Rewards of digital supply chains obscure dangers

Just as digital supply chains bring rewards, they also bring dangers. Supply chain managers are always on the lookout for corruption, but in the digital age the clues are harder to spot, warns Dr Abdul Majid Mahomed, Head of Professional Body CIPS, SA.

Digitalisation is the buzzword of the moment and the future of supply chains. Its influence spreads from creative industries to manufacturing plants, governments and charities.

Supply chains are already, at least in part, digital. Whether it is the metadata on the sell-by-date of cargo (useful for food and perishable goods) in real-time shipping progress or factory information where material stocks are running low, supply chains are now running on physical and digital networks.

But in the rush to take advantage of the available opportunities, businesses, organisations and economies are exposing themselves equally to dangers, such as cybercrime, fraud and theft.

To combat these threats, procurement and supply chain management must develop new skills and capabilities to cope and prosper in the digital age.

According to PWC’s 2016 report, Economic Crime: A South African Pandemic, 69% of organisations surveyed (2 out of 3) reported being victims of crime. Almost a third (32%) had been victims of crime and had become aware, and 70% believed that local law enforcement agencies could not or did not help them.

Data travelling along a supply chain can be stolen and manipulated at any point in the supply chain – just like in physical supply chains. Managers thus need to be trained and have the skills to control the implementation of firewalls, configure robust networks, limit access to only the right people, install malware and virus protection, and timely and regularly install security patches.

Whether companies embrace the possibilities or reject them, blockchain is big news. Blockchain offers great potential to make supply chains more transparent and secure, and can also help with controlling costs. It is being taken seriously with documented research on what it means for the region. Some areas for concern are:

– Lack of standards
There are several systems vying for the position of top choice for companies so, at the moment, it feels like the battle between VHS and Betamax in a bygone era.

– Accuracy of blockchain data
Will blockchain be able to replicate all the steps needed in a supply chain?

– Handling transaction volume
Can blockchain offer value across supply chains, considering the number of transactions in a typical global supply chain, which can amount to hundreds or even thousands?

– Who will lead and pay for the technology?
Should procurement be responsible or the finance team?

– Ethical and sustainability concerns
Any company wanting to use blockchain has a number of hurdles to overcome, such as persuading boards and CEOs that blockchain and its components (e.g. Bitcoin and others) are not just vehicles for illicit financial transactions.

‘Smart’ digital contracts
Digital contracts are another revolutionary aspect of blockchain technology where a decentralised ledger system allows for the transfer of valuable goods, property or money.

Digital contracts automate business processes, in computer code, and make use of databases stored across the Internet, which are accessible to all the parties involved and allow for adjustments to be made instantly. Amongst other benefits, smart contracts can also support verification, provide visibility of progress, lower costs and promote self-execution, clarity in agreement terms, fraud protection and instant connectivity.

Artificial Intelligence (AI)
AI is already adopted as a game changer in many regions of the world, from manufacturing to healthcare and no less so in Africa.

Some medical institutes in South Africa and Cameroon have already adopted AI to improve patient care and to identify mutations in genome profiles. Drones in Rwanda have been used to drop essential blood supplies to transfusion centres, which is a life-saving development in remote regions cut off from basic facilities.

The digitalisation of supply chains shows no signs of stopping. But it is increasingly important for supply chain managers to have soft skills that will help them spot trouble ahead for their businesses. Digital supply chains are only as good as those that manage them.

For this reason, the CEO of Apple, Tim Cook, has called for changes to AI at its inception and is developing systems to ensure that there is security, privacy and humanity built in from the beginning.

Just as any good supply chain manager will understand the production facilities of their suppliers, they must also scrutinise any data-protection processes. Any breach in the supply chain will need to be dealt with swiftly and all concerned communicated with at the right time, having the correct information at hand.

Since supply chains make use of digital technology, this development is now unstoppable and needs careful management.

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