Digital Supply Chain Companies That Do Not

Digital Supply Chain

Companies that do not have good supply chain systems and processes often experience lower customer satisfaction levels, order lead times, and inefficient production processes vs. those that do. Before the widespread expansion of the Internet, most supply chains operated according to a very traditional and linear model -- business partners worked together directly with separately managed linkages between suppliers and customers. Today, the advent of the Internet has had a significant impact on supply chain management. Digital supply chain is an emerging trend especially in the music, publishing, and library industries. It provides a rare opportunity to use electronic means to impact the delivery of goods and services, offering a unique view of the process at critical points between the origin of raw materials to final delivery to the customer.

A number of companies have used the Internet to lower costs and add value to their business. First and foremost, the Internet can create more sourcing opportunities for materials. Partnering options are widely expanded with players being as close as in the same city or as distant as overseas. Online forums, public exchanges and paid member sites exploded in popularity in the late 1990s and allow suppliers and buyers to connect in new ways. Major benefits include automated procurement, collaboration in forecasting, planning and replenishment, and lower costs due to more competitive bidding (Gulledge and Chavusholu, 2008). In addition, materials are often easier to source with shorter lead times due to a greater number of supplier options. All of this has the potential to decrease inventory volume, thus decreasing overhead costs.

The supply chain of the past was often an inflexible series of events that somehow managed to get products out the door. It often involved inaccurate inventory forecasts, rigid production plans and hypothetical shipping schedules. Digital supply chain management, especially for video and virtual content, has ushered in a new paradigm. Warehouses are being replaced with data centers, boxes replaced by bits, and trucks replaced by bandwidth (Whelage, 2008). Within the digital supply chain, one can receive a digital item into inventory and then sell it a million times over within a short time period without restocking. Vendors can be paid for each digital asset sold without restocking inventory that has the potential to become stagnant during slow sales seasons. The overall channel management, therefore, shifts from conventional distribution to retailers, to broadband providers, to the web, and finally directly to the consumer.

Companies such as Dell and Apple have mastered the process, resulting in enormous competitive advantages in the marketplace including improved order and environmental management. Major benefits include a more customer-responsive ordering system, improved product availability, cost savings, and an integrated information system and have allowed them to position themselves as top delivery contenders. The digital supply chain allows for "real-time" information to be pulled from across business units which can be an important differentiator for companies (Tarantillis, et al., 2008). Projects are most likely to provide financial benefits when they are well planned and executed.