The Key Drivers for the Digitalization of the Supply Chain

The Key Drivers for the Digitalization of the Supply Chain

Stavros Ioannis Valsamidis (Department of Accounting and Finance, International Hellenic University, Kavala, Greece)
DOI: 10.4018/IJORIS.2020070101
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Abstract

The digital supply chain is a reality since markets are demanding efficiency, agility, and flexibility for modern supply chains. Digitalization can have a major impact on the supply chain. The aim of the study is to deepen the knowledge and understanding of the digitalization of the supply chain. It explores executives' attitudes towards the use of trends and technologies in supply chain. It identifies the factors that affect executives' attitudes towards those trends and technologies, and it classifies them into groups according to their similar behaviour patterns and profiles each group of respondents according to the characteristics of their companies. The main factors are mobility, human factors, and pricing. Characteristics such as type of company, year of establishment, number of employees, technological infrastructure have an impact on executives' behaviour. The survey revealed a few noteworthy findings that may influence companies for resource reallocation and strategically shift resources to create more value and deliver higher returns to shareholders.
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1. Introduction

Industry 4.0 is defined as the next phase in the digitization of the manufacturing sector, driven by the astonishing rise in data volumes, computational power, and connectivity, especially new low-power wide-area networks; the emergence of analytics and business-intelligence capabilities; new forms of human-machine interaction such as touch interfaces and augmented-reality systems; and improvements in transferring digital instructions to the physical world, such as advanced robotics and 3-D printing (Roblek et al., 2016; McKinsey Special Collection Digital strategy, 2017). The term describes “the forth industrial revolution, a new step of organization and management of whole supply chains over the life cycle of products” (Platform I4.0, 2015). The biggest impact from the Industry 4.0 technologies and concepts is to be expected from a technological view especially for the procurement, production and distribution activities in the supply chain (Kersten et al., 2015).

Industry 4.0 is not limited to the technical dimension of digitalizing modern businesses, as it is rather the complete new organization and network coordination of value and supply chains (Glas and Kleemann, 2016). Industry 4.0 is expected to form in its ultimate shape new digitalized supply chains, which shall realize collaborative productivity rents and ensure no less than the competitiveness of entire industries (Willems et al., 2018). Whilst many more companies are already investigating how to react to the current trend of implementing Industry 4.0 technologies and concepts, recent research with respect to this term is highly diverse and limited to the operational implementation of technologies and concepts on the production process-level (Herman et al., 2015).

The function of any supply chain centers on the movement of materials, finished goods, capital, and other assets from place to place, as well as the production of finished goods. A supply chain is the system of organizations, people, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform raw materials and components into a finished product that is delivered to the end customer. At their core, however, supply chains consist of many transactions: the exchange of time, money, information, or physical materials for some other unit of value (Christopher, 2016).

Supply Chain Management is the design and management of processes across organizational boundaries with the goal of matching supply and demand in the most cost effective way. Dramatic technological and digital developments, such as greater computing power and lower overall costs, have impacted the traditional supply chain in several key ways, including a reduction in transaction costs and increase in innovation related to the production process itself (EY, 2017).

Supply chains traditionally are linear in nature, with a discrete progression of design, plan, source, make, and deliver. Today, however, many supply chains are transforming from a staid sequence to a dynamic, interconnected system that can more readily incorporate ecosystem partners and evolve to a more optimal state over time (Deloitte's Digital Supply Networks, 2016). This shift from linear, sequential supply chain operations to an interconnected, open system of supply operations could lay the foundation for how companies compete in the future (Specture Labs, 2018). Historically, supply chain professionals managed the “four Vs” (volatility, volume, velocity, and visibility) as they attempted to optimize results across a series of objectives that include total cost, service, quality, and support for innovation (Deloitte's Digital Supply Networks, 2016). For a number of industry sectors (retail, auto, electronic, aviation, chemical), digitalization of supply networks has been an important issue for more than two decades, but this concern is not shared across other industries (Hartmann et al., 2015).

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