even an in-house software expert in these companies. Recognizing digitalization as a friend, rather than foe, would go a long way towards helping these businesses thrive.
Hardware Over Software
EMS companies are willing to invest hundreds of thousands of dollars to make a 1% improvement in their manufacturing process. Because digital solutions are more abstract and not something you can hold in your hand, it’s harder to believe that the benefits can be real.
Acknowledging these biases and actively working towards the most efficient process, rather than the most familiar, would make a huge impact on their success rate and bottom lines.
Change is a challenge, but it does not have to be negative. Digitalization offers EMS companies the ability to step firmly into the modern era of speed, accuracy, and efficiency. By embracing digitalization, and examining business practices, past and present, the EMS industry can move forward to face the challenges of the modern world.