The old way of managing supply chains is dead; the business models that have shaped the dynamics of supply chains for decades are shifting fast and suppliers must gain new digital capabilities to ensure their continuity.
Legacy systems still have a role to play, however. The key is making sure that these can deliver even more value with a future-proof integration strategy.
In this blog, we will see exactly why breaking down silos and integrating your systems cannot be delayed any longer.
What is the future supply chain?
The ‘supply chain of the future’ uses comprehensive digitalization and real-time data flows to drive improved decision making. We can already see it taking form; it’s responsive, digital, dynamic, collaborative, and much more resilient.
This model relies on an open architecture that can support data flows from systems that were previously not connected to one another.
By combining diverse data sources such as legacy ERPs, on-premise databases, cloud services, IoT, microservices, and AI algorithms, each partner gains real-time visibility across the supply chain. It becomes possible to create entirely automated event-driven processes, extract new insights, and work together in tight coordination.
Unlike previous supply models, the supply chain of the future includes a continuous, multi-branched ‘data chain’. This means that every step of a product’s journey from raw material sourcing to manufacturing, shipping, warehousing, distribution, and final purchase is connected by real-time data.
Imagine a scenario where a spike in demand for a popular product is detected at the point-of-sale. This information is instantly shared across the chain: production schedules are adjusted, raw material orders are updated, transport is reallocated, and inventory levels in regional warehouses are optimized all automatically.
The result is a supply chain that can respond quickly and efficiently, minimizing stockouts, reducing overproduction, and keeping customers happy.
And, just as a living organism gains more awareness by using multiple physical senses, additional data sources also help the supply chain to become more intelligent and effective.
By supporting end-to-end visibility and integrated digital processes, this model can enable supply chains to orchestrate and optimize every aspect of operations and administration.
There are some strong drivers for this shift:
- Increased automation and the adoption of advanced manufacturing has created a higher level of digitalization and new opportunities for collecting and using data.
- Disruptions and shortages of supplies and labor push supply chains to become more agile, efficient, and resilient.
- Customer expectations have increased. This is driving the demand for more personalization and on-demand services, as well as greater transparency and accountability.
- Buying patterns are changing, and traditional distribution models are becoming less relevant. Omnichannel and Direct-to-Consumer initiatives can be highly valuable additions to your business model.
Advantages of the future Supply Chain
From the top of the chain, right down to consumers, everyone has a lot to gain from an integrated supply chain. It can become more responsive to customer demands, adapt to new market conditions, and empower each business to operate more effectively.
As you might imagine, this requires significant IT modernization and legacy integration but this is a worthwhile investment when you consider the benefits.
For example, by sharing data across their supply chain Office Depot was able to decrease inventory by 30% while ensuring stock availability.
The benefits of supply chain integration
Cost reduction – Using real-time data to drive timely decisions and capture new opportunities. Costs are reduced through improved efficiencies, optimized workforce utilization, dynamic procurement, and reduced wastage.
Maximized working capital – With more accurate supply chain forecasting, inventory is reduced, and turns are increased. By accepting a lower margin in exchange for maximum sell-through, the throughput of the supply chain is increased, and working capital is utilized more effectively.
Happy customers – Using real-time data flows, customers can be kept updated and given personalized services. Customers are more critical than ever, and the future supply chain will help meet their expectations.
New business models – A smart integration strategy allows rapid adoption of new business models, such as direct-to-consumer (DTC), omnichannel, dropshipping, and collaborations. Transparency and visibility throughout the chain can create new synergies, new partnerships, and more agile processes.
Sustainability and accountability – End-to-end visibility allows transparent collection and sharing of data, making it easier to track orders and assure customers of your sustainability and accountability credentials.
Reduced risk – Errors are prevented, delays avoided, and waste minimized. AI analytics can use real-time data to predict and mitigate issues before they become a problem. Algorithms and AI can help ensure business continuity by adapting to emerging conditions.
What is needed to make the future supply chain work?
There are three pillars that are needed to support this kind of integrated supply chain: operations, behaviors, and technology.
