Why this book now. For some time now, my research has focused on the progress made by supply chain management (SCM) thanks to digital technologies and the ongoing evolution in global supply chains. I was preparing a publication when, in 2020, a phase of very strong change began that broadened my interests. The Fukushima nuclear disaster almost ten years earlier had already highlighted the vulnerability of supply chains to unforeseen events, but the explosion of the coronavirus pandemic and Russia's subsequent invasion of Ukraine have changed the scene far more deeply. While what supply chain managers had learnt during the coronavirus pandemic was becoming the ‘new normal’ and we were moving towards a humanitarian and economic crisis, a new mindset had emerged. Global supply chains had been strained, which made it urgent for policies that would lessen disruptions and intensify resilience. In the economic literature, new expressions have been used more and more frequently, such as reshoring vs. onshoring, inshoring vs. outsourcing, resilience vs. robustness, preparing for ‘just-in-case’ vs. ‘just-in-time’ delivery, and new words such as deglobalization have appeared. Companies have had to rethink most of their businesses and to develop new competencies. Old rules are not completely obsolete, but used on their own they are inappropriate for surviving and prospering in a fast-changing environment. Starting from these premises, I decided to review what I had already written and explore the impact of new events on the challenges and policies posed by SCM. What this book is about? The purpose of this book is to review the foundation of SCM and discuss how it can deal with the recent waves of change by using digital technologies for more efficiency, profitability, and resilience. The book provides an understanding of the breathtaking shift in traditional industries and the resulting significant implications for SCM. The basic message is that the new social and economic environment requires a totally new strategic management mindset. Key definitions and events 1. Digital transformation is the process of using digital technologies to reinvent a business to be more responsive to market demands. With digital transformation, the company "starts with a blank sheet", and by integrating new technologies it redesigns its activities, products, and services. It represents a path, a journey, with different objectives that depend on the industry to which the company belongs. The path must be accompanied by a process of change management both to overcome the normal resistance of the organization and adapt this to the transition. 2. “Supply chain management (SCM) is the handling of the entire production flow of a good or service to maximize quality, delivery, customer experience and profitability” (IBM, 2022). “By managing the supply chain, companies can cut excess costs and deliver products to the consumer faster” (Fernando, 2022). SCM has greatly benefited from digital transformation. 3. Digital transformation in SCM it is not only the use of modern technology to increase efficiency and productivity, reduce risks, and leverage new opportunities; it is also a profoundly new way to drive the company. “Digital transformations are a long game” .. .. “The point of digital transformation isn’t to become digital. It’s actually to generate value for the business” (Smaje, Zemmel, 2022). 4. In recent years, some events have accelerated the digital transformation in SCM, which has taken center stage in business strategies. The Fukushima nuclear disaster (the earthquake and subsequent tsunami on the west coast of Japan), the coronavirus pandemic, and the war in Ukraine have had a common denominator in the disruption of supply chains, prompting the need to restore their resilience. A new age of SCM has begun in which a long journey toward resilience needs to continuously reconfigure business processes in a fast-changing environment. 5. Digital transformation has been ongoing for decades, but it got a boost when the coronavirus pandemic broke out and a lot of people around the world moved online. With Internet access, students and employees forced to say home in isolation carried out their normal activities remotely. At the same time, many companies adopted digital business models to manage all stages of the value chain. Fast and reliable connectivity facilitated interactions between machines, people, and organizations, prompting adaptation to the disruption of supply chains. 6. Just when the global economy was supposed to complete its recovery from COVID-19, the largest war on European soil for almost 80 years has undermined global economic prospects. Russia’s invasion of Ukraine has contributed further to disrupting global supply chains in a more geographically limited way but with stronger consequences and a slower recovery of resilience than was the case at the end of the most acute phase of COVID-19, thereby accelerating the shift from global to regional, and even local, sourcing. 