Virtual Supply Chain (VSC)
A Virtual Supply Chain (VSC) is the informational representation or data visualization of the organization’s physical supply chain network. This includes, though is not limited to manufacturing plants, warehouses along with the supply chain components of the extended enterprise viz. customers, suppliers, logistics providers and so on. Just as a virtual model of an architect’s drawing allows the construction and client teams to walk through a design, a VSC allows the supply chain planners an overall view of the operations with the ability to zoom in on various areas of interest.
In the 80s, the proliferation of personal computers gave rise to computerized departments – finance, human resources, manufacturing, and so on. In the 90s came the realization that the silos which the departments had formed around themselves needed to be torn down to communicate with each other. This led to Enterprise Resource Planning (ERP) systems which functioned at the intra-company level. Today, the need for a more extensive inter-company connectivity for the supply chain functions of the company are being felt. This has led to the rise of the Virtual Supply Chain.
Typically, most large organizations have decade’s old ERP systems which have been modified, localized and upgraded over time. Besides the ERP system, the company may have other IT systems for specific areas of operations or locations. The ability of disparate and heterogeneous systems at the company, customer, supplier and logistics providers shaking hands with each other can be very challenging. These challenges can be circumvented by having a platform independent cloud-based solution which does not depend upon the systems and hardware at the individual organizations. Thus, VSC’s are cloud-based systems which connect to the IT systems of companies at the back end.
Advantages & Benefits to the Supply Chain
The VSC will allow companies in the supply chain to function as departments of a single unit rather than separate, disjointed entities. This will enhance the planning functions, reduce inefficiencies and eliminate surprises.
End-to-end visibility and transparency
All entities in the VSC will have access to a single version of the truth in real-time. This leads to more effective communication and coordination.
Deviations and disruptions can be flagged. Corrective actions can be taken promptly.
Companies constantly need to tweak their strategies leading to changes in business processes. They could be acquiring new companies, targeting new markets, launching new products or switching to a 3PL or 4PL provider. Companies need to have systems which are flexible enough and keep up with the rate of change.
The rise of customer-centric paradigms such as on-demand personalized manufacturing, Omni-channels, faster last mile delivery requirements, etc. has caused companies to need an enabler. The VSC can help attain customer satisfaction targets.
Data is no longer just a byproduct of business processes. It has become an important asset. The intelligence gleaned from VSC can highlight inefficient processes, unviable products or sub-optimal routes.
Adaptive to new technology
The digitization of the supply chain industry is occurring at a steady pace. It will be easier to add and integrate new applications to the VSC as and when new technologies such as IoT, Blockchain, AI, etc. gradually mature.
The VSC also provides the ability to run simulations in order to chart the optimum course.
Implementation of a VSC
The three necessary components of implementation are –
- An overarching project such as this needs senior management to champion the cause. The vision and momentum for the implementation must come from the top.
- Next, the implementation must have the buy-in and active involvement of the IT department, the supply chain team, and the company’s customers & suppliers.
- Finally, the capability of the company’s IT consulting vendor is extremely important. Only a vendor experienced in VSC’s implementations can be the catalyst for change.
Leading Tech and Pharmaceutical companies have implemented VSCs. It’s only a matter of time before companies and their entire ecosystems are a part of an ever-expanding VSC. The VSC will evolve into the digital nervous system of the extended enterprise. With the passage of time, it will involve feedback and feedforward signals to various IoT devices, drones, and AI systems. AI systems will be able to monitor local events, integrate real-time traffic, weather forecasts, etc. and provide options for decision makers.
The increase of automation, robotics will lead to a kind of digital sentience. We may then need a new term – the ‘Cybernetic Supply Chain’.