On the operational level, the supply chain will need to work more collaboratively and make changes to common processes. This may include near-shoring production for certain items, creating more regional warehouses or distribution hubs, forging new partnerships, or flexible contracts.
Behaviors need to change too. Collaborative behavior is a vital ingredient, and sharing of data is key to enabling this. The future supply chain demands agility, so new data connections must be easy to implement quickly. And priorities need to shift away from a focus on volume discounts to strive for the perfect balance of demand and supply. Improved demand forecasting and new KPIs will be crucial for this.
Finally, as the prime enabler, your technology stack must support seamless data flows and the integration of new digital capabilities. Digitalization must cover every aspect of the business, using real-time data and robust integrations to sync multiple systems.
By enabling the controlled flow of data between your systems and those of your partners, the supply chain can break down silos and overcome the built-in limitations of its legacy applications. Data governance and security will be important factors here, and the adoption of predictive technologies and automated supply chain management will also be crucial to success.
Why legacy systems cannot deliver without integration
A fully integrated supply chain cannot operate when IT systems remain fragmented. It’s not enough to only integrate modern applications and systems. Legacy systems hold information with irreplaceable business value so this data must be equally accessible. Without it, your automated decisions and process optimizations will miss out on important contextual information and fail to deliver. In other words, legacy integration is a must.
The problem is that each partner in the chain uses specific software for their domain and these applications were never designed to work together. Enterprise Resource Planning applications (ERPs) may be critical to each business in the chain, yet the value they deliver is limited unless it can be combined with all the other data that you need to give value in different contexts.
Without building bridges between legacy software and new systems, it will be impossible to harness the transformative power of technologies like agentic AI, predictive algorithms, or whatever else comes along.
For example, in times of high demand, a ‘low stock alert’ at a retail location might already be too late, and stockouts would be inevitable. But, if a predictive algorithm indicates high demand for an item before stock runs low, this information can be sent up the chain instantly, triggering automated events in each partner’s ERP so that the right amount of stock can flow in the most efficient way to where it is needed.
Unless they implement a comprehensive and forward-looking integration strategy, a supply chain business is at a serious disadvantage. The market clearly demands these capabilities and the agility they offer.
The role of integration strategy in supply chains
Your integration strategy will play a major role in how fast and cost-effective your IT modernization will be.
For one thing, building integrations with ERPs or legacy applications is rarely straightforward. There is never a ‘standardized’ integration for an ERP. It requires in-depth knowledge of both the ERP and the way it has been customized to that specific business.
There may also be some orchestration required, so that data is correctly transformed as it moves between systems.
You may need to pay attention to the fundamental limitations of your legacy IT. For example, many ERPs are not designed to handle the data types or data volumes involved, so some additional development or data throttling may be needed to make it work.
There are two approaches you can take: point-to-point integration, or platform-based integration. When just one or two integrations are needed, many businesses choose point-to-point integration. This is quite manageable for just a few integrations, as the costs of building and maintaining them are relatively small.
However, if you’re looking to integrate many different systems then a platform is usually the better choice. There are many factors to consider, but an Integration Platform as a Service (iPaaS) gives distinct advantages in this scenario, because you’re creating a highly dynamic system that spans multiple IT environments.
An iPaaS solution is also more cost-effective as it has lower long-term maintenance costs and a shorter time-to-value. You also gain better visibility over your data flows with the right iPaaS, and it will expose any breaks in the data chain – something that point-to-point integrations cannot do.
Why businesses must modernize their fragmented legacy IT
The digital capabilities demanded by customers today (and tomorrow) will hinge on using seamless data flows and high levels of integration and automation. Without modernizing their IT environments and integrating their fragmented systems into a cohesive landscape, a business cannot stay future proof.
Conversely, by bringing end-to-end visibility into the supply chain, each partner is empowered to take data-driven decisions that ensure continuity, reduce costs, and prevent delays.
Good advice can go a long way with a project like this and help avoid common issues that add cost and slow down delivery.
Yenlo has significant experience in helping organizations break down their data silos and integrate their IT infrastructure. If you’re ready to implement a future-proof integration strategy, our integration experts can help you craft a scalable plan that matches your business needs.