7. Globalization refers to the increase in the flows of trade, money, people, and ideas among countries beginning with the end of World War II. Globalization of supply chains means instead that, thanks to the ease of exchanges between countries, a product sold in one country can be the sum of components, modules, and services produced in various parts of the world, even when there is a great distance between the countries involved. The former is a powerful trend of international trade, while the latter is the “blood vessel system” that makes it possible. Globalization and supply chain are therefore strictly connected. Since the last decade, more frequent and intense supply chain disruptions have undermined globalization, leading to the widespread belief that globalization will suffer a decline, although the forces that support it will not be defeated. The structure of the book. The book is organized into five key parts and nine chapters. Part One (Chapter 1) is about the drivers of digital transformation and their effects on the supply chains; Part Two (Chapters 2 to 5) about the digital technology solutions for managing the supply chains; Part Three (Chapter 6) deals with the evolution of the global supply chain and global strategies; Part Four (Chapter 7 and 8) discusses the effects on the supply chain of the recent wave of disruptions; and Part Five (Chapter 9) discusses how businesses have reacted to disruptions of supply chains. Some chapters (such as Chapter 6) can be read as a stand-alone complete set of concepts, while others are closely connected with each other (such as Chapters 2 to 5). Each chapter leads, one step at a time, toward a better understanding of the new tools available today and the need for a new approach. Chapter 1 gives special attention to digital transformation (DT) as an everlasting changing strategy. Amazon, Airbus, Dell, and Walmart have rewritten the rules of competition in their industries, demonstrating that the supply chain can be a strategic differentiator. For its part, the academic literature has identified 4 tiers of DT and five domains of strategy that DT is changing. To highlight the concepts introduced, the chapter recalls how Netflix’s original DVD service defeated the leading position of Blockbuster. Facing an absolute dominator in the retail distribution of movie rentals, Netflix decided to attack Blockbuster by offering customers a completely new value proposition based on the introduction of new technologies, among which DT was the most important. Chapter 2 focuses on the impacts of digital technology solutions and is divided into three parts. The first deals with the progress brought by the digital supply network (DSN) and discusses its main capabilities. The second gives evidence of progress made possible by the rise of Industry 4.0, which involves a radical shift in how production currently operates and has many impacts on the supply chain. The process is driven by technologies such as Cloud computing, Big Data, the Internet of Things, Blockchain, Robotics, Additive Manufacturing and 3D printing, autonomous vehicles and Intelligent Transport Systems, Artificial Intelligence (AI), Co-Creation, and the Digital Value Chain (DVC). The third part warns that there is still a lot of hurdles to overcome in fully deploying automation in the supply chain. Industry 4.0 is still far from being fully realized. In fact, many companies are still at the early stages of exploring its possibilities and implementing the information sharing necessary to achieve sharp-witted supply chain management. Chapter 3 examines how Supply Chain 4.0 technologies are rewriting the rules of supply chain management. One of the main advantages is overcoming the lack of transparency, in which a segmented supply chain is found in independent silos that do not communicate with each other. With Industry 4.0 technologies, the boundaries between silos disappear, and every link between them becomes visible to all players in the supply chain. Other main benefits of transitioning to a digitized, automated, and fully interconnected supply chain are identified. The adoption of digital technologies allows companies to obtain and analyze data in real time, providing relevant information to the production systems, which leads the way to advanced manufacturing, known as Smart Manufacturing and Smart Factory. Under Smart factory management, the traditional distinction between production planning and production management disappears since the machines constantly exchange information about the production process. An essential requirement to compete in the digital age is close cooperation among the various functions of the enterprise and communication among the various parts of the supply chain. Chapter 4 surveys the evolution of transportation, warehousing, logistics, and procurement under Supply Chain 4.0 technologies, which bring many advantages. For instance, new technologies applied to trucking help in choosing the best routes to reach a destination, which is not a simple process as various elements need to be considered: speed limits that are different from one road section to another, the risks of traffic congestion, weather conditions, temporary road closures, and fuel costs. Warehouse transformation benefits from a wave