5 Problem Areas in Supply Chain Systems That Immediately Require Modernization
October 10, 2022
The economic impact of COVID-19 has severely exposed the limitations of supply chains across the world and there are 5 key areas where legacy systems are hampering the quality of these supply chain systems:
1. Reliance on manual processes for decision-making and legacy tools like excel spreadsheets to manage logistic operations.
2. Data silos that adversely affect organization’s ability to gain visibility
3. Failure to move legacy systems to a cloud-based enterprise system across the entire supply chain
4. Integration-related issues with existing logistics systems
5. Inability to facilitate the flow of real-time information
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The economic impact of COVID-19 has severely exposed the limitations of supply chains across the world. A “normal” 15% uptick in demand for goods in the U.S overloaded the existing supply chain systems in place because most of the organizations in the country still heavily relied on legacy systems to get work done.
A recent Reuters Events supply chain survey found that 44% of executives think their legacy systems are not well integrated with other systems. Further,43% lament that their systems lack automatic planning and optimization.
In a post-pandemic world, industries are starting to realize the importance of moving beyond legacy systems toward a modern enterprise system that is functional, secure and scalable.
5 Key Areas Where Legacy Systems Are Impacting Supply Chains
Modern supply chains no longer operate “locally” but have developed a “global” presence. Players in this complex supply chain reality need to work with real-time data across disparate systems to gain visibility. On its part, supply chain systems need to be more agile and responsive to sudden disruptions. But this is easier said than done because there still exist 5 key areas where legacy systems are hampering the quality of supply chain systems.
The 2021 Reuters Events report found that 55% of supply chain executives still use manual processes for decision-making. Furthermore, companies are still relying on tools like spreadsheets to manage their logistic operations. 22% of industry executives still use MS Excel to plan their operations and only 15% rely on modern transport management systems. Manual processes can be a bottleneck when it is a matter of handling increased demand.
Organizations must first determine which manual processes can be easily automated to close security gaps and to improve visibility across the supply chain. Incorporating automationinto supply chain processes can minimize errors and free up employee time for more strategic and meaningful responsibilities. A more automated workflow would allow organizations to digitize and share purchase orders, auto-assign production tracking tasks and keep track of deliveries in real time. So as a company’s supply chain ecosystem becomes more complex, the need for automation will exponentially increase.
According to the U.S Natural Resources Defense Council(NRDC), 40% of food produced in the U.S is wasted each year. Data silos are pegged as a prime cause of this waste. They exist in legacy systems due to a lack of system integration. Of course, creating an integrated environment is so much harder when legacy systems dominate the landscape. And even then, despite all the integration, a single “isolated” enterprise system is sufficient to break down the supply chain.
Organizations must prioritize improving end-to-end supply chain visibility through digitization. New approaches involve leveraging artificial intelligence, incorporating structured and unstructured data, and using proprietary or even subscription-based databases to illuminate supply networks and bring in that much needed visibility to the entire network. Once the issues are visible, the solutions will come from achieving increased flexibility and control.
A recent McKinsey study found that on average, supply chains are digitalized to only around 43%. Despite the benefits of digitalization, why are companies hesitant to make the transition? The answer is that companies find it challenging to move from legacy systems to a cloud-based enterprise system across the entire supply chain. This leads to incomplete digitalization. For example, the production facility may be working with real-time data and analytics. At the same time, the warehouse facility may still be working on manual spreadsheets and processes.
So, while the notion of replacing legacy technologies seems like the best answer, the actual execution of is far more complex, thanks to the human factor that is at play.
Replacing the entire workforce with tech savvy individuals would seem like the best solution on paper but if this is done, it will showcase that your company does not value the workers of yesteryear who have helped them achieve greatness sometime in the past. Sure, tech centric people need to be hired onto your organization to help your organization thrive, but it must not come at the cost of abandoning existing ones. Training out the archaic ways of your old workforce and fostering a culture of innovation within the organization is the best way forward.
Nearly one-third of the Reuter Events respondents say the technology gaps are a significant factor between their planning and execution. Just 2% of the respondents are completely satisfied with their current planning technology. Further, 54% of logistic service providers underline integration-related issues with their customer’s existing logistics systems. Challenges include application downtime, customization problems, and incompatibility with external systems
To modernize these age-old machines organizations should consider going for these four modernization alternatives that can garner you the best results: Replace technology with a custom-built system, move towards an IaaS solution, rebuild features from scratch or refactor your legacy code.
Lack of real-time information:
A majority of companies still rely on spreadsheet data and manual processes. Supply chain partners need to be able to push information back and forth at will. However, a legacy system cannot facilitate the flow of real-time information and can hamper informed decision-making.
With the availability of user-friendly data visualization tools and platforms such as Tableauon the rise in large part due to the digital transformation phenomenon, companies can unlock data from legacy systems and communicate efficiently with other supply chain players. One such successful case study is that of the Dutch shipping company, Vopak which deployed a management system for its operators and port employees. This technology platform enabled them to make data-backed decisions and complete their tasks 10 to 25 times faster.
On the same note, logistics technology enables companies to collect and analyze real-time data from connected devices like GPS units, RFID tags, and smart scanners. For example, Green Cargo deployed cloud-based applications to replace its legacy mainframe system. With smart mobile apps for its workers, the company improved customer service and reduced equipment failure by 50%
For business survival, companies can no longer rely on legacy systems and need to implement effective strategies to successfully take the leap of faith towards a brighter and more profitable future.
As a technology enabler, Adtech delivers years of industry experience in building modern enterprise solutions and engineering products. If you are looking for a technology partner to modernize your supply chains, drop us an email on firstname.lastname@example.org