Closing the Gap Between the Digital and Physical Supply Chain

This is a guest post by Ellie Gabel.

The Baltimore bridge collapse and the Taiwan earthquake are among the latest disruptions forcing businesses to adjust their management and tracking strategies. They’re an unwelcome addition to the continued Red Sea attacks plaguing commercial vessels. As exporting and importing goods become more complicated in the face of these unpredictable events, the digital and physical supply chain gap widens. How can brands close the gap?

Disruptions to Trade Routes Are Widening the Gap

In March, the Francis Scott Key Bridge — a structure that took nine years to plan and five to build — collapsed. U.S. Transportation Secretary Pete Buttigieg called the Baltimore bridge collapse a “major and protracted” issue for supply chains.

The Port of Baltimore is among the busiest in the country. It handled $80 billion worth of cargo in 2023, so its closure will cause millions in daily trade and tax revenue losses for the foreseeable future. Of course, no one could have predicted this incident would occur.

The more recent 7.2-magnitude earthquake in Taiwan — the largest in over two decades — further illustrates this point. The country is one of the leading global hubs of critical electronic components like display panels and semiconductors. Notably, it is home to Taiwan Semiconductor Manufacturing Co. (TSMC) — the world’s largest chipmaker.

For some time now, supply chains have been plagued by prolonged disruptions caused by geopolitical conflicts. For instance, Red Sea shipping attacks have lasted months. Yemen’s Houthi rebels have launched dozens of assaults since November 2023, sinking one vessel and seizing another.

While navigating geopolitical-based disruptions has proven challenging and led to significant delays and price hikes, these issues are more predictable. For instance, the Houthi rebels stated they’ll continue to carry out their operations until Israel leaves Gaza alone. On the other hand, freak accidents are impossible to forecast.

Since businesses cannot anticipate supply chain disruptions like these, they must be able to recover as quickly as possible. However, many cannot because the digital and physical supply chain gap leaves them with inadequate visibility and avenues for response.

The Gap Between the Digital and Physical Supply Chain

The gap between the digital and physical supply chain is an imbalance in how a business stores, transports and tracks physical goods, and manages their flow of supply-chain-related data. It can manifest as a failure to utilize data, a lack of visibility, inefficient vendor collaboration or poor insight extraction.

Many companies overlook valuable opportunities at smaller scales. Take manufacturers’ air compressors, for example, which can power several separate equipment simultaneously. By integrating digital monitoring systems, decision-makers can better understand their suppliers’ production rates, making inventory tracking more accurate.

Despite the emergence of modern product tracking and vendor management technologies, many enterprises fail to connect their digital supply chain to its physical counterpart. According to one survey, less than three in 10 organizations are data-driven. In an age where supply chain disruptions are becoming increasingly common, data reliability is critical for success.

Why Businesses Must Work to Close the Gap

When data on warehouse inventory levels and product locations doesn’t reflect its real-world counterpart, brands suffer from process inefficiencies. Consequently, reacting to market changes, supply chain disruptions and shifts in consumer demand become more challenging. As a result, they may struggle to keep up with their competitors. 

Productivity loss is another one of the most significant byproducts of such discrepancies. Equipment failure — which is often addressed with reactive maintenance programs — accounts for 50% of unplanned downtime, amounting to billions of dollars in annual losses.

If businesses cannot rely on their data, the collaboration between manufacturers, suppliers and logistics fulfillment falls apart. How are third parties — many based in different countries — supposed to work in tandem when the foundation for their efforts is inaccurate or outdated?

More often than not, the gap between the digital and physical supply chain is artificial — an unintentional byproduct of mismanagement. Many enterprises underutilize their data, resulting in missed opportunities and wasted resources. In fact, nearly 80% of firms report they struggle to take action on insights extracted from real-time information collection.

Closing the Gap By Leveraging Technology 

When disruptions impact trade routes, organizations that rely on a cohesive digital and physical supply chain will emerge composed and collected. They can also outperform their competitors and leave those struggling with the widening gap behind. Decision-makers who recognize a discrepancy between their digital and physical supply chains should consider leveraging automation, decentralized ledger and Internet of Things (IoT) technologies to close the gap.

The goal is to enhance visibility and traceability by improving the accuracy of management and tracking technologies to eliminate discrepancies between the digital and physical supply chains. In this context, automation technology like artificial intelligence or robot process automation can fill the gaps where real-time data is unavailable or unnecessary, streamlining administrative tasks.

With decentralized ledger technology — namely, the blockchain — companies and their vendors can log an immutable record each time products change hands or move locations. This real-time information enables them to respond dynamically to any sudden market changes or supply chain disruptions, as it ensures their data always reflects its real-world counterpart.

In some cases, businesses can use technology for predictive analytics applications to enhance their demand forecasting. This would allow them to anticipate shifts in consumer demand or potential delays, and adjust their inventory levels or shipping routes accordingly.

Digital transformation or optimization is vital for closing the gap. Brands can proactively adjust to unforeseen changes while securing a positive return on investment.

The Importance of Strategic Digital Transformation

Many organizations have discovered their current technological solutions are inadequate in the face of natural disasters and freak accidents. As they struggle to apply their data in decision-making processes or integrate their equipment in meaningful ways, they lose their competitive edge to those who have already closed the gap.

In short, businesses must consider strategic digital transformation or optimization to ensure they can meaningfully extract and apply data-driven insights. Simply utilizing modern technologies or collecting real-time information isn’t enough anymore — they must strive to ensure their digital supply chain accurately reflects its physical counterpart.

This was a guest post by Ellie Gabel.

Author Bio

Ellie is a freelance writer who loves exploring the latest advancements in tech and science and how they’re impacting the world we live and work in. She’s also the associate editor of Revolutionized.com.