of technological innovation that includes robotics, augmented reality, autonomous vehicles, sensor technology, and the Internet of Things. In recent years, due to the introduction of smart technologies, which are ‘intelligent’ systems capable of controlling processes autonomously, without human intervention, logistics has undergone a profound evolution from a simple operational function of the company to a means of carrying out advanced planning processes. Digital technologies have also brought significant advances in procurement made possible thanks to the greater transparency of supplier/buyer transactions afforded by connecting the physical and digital worlds. Thanks to new technologies, strong advances have been made in the two parts of the procurement process: sourcing and purchasing. Chapter 5 notes that the introduction of digital technologies in supply chain management (SCM) has forced companies to review and reconsider all their operations. The amount of information about internal and external processes has grown dramatically, increasing the efficiency in all management areas, especially in SCM. Using the latest digital technologies – from Cloud computing to the Internet of Things, from Blockchain to Artificial Intelligence – to increase cost-effectiveness has become a must. This chapter examines the main features of, and the main advantages from, the use of digital technologies to manage the supply chains and making them a competitive weapon. Chapter 6 provides a historical perspective on outsourcing and offshoring and on recent waves of disruptions. Over the past 30 years, globalization has been at the center of interest of many companies attracted by the rapid development of demand in some countries, especially China and India. Thanks to the low cost of labor in developing countries, these companies have made significant profits. Offshoring has quickly become a vital part of global strategies. However, starting from the financial crisis of 2008-2009, the scene has changed. Rising protectionism, the trade war between China and the U.S., and recent radical changes to industries and markets have slowed the pace of growth. Reshoring has become a buzzword and the nature of globalization has changed, requiring managers to change their entire approach to the design and management of supply chains. Chapter 7 explores the role of the coronavirus pandemic on the management of supply chains. The rapid spread of the epidemic throughout the world has been an unprecedented phenomenon, which has rapidly created a mismatch between supply and demand challenging the management of supply chains. Factory closures have stopped production by creating bottlenecks and shortages at various points in the supply chains, and the transport crisis has exacerbated the situation. Many firms have shifted their production closer to home and raised prices. Chapter 8 addresses the key challenges that Russia’s invasion of Ukraine poses to the global supply chains. This chapter was written when the Russia-Ukraine conflict had been going on for about three months. It was difficult to predict how the conflict would evolve, but some effects on supply chains were already evident and destined to last. Many companies have been forced to rethink their supply chains built over decades. The war has brought to the surface the vulnerability of supply chains and accelerated the shift of the critical phases of their activities from global to regional, and even to local. Global supply chains in some sectors are closely intertwined and feed production that has difficult-to-replace components. The invasion added further pressure to the global logistics and transportation network, also creating a spillover effect. Chapter 9 looks at how businesses have reacted to various types of supply chain disruptions. The process is no different for anyone facing risk and uncertainty: first, identify the vulnerability, and second be more resilient. There are many key strategies to make supply chains more resilient without weakening their competitiveness, such as building inventories faster than building factories, reshoring or onshoring, diversifying supply bases, devising a new business model, accelerating technological innovation, and rethinking the trade-off between product variety and flexible production capacity. This chapter distinguishes between ‘resilience’ and ‘robustness’. Resilience refers to the ability to return to normal operations after a disruption, while robustness refers to the ability to maintain operations during a crisis. It also distinguishes between ‘just in time’ and ‘just in case’, the former being more appropriate in times of intense supply chain disruptions. At the end, a question is asked: why do disasters often find the MNCs unprepared? Psychologists have an answer. The problem is often not the inability to predict but the inability to react to the perception of a risk. This may explain why organizations, that have considerable means to scrutinize the horizon and protect themselves from large risks, have been slow to react to the effects of the pandemic, thereby worsening the effects of supply chain disruptions.
