The Digital Divide: Bridging the Gap Between Technology and People in SCM

Did you know a study from 2022 showed a big change in how companies manage their supply chains? While 85% of companies are getting into new tech like AI, IoT, and blockchain to improve their supply chains, 75% also say they need people who know how to use these technologies well.

Another research (by Accenture) involving 900 companies revealed a significant leap in digital maturity within the supply chain—from 39% before the pandemic to 48% today. Yet, this progress also highlights a burgeoning challenge: a deepening digital divide among companies, which is threatening to undermine the competitiveness of those unable to keep pace.

Some companies are moving forward, gluing their technology and teams together, but others are struggling because they don't have enough know-how in the digital arena.

In this article, we'll examine why there's a big gap in using tech in supply chains and show you different ways to fix it. 

The 3 Forces Causing The Digital Divide

The digital divide in supply chain management refers to the gap between companies that have successfully integrated digital technologies into their operations and those that have yet to. This divide is significant because it affects a company's efficiency, ability to adapt, and competitiveness. 

Several key factors contribute to the digital divide in supply chain management:

1. The Financial Resource Gap Between Big & Small Players

“Small companies are just too small to embrace some of the more advanced technologies and are lucky that they can just get their enterprise resource planning systems free of dirty data, let alone even think that they could use something like AI.”  - Norman Katz, "Principal Execution Officer", Author, Global Supply Chain, ERP & Analytics Influencer

Larger corporations often have the financial capability to invest in cutting-edge technologies like AI for predictive analytics, IoT for real-time tracking, and blockchain for securing transactions. These investments significantly enhance supply chain visibility, accuracy in demand forecasting, and overall efficiency. 

Smaller companies find the cost of acquiring and implementing these technologies prohibitive, leading to a gap in operational capabilities and competitiveness. In fact, 28% of small businesses cite IT budgets on existing IT issues as the biggest barriers to adopting digital tools.

2. Problems in integrating with existing tech stacks

Another factor playing spoilsport is the difficulty of integrating new technologies with existing tech stacks. Norman Katz’s interview highlights supply chain companies' challenges with integrating new technologies into their existing systems. 

For example, a media-type company (Norman says) was found to have a 20-year-old dead software language in their order processing system. When conversation around adopting advanced technologies ruled the roost,  the company was stifled due to the constraints imposed by outdated systems. 

This creates barriers to progress and hinders the adoption of transformative technologies like artificial intelligence.  

While bigger companies can afford to throw money at the problem, investing heavily in software migration and employee training, smaller companies find themselves ending up at the wrong end of the digital divide — constrained by the limitations of their tech stack, making it challenging to keep pace with the rapidly evolving digital landscape.

3. A skills drought is rising hiring costs - furthering the divide 

The successful deployment of digital technologies requires a workforce proficient in digital skills. However, there's a widespread skills gap in the industry, particularly in areas like data analysis, cybersecurity, and digital tool management. 

For example, companies like DHL and FedEx, with continuous learning and a digital fluency culture, provide comprehensive training programs and resources to ensure their workforce can effectively leverage new technologies. 

However, smaller businesses, without access to training on advanced SCM platforms, such as warehouse management systems or route optimization software, face challenges in adapting to the demands of the digital age, hindering their ability to compete effectively in the market.

The End Game: What would happen if the digital divide burgeons? 

Distrust between bigger and smaller companies

Bigger companies often rely on smaller suppliers or partners within their supply chain network. If these smaller entities struggle with digital adoption or face operational inefficiencies due to the digital divide, it can disrupt the entire supply chain, leading to delays, shortages, or quality issues for larger companies.

Moreover, smaller companies that aren't digitally equipped lack operational resilience. This will jeopardize supply chain continuity and expose the company and its partners to increased operational and financial risks. 

Small companies would be operating in the dark - lose competitive advantage

According to software advice’s SMB Retail Supply Chain survey, 91% of SMB retailers feel that enterprises are at an advantage in procuring inventory, and 50% say this advantage exists because they don’t have prioritized vendor status. Even without a digital divide, times are tough for SMB supply chain vendors. 

The slow digital adoption and transformation lead to many issues, such as lack of visibility and slow decision-making.  69% of supply chain organizations still need help achieving complete supply chain visibility.  This lack of visibility is akin to stumbling around in a dimly lit room, where crucial issues or areas for improvement remain hidden. 

Bigger companies use tech like IoT sensors, RFID, and real-time tracking systems to get a 360-degree view of their supply chain operation, boosting their inventory accuracy by up to 95%

However, smaller companies, without these systems, are struggling to: pinpoint the exact location of products in transit, make timely deliveries, forecast issues early on, etc. Manual processes in order processing and inventory management can result in extended lead times, slowing down the movement of products through the supply chain. Without automation and digital tools to streamline communication and collaboration, companies risk inefficiencies and delays impacting customer satisfaction and market responsiveness.

On the customer front, without proper tools to analyze data, companies would find it difficult to identify recurring product issues, and miss opportunities to improve product quality or enhance customer satisfaction, leading to increased returns and diminished brand reputation.

Inconsistent security standards will lead to increased risk of data breaches

Juniper’s research found that financial losses attributed to software supply chain cyber attacks will jump 76%, costing the global economy almost $81 billion in lost revenue and damages by 2026.

