The term Digital Supply Chain is mostly used in the context of managing supply chains in a digital manner but there’s some confusion related to the terminology. Some sources write about digital supply chains as means of delivering digital products, such as videos or music, from supplier to end-user. Therefore, we wanted to dig deeper into the terminology and elaborate on how we use the term, to avoid any confusions and misunderstandings.
Digital Supply Chain Definition
Let’s start with the definition of Supply Chain and then narrow it down to a digital context. A supply chain is a system of organisations, people, activities, information, and resources involved in moving a product or service from a supplier or manufacturer to the customer. It can be a very complex system with multiple tiers of companies in a network, needed to be working on the same pace towards the same goals in order to fulfil the needs of the end-customer.
When adding the word digital in front, the term could refer to two different scenarios. Most sources use it in the context of supply chains managed with technologies that make the collaboration cloud-based, real-time, visible and transparent. On the other hand, a digital supply chain can also refer to distributing digital goods or services, such as books and music, which had previously been supplied in a physical form. How do we know which context is the resource or writer referring to? Only by looking at the big picture and keeping in mind that some references think of digital supply chains as something that focuses solely on digital products. For us, and most supply chain professionals, the term is widely recognised to refer to any kind of cross-company processes – though, mainly in the manufacturing industry.
One of the most accurate definitions in our context is:
“A Digital Supply Chain is a smart, value-driven, efficient process to generate new forms of revenue and business value for organisations and to leverage new approaches with novel technological and analytical methods. Digital Supply Chain is not about whether goods and services are digital or physical, it is about the way how supply chain processes are managed with a wide variety of innovative technologies, e.g. unmanned aerial vehicles, cloud computing, and the internet of things, among others.” (Source: Sciencedirect.com)
The point of a digital supply chain is to make collaboration between different parties and companies smoother, faster and more transparent and secure. For example, when using an online collaboration tool, the effectiveness of the purchasing process can be improved by 100 %. This shows how digitalisation simply makes the supply chain collaboration much more effective.
Digitalisation vs. Digital Transformation
Another terminology question is whether there’s a difference between supply chain digitalisation and digital transformation. Do they refer to the same situation? In most cases, both terms refer to the process of transitioning a traditional supply chain into a digital one by integrating traditional purchasing, quality and engineering processes from ERP into a universal platform.
Transformation emphasises the prominent nature of the process. It is a big change for all parties and requires enough time and dedication to be implemented properly. Once you transform a major work phase from manual to digital, you’ll understand how big of an improvement it is for all the processes involved.
Friction Free Community is all about building a network of Supply Chain Professionals who are changing the status quo of the manufacturing industry. We highly appreciate your point of view on the important terminology of digital supply chains. Leave a comment below and join the discussion in our LinkedIn Group!