The Digital Transformation of Supply Chain Management
Pellicelli Michela
2023-01-01
Abstract
Why this book now. For some time now, my research has focused on the progress made by supply chain management (SCM) thanks to digital technologies and the ongoing evolution in global supply chains. I was preparing a publication when, in 2020, a phase of very strong change began that broadened my interests. The Fukushima nuclear disaster almost ten years earlier had already highlighted the vulnerability of supply chains to unforeseen events, but the explosion of the coronavirus pandemic and Russia's subsequent invasion of Ukraine have changed the scene far more deeply. While what supply chain managers had learnt during the coronavirus pandemic was becoming the ‘new normal’ and we were moving towards a humanitarian and economic crisis, a new mindset had emerged. Global supply chains had been strained, which made it urgent for policies that would lessen disruptions and intensify resilience. In the economic literature, new expressions have been used more and more frequently, such as reshoring vs. onshoring, inshoring vs. outsourcing, resilience vs. robustness, preparing for ‘just-in-case’ vs. ‘just-in-time’ delivery, and new words such as deglobalization have appeared. Companies have had to rethink most of their businesses and to develop new competencies. Old rules are not completely obsolete, but used on their own they are inappropriate for surviving and prospering in a fast-changing environment. Starting from these premises, I decided to review what I had already written and explore the impact of new events on the challenges and policies posed by SCM. What this book is about? The purpose of this book is to review the foundation of SCM and discuss how it can deal with the recent waves of change by using digital technologies for more efficiency, profitability, and resilience. The book provides an understanding of the breathtaking shift in traditional industries and the resulting significant implications for SCM. The basic message is that the new social and economic environment requires a totally new strategic management mindset. Key definitions and events 1. Digital transformation is the process of using digital technologies to reinvent a business to be more responsive to market demands. With digital transformation, the company "starts with a blank sheet", and by integrating new technologies it redesigns its activities, products, and services. It represents a path, a journey, with different objectives that depend on the industry to which the company belongs. The path must be accompanied by a process of change management both to overcome the normal resistance of the organization and adapt this to the transition. 2. “Supply chain management (SCM) is the handling of the entire production flow of a good or service to maximize quality, delivery, customer experience and profitability” (IBM, 2022). “By managing the supply chain, companies can cut excess costs and deliver products to the consumer faster” (Fernando, 2022). SCM has greatly benefited from digital transformation. 3. Digital transformation in SCM it is not only the use of modern technology to increase efficiency and productivity, reduce risks, and leverage new opportunities; it is also a profoundly new way to drive the company. “Digital transformations are a long game” .. .. “The point of digital transformation isn’t to become digital. It’s actually to generate value for the business” (Smaje, Zemmel, 2022). 4. In recent years, some events have accelerated the digital transformation in SCM, which has taken center stage in business strategies. The Fukushima nuclear disaster (the earthquake and subsequent tsunami on the west coast of Japan), the coronavirus pandemic, and the war in Ukraine have had a common denominator in the disruption of supply chains, prompting the need to restore their resilience. A new age of SCM has begun in which a long journey toward resilience needs to continuously reconfigure business processes in a fast-changing environment. 5. Digital transformation has been ongoing for decades, but it got a boost when the coronavirus pandemic broke out and a lot of people around the world moved online. With Internet access, students and employees forced to say home in isolation carried out their normal activities remotely. At the same time, many companies adopted digital business models to manage all stages of the value chain. Fast and reliable connectivity facilitated interactions between machines, people, and organizations, prompting adaptation to the disruption of supply chains. 6. Just when the global economy was supposed to complete its recovery from COVID-19, the largest war on European soil for almost 80 years has undermined global economic prospects. Russia’s invasion of Ukraine has contributed further to disrupting global supply chains in a more geographically limited way but with stronger consequences and a slower recovery of resilience than was the case at the end of the most acute phase of COVID-19, thereby accelerating the shift from global to regional, and even local, sourcing. 