Supply chain companies ( regardless of their size) hold a reservoir of sensitive, personally identifiable information (PII). This makes them lucrative targets for hackers to train their attacks. 

Supply chain cyber attacks can occur at any stage in the production or maintenance of a digital product or service, and supply chain security now must be as much about the flow of data as it is about the flow of goods.  In the absence of supply chain security management software, organizations are super vulnerable to cyberattacks originating from compromised software and lackadaisical attitudes. 

While enterprises possess the know-how, the money and the muscle to tighten security measures, smaller supply chain companies struggle to adapt to modern security standards.  In the context of a digital divide, this lack of inconsistent security standards poses a serious issue. Moreover, when enterprises partner with smaller supply chain vendors, they, too, are pulled into a more vulnerable spot as they have to rely on the smaller vendors’ data security standards.

Additional costs for larger companies as they have to invest in their smaller partners

In light of all this, larger companies will be forced to invest in training programs, provide technology subsidies, or seek alternative suppliers with better digital capabilities. Such expenses can strain the financial resources of larger companies and impact their profitability.

Gluing The Gap: Strategies To Bridge The Digital Divide

Here’s what various stakeholders can do to bridge the gap between technology and people in SCM:

1. Promote Digital Infrastructure Inclusivity Across Supply Chain Networks

Addressing the digital divide requires equitable access to essential digital infrastructure, particularly in underserved regions. Companies can collaborate with governments and industry partners to expand broadband coverage and invest in digital infrastructure development initiatives. 

For example, a consortium of logistics firms can partner with telecommunications companies to deploy mobile connectivity solutions in remote areas, enabling small-scale suppliers to participate in digital supply chain networks.

2. Cultivate a Culture of Learning, Collaboration and Knowledge-Sharing

Leaders prioritize workforce development by investing in digital upskilling and creating personalized learning experiences. By establishing digital factories and providing tailored training programs, companies empower employees to adapt to evolving technologies and embrace digital transformation.

Bridging the digital divide necessitates fostering a collaborative ecosystem where stakeholders exchange insights and best practices. Organizations can establish digital communities or forums where industry players can share experiences and learn from each other regardless of size or technological maturity. 

For instance, a trade association launched a digital knowledge-sharing platform where supply chain professionals can access resources, participate in discussions, and seek advice on digital adoption strategies. By nurturing collaborative environments, organizations empower all stakeholders to navigate digital challenges and collectively drive digital transformation across the supply chain.

3. Nurture Intentional Scalability for Widespread Digital Adoption

Scaling digital initiatives necessitates strategic alignment and leadership endorsement. Instead of pursuing disparate digital strategies, organizations rally support from top management to drive cohesive digital transformation efforts. By standardizing core supply chain functions while accommodating local nuances, companies promote equitable access to digital tools. 

For example, a multinational manufacturer implemented a modular digital platform adaptable to diverse supply chain contexts, facilitating seamless integration and scalability across regions.

4. Promote Data Accessibility as a Catalyst for Inclusion

In its research, Accenture noted that many supply chain issues stem from data challenges, enterprises prioritize data integration and accessibility. This is why digitally more mature companies invest in creating centralized platforms that aggregate and harmonize data from various sources, enabling real-time insights and informed decision-making. For instance, a global consumer goods manufacturer implemented a unified data platform, facilitating seamless data synchronization across departments and external partners and enhancing planning processes and product introductions.

The challenges encountered by small supply chain vendors—such as resilience issues and visibility gaps—are often rooted in data disparities. Fragmented and low-quality data across different supply chain tiers hinder effective decision-making. Establishing an integrated data platform accessible to all stakeholders can democratize access to valuable insights. 

5. Find The Right Digital Partner

Cloud-based Supply Chain Management (SCM) platforms allow easy access to data and tools from anywhere. This helps supply chain partners work together effectively, regardless of location. Implementing these solutions can help overcome distance-related challenges and improve business growth. 

Organization can explore cost-effective options such as cloud-based software as a service (SaaS) solutions that offer subscription-based pricing models and require minimal upfront investment. Additionally, they can leverage government grants or funding programs to support digital transformation initiatives. Collaborating with industry partners or joining consortiums provides access to shared digital infrastructure and resources, reducing individual investment requirements.

For example, Tata BB Matrix offers a complete SCM platform, including Order Management, Warehouse Management, and Transport Management Systems. With Tata BB Matrix, businesses can gain better visibility on their supply chains - love orders, logistics, and fleets. As supply chain managers navigate the challenges of market fluctuations, tools like Tata BB Matrix, part of a comprehensive cloud business management system, play a significant role. They automate key processes and deliver operational and financial insights, aiding in informed decision-making and ensuring resilience.

Next Steps for Supply chain pros and stakeholders

Clearly, technology isn't just solving supply chain problems; it's driving big changes. To build a better, faster and resilient supply chain, leaders need to embrace digital transformation. 

From the aforementioned examples, we’ve understood that the digital divide threatens supply chain companies regardless of size and digital maturity. Failure to address the digital disparities risks increased costs, diminished innovation, and heightened vulnerabilities to cyber threats and operational disruptions.  

Thus, stakeholders from all facets - private companies, think tanks, and government agencies - must come together to help bridge this gap. Policies must be implemented to enhance digital literacy, incentivize digital transformation and standardize security protocols.