Strategic Perspectives of the Digital Supply Chain

Introduction

Supply chains are as old as commerce itself, they have been enablers for geopolitical shifts and have played a major role in the outcome of virtually every military conflict throughout history. The earliest known supply chains date as far back as human writing itself and we understand today that some of the earliest human records were inventories and trade documents. Yet, supply chain management itself is a fairly new academic field and one that is still evolving rapidly in places. In its simplest form, supply chain management is the movement of material from one point to another and all that it entails. Obviously, this is a very simplistic view in light of our reality today. Large global corporations are moving billions of dollars in material value at any given point in time. These “material chains” are immensely complex, they can be subject to the laws and regulations in more than 200 countries and territories while they are heavily influenced by many different factors ranging from freight consolidation to timing of hundreds of concurrent shipments along with their delivery requirements and third-party transportation schedules to name just a few.

For our purpose, we broadly refer to supply chain management as the business processes related to the planning and fulfillment of market demand. Implicitly included in this definition is the procurement of materials, transport and storage of spare parts and movement of materials into manufacturing to create products and services. These include a range of core activities such as demand planning, procurement, warehouse and inventory management as well as transportation and distribution. Supply chain strategy is a central element of these core activities as we will show later in this chapter. Adjacent to supply chain management, manufacturing, design, packaging and marketing all have strong influences on the execution supply chain processes. Obviously, so do supporting activities such as business process, performance management and technology capabilities. Figure 1 below illustrates this set of adjacent, core and supporting activities.

Figure 1.

Core supply chain activities

The inclusion of supply chain strategy above is not yet common in literature or practice. In fact, it was virtually unheard of just a decade ago and one would have been hard pressed to find a dedicated textbook on the subject at the time. Yet, every managerial activity requires strategic planning and supply chain executives across all industries are hardly an exception to this rule. Before we define supply chain strategy, it is necessary to discuss the concept of strategic management and its foundations in detail.

Corporate Strategy

The concept of strategic management or corporate strategy has fallen out of favor in recent years. Many executives today claim that the world and certainly their industries are changing too fast for long-term planning. Most notably, Meg Whitman, then CEO of eBay, once proclaimed to a journalist that “my Monday morning meeting is my strategy.” Ironically, Whitman previously served as VP of Strategy at Disney where it was her job to do much more than hold a weekly meeting. Yet, we have to ask ourselves whether there is merit in the assertion that strategy is obsolete. Oftentimes managers confuse the fast pace of technological innovation and changes in operational capabilities with the long-term competitive positioning of the organization. As we will see a little further down in this chapter, changes in efficiency are not sufficient to establish a unique and defensible position in an industry. This misunderstanding can be a costly mistake as many high-flying companies found out during the dot-com bubble.