7. Globalization refers to the increase in the flows of trade, money, people, and ideas among countries beginning with the end of World War II. Globalization of supply chains means instead that, thanks to the ease of exchanges between countries, a product sold in one country can be the sum of components, modules, and services produced in various parts of the world, even when there is a great distance between the countries involved. The former is a powerful trend of international trade, while the latter is the “blood vessel system” that makes it possible. Globalization and supply chain are therefore strictly connected. Since the last decade, more frequent and intense supply chain disruptions have undermined globalization, leading to the widespread belief that globalization will suffer a decline, although the forces that support it will not be defeated. The structure of the book. The book is organized into five key parts and nine chapters. Part One (Chapter 1) is about the drivers of digital transformation and their effects on the supply chains; Part Two (Chapters 2 to 5) about the digital technology solutions for managing the supply chains; Part Three (Chapter 6) deals with the evolution of the global supply chain and global strategies; Part Four (Chapter 7 and 8) discusses the effects on the supply chain of the recent wave of disruptions; and Part Five (Chapter 9) discusses how businesses have reacted to disruptions of supply chains. Some chapters (such as Chapter 6) can be read as a stand-alone complete set of concepts, while others are closely connected with each other (such as Chapters 2 to 5). Each chapter leads, one step at a time, toward a better understanding of the new tools available today and the need for a new approach. Chapter 1 gives special attention to digital transformation (DT) as an everlasting changing strategy. Amazon, Airbus, Dell, and Walmart have rewritten the rules of competition in their industries, demonstrating that the supply chain can be a strategic differentiator. For its part, the academic literature has identified 4 tiers of DT and five domains of strategy that DT is changing. To highlight the concepts introduced, the chapter recalls how Netflix’s original DVD service defeated the leading position of Blockbuster. Facing an absolute dominator in the retail distribution of movie rentals, Netflix decided to attack Blockbuster by offering customers a completely new value proposition based on the introduction of new technologies, among which DT was the most important. Chapter 2 focuses on the impacts of digital technology solutions and is divided into three parts. The first deals with the progress brought by the digital supply network (DSN) and discusses its main capabilities. The second gives evidence of progress made possible by the rise of Industry 4.0, which involves a radical shift in how production currently operates and has many impacts on the supply chain. The process is driven by technologies such as Cloud computing, Big Data, the Internet of Things, Blockchain, Robotics, Additive Manufacturing and 3D printing, autonomous vehicles and Intelligent Transport Systems, Artificial Intelligence (AI), Co-Creation, and the Digital Value Chain (DVC). The third part warns that there is still a lot of hurdles to overcome in fully deploying automation in the supply chain. Industry 4.0 is still far from being fully realized. In fact, many companies are still at the early stages of exploring its possibilities and implementing the information sharing necessary to achieve sharp-witted supply chain management. Chapter 3 examines how Supply Chain 4.0 technologies are rewriting the rules of supply chain management. One of the main advantages is overcoming the lack of transparency, in which a segmented supply chain is found in independent silos that do not communicate with each other. With Industry 4.0 technologies, the boundaries between silos disappear, and every link between them becomes visible to all players in the supply chain. Other main benefits of transitioning to a digitized, automated, and fully interconnected supply chain are identified. The adoption of digital technologies allows companies to obtain and analyze data in real time, providing relevant information to the production systems, which leads the way to advanced manufacturing, known as Smart Manufacturing and Smart Factory. Under Smart factory management, the traditional distinction between production planning and production management disappears since the machines constantly exchange information about the production process. An essential requirement to compete in the digital age is close cooperation among the various functions of the enterprise and communication among the various parts of the supply chain. Chapter 4 surveys the evolution of transportation, warehousing, logistics, and procurement under Supply Chain 4.0 technologies, which bring many advantages. For instance, new technologies applied to trucking help in choosing the best routes to reach a destination, which is not a simple process as various elements need to be considered: speed limits that are different from one road section to another, the risks of traffic congestion, weather conditions, temporary road closures, and fuel costs. Warehouse transformation benefits from a wave of