According to Mentzer (1), a supply chain can be defined as a set of three or more entities (i.e., organizations or individuals) directly involved in the upstream and downstream flows of products, services, finance, and/or information from a source to a customer. This definition highlights the role of information flows between the supply chain players.
Advances in digital technologies (Internet of Things, the use of advanced robotics, the application of advanced analytics of big data in supply chain management) and their synergistic interactions are disrupting business models and their respective supply chains, and requires companies to rethink the way they design their supply chains. According to Alicke, Rachor and Seyfert (2), “besides the need to adapt, supply chains also have the opportunity to reach the next horizon of operational effectiveness, to leverage emerging digital supply chain business models, and to transform the company into a digital supply chain”.
The Digital Supply Chain is characterized by the strategic and operative exchange of information to enhance communication between actors in the chain. This supply chain information sharing and processing is not confined to the business process level but also includes a vast amount of data from devices and sensors (IoT) and from social media applications.
As supply chains become more digital, they increasingly benefit from platforms.
According to Sean T. Monahan (3), there are two groups of supply chain digital platforms: Informational Supply Chain Platform and Physical Supply Chain Platform .
The first ones are a set of foundational technologies and process whose goal is to facilitate information sharing, coordination, frictionless confirmation, payments and consumer survey activities; while the second ones are a foundational set of digital enabled physical assets and technologies (warehouses, factories, robotics, sensors, etc) which companies leverage to enable breakthrough physical product handling and flow performance.
According to Alicke, Rachor and Seyfert, the digitalization of the Supply Chain impacts all areas in supply chain management (planning, logistics, performance management, orders management, supply chain strategy) and makes the supply chain become:
- more flexible: ad hoc and real-time planning allows a flexible reaction to changing demand or supply situations. Planning becomes a continuous process that is able to react dynamically to changing requirements or constraints
- more accurate: big data collection and analytics provides real-time, end-to-end transparency throughout the supply chain. in addition, the integration of data of suppliers, service providers, etc. in a “supply chain cloud” ensures that all stakeholders steer and decide based on the same facts.
- more efficient: efficiency in the supply chain is boosted by the automation of both physical tasks and planning
According to Caballero, Hajibashi and Denner (4), the right data infrastructure is central to any digital platform, as is using a digital platform to coordinate data in a way that creates new data relationships for new, better processes. External partnerships also offer a competitive advantage, but for a platform-based ecosystem to work, you need to favor lightweight, cloud-based architectures over legacy systems or ERP systems. This flexible foundation allows for continuously evolving non-core functions, such as planning, warehousing, transportation, manufacturing, sourcing and more. These platforms can “plug and play” offering access to best-in-market solutions, and as organizations increasingly harvest data intelligence via algorithms and analytics, a modern digital platform is capable of hosting these algorithms, making them part of the overall business logic.
See you next time I will talk about digital supply chain management. Don’t lose it.
(1) Mentzer, J., (2001) Supply Chain management, , Sage Publications, Inc. 2001
(2) Alicke, Rachor and Seyfert, Supply Chain 4.0 – the next-generation digital supply chain, 27 October 2016, article, Mc Kinsey and Company
(3) The rise of supply chain platforms, Sean T. Monahan and Michael Hu, https://supply-chain.cioreview.com/cxoinsight/the-rise-of-supply-chain-platforms-nid-9907-cid-78.html
(4) Caballero, Hajibashi and Denner, 2020, Digital Platform, Accenture