Study shows growth in digital linkages between customers and suppliers

Supply chain software is usually invisible to end customers, but digital linkages between customers and suppliers are on the rise as retailers hustle to keep up with the demands of today's instant-gratification buying culture, a study released Tuesday shows.

More and more companies are embracing digital automation tools as they strive to remain competitive, reduce costly human errors, and improve customer service levels, according to research from DiCentral, a business-to-business managed-services provider, in partnership with SAP SE and the Global Supply Chain Institute at the University of Tennessee (UT)'s Haslam College of Business.

The result is rising investment in the array of disruptive technologies sweeping over the digital supply chain, from machine-to-machine communication such as electronic data interchange (EDI) to data analytics, cloud-based solutions, and mobile capabilities, according to the whitepaper, "Proactive Partnerships: Creating Supply Chain Value in the Digital Era."

But there is a long way to go, with nearly a third of companies surveyed revealing that their trading partners are more prepared for automation and EDI integration than they are.

The investment is worthwhile because suppliers operate in a world of slim profit margins and tight deadlines, and shipments that are late because of failure to follow a retailer's packaging requirements—such as a misplaced barcode—can result in costly penalties, the study shows.

Eight out of ten survey participants said their customers run an existing EDI compliance program, which can result in penalties, and nearly 75 percent of survey respondents have been subject to fines due to noncompliance. Among those respondents receiving fines, 3 percent report receiving fines of more than $100,000 in a 12-month period—a heavy drag on profits for most small- and midsized businesses.

In addition, 76 percent of survey participants expect growth in their electronic supplier connections of up to or more than 25 percent. More than 75 percent of survey participants agree their current system can process most inbound EDI/XML connections without human intervention, and 60 percent of participants report business-to-business integration has enabled them to improve customer service levels.

"Technology continues to improve and evolve at a frantic pace, so companies must act now, or get left behind," Randy Bradley, assistant professor of information systems and supply chain management at UT's Haslam College of Business, said in a release. "Our survey demonstrates that many companies are moving in the right direction, but they need to continue to move faster."