technological innovation that includes robotics, augmented reality, autonomous vehicles, sensor technology, and the Internet of Things. In recent years, due to the introduction of smart technologies, which are ‘intelligent’ systems capable of controlling processes autonomously, without human intervention, logistics has undergone a profound evolution from a simple operational function of the company to a means of carrying out advanced planning processes. Digital technologies have also brought significant advances in procurement made possible thanks to the greater transparency of supplier/buyer transactions afforded by connecting the physical and digital worlds. Thanks to new technologies, strong advances have been made in the two parts of the procurement process: sourcing and purchasing. Chapter 5 notes that the introduction of digital technologies in supply chain management (SCM) has forced companies to review and reconsider all their operations. The amount of information about internal and external processes has grown dramatically, increasing the efficiency in all management areas, especially in SCM. Using the latest digital technologies – from Cloud computing to the Internet of Things, from Blockchain to Artificial Intelligence – to increase cost-effectiveness has become a must. This chapter examines the main features of, and the main advantages from, the use of digital technologies to manage the supply chains and making them a competitive weapon. Chapter 6 provides a historical perspective on outsourcing and offshoring and on recent waves of disruptions. Over the past 30 years, globalization has been at the center of interest of many companies attracted by the rapid development of demand in some countries, especially China and India. Thanks to the low cost of labor in developing countries, these companies have made significant profits. Offshoring has quickly become a vital part of global strategies. However, starting from the financial crisis of 2008-2009, the scene has changed. Rising protectionism, the trade war between China and the U.S., and recent radical changes to industries and markets have slowed the pace of growth. Reshoring has become a buzzword and the nature of globalization has changed, requiring managers to change their entire approach to the design and management of supply chains. Chapter 7 explores the role of the coronavirus pandemic on the management of supply chains. The rapid spread of the epidemic throughout the world has been an unprecedented phenomenon, which has rapidly created a mismatch between supply and demand challenging the management of supply chains. Factory closures have stopped production by creating bottlenecks and shortages at various points in the supply chains, and the transport crisis has exacerbated the situation. Many firms have shifted their production closer to home and raised prices. Chapter 8 addresses the key challenges that Russia’s invasion of Ukraine poses to the global supply chains. This chapter was written when the Russia-Ukraine conflict had been going on for about three months. It was difficult to predict how the conflict would evolve, but some effects on supply chains were already evident and destined to last. Many companies have been forced to rethink their supply chains built over decades. The war has brought to the surface the vulnerability of supply chains and accelerated the shift of the critical phases of their activities from global to regional, and even to local. Global supply chains in some sectors are closely intertwined and feed production that has difficult-to-replace components. The invasion added further pressure to the global logistics and transportation network, also creating a spillover effect. Chapter 9 looks at how businesses have reacted to various types of supply chain disruptions. The process is no different for anyone facing risk and uncertainty: first, identify the vulnerability, and second be more resilient. There are many key strategies to make supply chains more resilient without weakening their competitiveness, such as building inventories faster than building factories, reshoring or onshoring, diversifying supply bases, devising a new business model, accelerating technological innovation, and rethinking the trade-off between product variety and flexible production capacity. This chapter distinguishes between ‘resilience’ and ‘robustness’. Resilience refers to the ability to return to normal operations after a disruption, while robustness refers to the ability to maintain operations during a crisis. It also distinguishes between ‘just in time’ and ‘just in case’, the former being more appropriate in times of intense supply chain disruptions. At the end, a question is asked: why do disasters often find the MNCs unprepared? Psychologists have an answer. The problem is often not the inability to predict but the inability to react to the perception of a risk. This may explain why organizations, that have considerable means to scrutinize the horizon and protect themselves from large risks, have been slow to react to the effects of the pandemic, thereby worsening the effects of supply chain disruptions.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
