Mark Skilton    Copyright 2019  ©

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Technology in the Supply chain network

The concept of the supply chain has been around for years, it is probably one of the foundations of the industrial revolution and latterly the modern industrial economy.   Business processes would be separated and managed across a complex of operations that enabled access to markets and labor as well as economies of scale.  This general principle was based on the notion of physical separation of tasks and labor could be managed and distributed through a chain of supply to meet market demand.   Yet this idea have been radically altered with the advent of global telecommunications networks and the internet based virtual processes on top.  Many traditional supply chains have opened up it onto many kinds of virtual organizations (VOs) that either in whole or in part can function equally if not better over the on-line channels.   The supply chain becomes the supply network ecosystem of processes that present new opportunities and challenges for enterprises to rethink their business model.

There have been three major transformational shifts that have resulted in a technology ecosystem surrounding the supply chain:

  1. Physical supply chain network, that represent the physicality of the supply chain existence

  2. ecommerce models, that represents how monetary transactions are conducted

  3. Virtual supply chain network, The structural change brought about by digitization of the physical supply chain and ecommerce models creating virtual supply chain business processes and digital value operating network models. 

The mission imperative – understanding your physical to Virtual Supply chain strategy design and execution

 

Many business operations are now extended across a marketplace that is rapidly being deconstructed and reconstructed through digital technologies.   A mission imperative is to understand this impact of this on your business model and to define how the physical to virtual connectivity and transformations for competitiveness, investment and performance.

Firstly, a major change caused by the digital technologies has been the creation of ecommerce models that can enable potential any business process to be monetized and charged through an on-line transactional model.  This perspective has been described by the Business to Business (B2B), Business to consumer (B2C) and latterly new collaborative models that use crowd sourcing to generate a Consumer to Consumer Model (C2C)  through social networking and collaboration.

Secondly, the movement of physical asset ownership to a subscription or “Pay-as-you-go” based economic model have driven opportunities for a leaner supply chain operation. This is achieved by exploiting supply chain partners who may host part of the business supply chain rather than the enterprise investing in its own assets. The overall effect is a shift from a physical supply chain to a more modular virtual supply chain network operation with new performance potential.  

Thirdly the design of the business model itself is altered through the use of digital technologies that can extend the reach of sourcing and networking to customers through one or multiple channels to market. These are not limited to the physical contact but through mobile smart devices and web marketplaces enabling what in computing language, is described as multiplexing and multiplicity of services.  This means that more concurrency of products and services can be offered to customers on-line creating a potentially wider set of options and a broader addressable market to sell to and service.  The challenge in building the digital enterprise is in defining what business processes and business models can be realized by these digital technologies.

Mapping physical to virtual supply chains

Examples of physical business process and their virtual business process equivalents and extensions

Using digital to disintermediate, re-intermediate your business

 

This aspect of digitization in the industry example creates new enterprise capabilities that are enabled through digital technologies.   The structural changes include connectivity across physical geography of telecommunications and the enterprise capabilities that become intermediated in new ways through the separation of digital content, digital platforms that represent software and hardware, and devices that can read and display this content for other intermediaries and customers. 

Digitization restructures the enterprise capabilities creating different ways to define an enterprise set of capabilities and the marketplace industry it operates. This can be summarized as the following key examples of digital restructure effects on enterprise and market economies.

  • Unbundling physical products and services into separate capabilities that can be sold and reused,

  • Rebundling digital products and services into new types of personalized services, from bundling digital content into new products and services,

  • Creating digital platforms for two sides and multi-sided marketplace making these digital services that can both service individual one-to-one needs and to reach multiple customers and groups building communities online and new marketplaces

  • Creating new type of business processes and data enabled analytical services that form new performance opportunities for rapid delivery, online commerce payments and

  •  the points of touch in an organization and its employees with the marketplace and its supply chain.

  • Digitization changes and lowers the barriers to monetization in the micro economy altering how suppliers and customers and intermediates may interact and service each other. The  macro economy can restructure through cross-cutting digitization links between primary, secondary and tertiary sectors.

From the perspective of practitioners designing and implementing digital capabilities, we can illustrate this restructuring with many examples in the case studies we have examined so far. The following table provides just some of the examples of the digital unbundling and rebundling of the digital enterprise.

Mapping the supply chain and its constituent parts has moved to the ecosystem of resources, assets, business operations and markets.    This reality is the new digital supply chain design paradigm that every organization needs to consider in developing its strategy.