Merging physical and digital tools to build resilient supply chains

Organizations are building resilient supply chains with a “phygital” approach, a blend of digital and physical tools. In recent years, the global supply chain has been disrupted due to the covid-19 pandemic, geopolitical volatility, overwhelmed legacy systems, and labor shortages. The National Association of Manufacturers (NAM), an industrial advocacy group, warns the disruption isn’t over—NAM’s spring 2023 survey found 90% of respondents saw significant (52.5%) or partial (39%) supply chain disruption during the past two years. Just 0.5% of respondents reported no disruption at all. Digitization presents an opportunity to overcome supply chain disruption by making data flow more efficiently, using technology and data standards to break barriers between disparate systems.

“Phygital merges two worlds together, where standards provide an interoperable system of defined data structures,” says Melanie Nuce-Hilton, senior vice president of innovation and partnerships at GS1 US, a member of GS1, a global not-for-profit supply chain standards organization. “The approach is intended to deliver multiple benefits—improved supply chain visibility for traceability and inventory management, better customer experiences across online and offline interactions, and the potential for better circularity and waste reduction by maintaining linkages between products and their data throughout their lifecycle,” she says.

Unlocking data value

Phygital systems blend digital tools and data standards with physical data carriers, such as barcodes. These tie products, assets, logistics units, and locations within a supply chain to digital information for enhanced accuracy and consistency. This capability, especially with more advanced data carriers, can help automate data flows and boost supply-chain visibility.

Newer barcode iterations such as the increasingly common QR codes (quick-response codes) or Data Matrix barcodes (codes with a black-and-white grid pattern), store more information—up to 7,000 characters, compared to about 20 characters for conventional bar codes. The technology is growing alongside its use in the supply chain. Grand View Research data measured the global barcode reader market at $7.3 billion in 2022, and projects it will maintain a 7% CAGR from 2023 to 2030.

By uniquely identifying products and tracking their supply chain journey with universal standards, Nuce-Hilton says, organizations can unlock extended value for the whole enterprise. This can lead to raising operational efficiencies, improving safety, attracting consumers, advancing energy efficiency, and decreasing waste. “Supply chain resilience isn’t just about the supply chain,” she says. “It’s about the whole enterprise coming together from a data, product, and execution point of view to create an immersive experience.”

The best of both worlds

Several industries have explored phygital connections to enhance user experience or speed up processes. There are multiple ways to connect physical objects to technology and standardized data; all can help make data accessible, sharable, and useful. These phygital connections of product data, financial facts, and information to real-world activity can lead to a more resilient supply chain, Nuce-Hilton says.

For example, retailer Pacsun launched a phygital venture—Pacsun Los Angeles Tycoon—in early 2023 with platform provider Roblox. This metaverse experience uses avatars so participants can connect and play games while viewing Pacsun’s 2023 summer clothing collection, bridging physical and virtual experiences. Nike also used phygital tools in 2022 in its Cryptokicks digital sneaker campaign with Roblox. Avid sneaker collectors can buy virtual sneakers as non-fungible tokens (NFT). Each unique digital pair is one of 20,000 customizable NFTs, some of which trade for hundreds—or thousands—of dollars.

Healthcare companies have invested in phygital track-and-trace technology like barcodes and RFID tags for patient safety: Global healthcare company Fresenius Kabi relies on GS1 DataMatrix, a two-dimensional barcode carrying drug information, for its product portfolio. German consultancy Roland Berger said in its 2021 Future of Health 3 study that such digital health care technologies are reaching maturity, pointing to not just tracking but digital patient monitoring, early detection devices, and using data

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By: MIT Technology Review Insights
Title: Merging physical and digital tools to build resilient supply chains
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Published Date: Wed, 09 Aug 2023 14:00:00 +0000


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