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THE DIGITAL
TRANSFORMATION OF
SUPPLY CHAIN
MANAGEMENT
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THE DIGITAL
TRANSFORMATION OF
SUPPLY CHAIN
MANAGEMENT
MICHELA PELLICELLI
Department of Economics and Management, University of
Pavia, Italy
Elsevier
Radarweg 29, PO Box 211, 1000 AE Amsterdam, Netherlands
The Boulevard, Langford Lane, Kidlington, Oxford OX5 1GB, United Kingdom
50 Hampshire Street, 5th Floor, Cambridge, MA 02139, United States
This book and the individual contributions contained in it are protected under copyright
by the Publisher (other than as may be noted herein).
Notices
Knowledge and best practice in this field are constantly changing. As new research and
experience broaden our understanding, changes in research methods, professional
practices, or medical treatment may become necessary.
Practitioners and researchers must always rely on their own experience and knowledge in
evaluating and using any information, methods, compounds, or experiments described
herein. In using such information or methods they should be mindful of their own safety
and the safety of others, including parties for whom they have a professional
responsibility.
To the fullest extent of the law, neither the Publisher nor the authors, contributors, or
editors, assume any liability for any injury and/or damage to persons or property as a
matter of products liability, negligence or otherwise, or from any use or operation of any
methods, products, instructions, or ideas contained in the material herein.
ISBN: 978-0-323-85532-7
Introduction ix
v j
vi Contents
Index 257
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Introduction
ix j
x Introduction
Chapters 2 to 5). Each chapter leads, one step at a time, toward a better un-
derstanding of the new tools available today and the need for a new
approach.
Chapter 1 gives special attention to Digital transformation (DT) as an
everlasting changing strategy. Amazon, Airbus, Dell, and Walmart have
rewritten the rules of competition in their industries, demonstrating that
the supply chain can be a strategic differentiator. For its part, the academic
literature has identified four tiers of DT and five domains of strategy that
DT is changing. To highlight the concepts introduced, the chapter recalls
how Netflix’s original DVD service defeated the leading position of Block-
buster. Facing an absolute dominator in the retail distribution of movie
rentals, Netflix decided to attack Blockbuster by offering customers a
completely new value proposition based on the introduction of new tech-
nologies, among which DT was the most important.
Chapter 2 focuses on the impacts of digital technology solutions and is
divided into three parts. The first deals with the progress brought by the
Digital Supply Network (DSN) and discusses its main capabilities. The sec-
ond gives evidence of progress made possible by the rise of Industry 4.0,
which involves a radical shift in how production currently operates and
has many impacts on the supply chain. The process is driven by technologies
such as Cloud computing, Big Data, the Internet of Things, Blockchain,
Robotics, Additive Manufacturing and 3D printing, Autonomous Vehicles
and Intelligent Transport Systems, Artificial Intelligence (AI), Co-Creation,
and the Digital Value Chain (DVC). The third part warns that there is still a
lot of hurdles to overcome in fully deploying automation in the supply
chain. Industry 4.0 is still far from being fully realized. In fact, many com-
panies are still at the early stages of exploring its possibilities and implement-
ing the information sharing necessary to achieve sharp-witted SCM.
Chapter 3 examines how Supply Chain 4.0 technologies are rewriting
the rules of SCM. One of the main advantages is overcoming the lack of
transparency, in which a segmented supply chain is found in independent
silos that do not communicate with each other. With Industry 4.0 technol-
ogies, the boundaries between silos disappear, and every link between them
becomes visible to all players in the supply chain. Other main benefits of
transitioning to a digitized, automated, and fully interconnected supply
chain are identified. The adoption of digital technologies allows companies
to obtain and analyze data in real time, providing relevant information to the
production systems, which leads the way to advanced manufacturing,
known as Smart manufacturing and Smart factory. Under Smart factory
Introduction xiii
have made significant profits. Offshoring has quickly become a vital part of
global strategies. However, starting from the financial crisis of 2008-2009,
the scene has changed. Rising protectionism, the trade war between China
and the United States, and recent radical changes to industries and markets
have slowed the pace of growth. Reshoring has become a buzzword and the
nature of globalization has changed, requiring managers to change their
entire approach to the design and management of supply chains.
Chapter 7 explores the role of the coronavirus pandemic on the manage-
ment of supply chains. The rapid spread of the epidemic throughout the
world has been an unprecedented phenomenon, which has rapidly created
a mismatch between supply and demand challenging the management of
supply chains. Factory closures have stopped production by creating bottle-
necks and shortages at various points in the supply chains, and the transport
crisis has exacerbated the situation. Many firms have shifted their production
closer to home and raised prices.
Chapter 8 addresses the key challenges that Russia’s invasion of Ukraine
poses to the global supply chains. This chapter was written when the
Russia-Ukraine conflict had been going on for about three months. It
was difficult to predict how the conflict would evolve, but some effects
on supply chains were already evident and destined to last. Many companies
have been forced to rethink their supply chains built over decades. The war
has brought to the surface the vulnerability of supply chains and accelerated
the shift of the critical phases of their activities from global to regional, and
even to local. Global supply chains in some sectors are closely intertwined
and feed production that has difficult-to-replace components. The invasion
added further pressure to the global logistics and transportation network, also
creating a spillover effect.
Chapter 9 looks at how businesses have reacted to various types of supply
chain disruptions. The process is no different for anyone facing risk and un-
certainty: first, identify the vulnerability, and second, be more resilient.
There are many key strategies to make supply chains more resilient without
weakening their competitiveness, such as building inventories faster than
building factories, reshoring or onshoring, diversifying supply bases, devising
a new business model, accelerating technological innovation, and rethinking
the trade-off between product variety and flexible production capacity. This
chapter distinguishes between ‘resilience’ and ‘robustness’. Resilience refers
to the ability to return to normal operations after a disruption, while robust-
ness refers to the ability to maintain operations during a crisis. It also distin-
guishes between ‘just in time’ and ‘just in case’, the former being more
Introduction xv
References
Fernando, J. (2022). Supply Chain Management (SCM), Investopedia, January 29. https://www.
investopedia.com/terms/s/scm.asp#:w:text¼of%20a%20product.-,By%20managing
%20the%20supply%20chain%2C%20companies%20can%20cut%20excess%20costs,the
%20inventories%20of%20company%20vendors.
IBM. (2022). What is supply chain management? https://www.ibm.com/topics/supply-chain-
management.
Smaje, K., & Zemmel, R. (2022). Digital Transformation on the CEO agenda, May 12.
https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/digital-
transformation-on-the-ceo-agenda.
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PART ONE
1 j
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CHAPTER ONE
1
The platform concept has been widely discussed in the literature, leading to many definitions with
only small variations. According to Schenkl et al. (2011), “A platform is defined as a set of corporate
values of the category’s components (parts, production tools, electric circuits and software), processes
(development processes and production processes, supply-chain), knowledge (developmental know-
how and production technologies) as well as humans and networks. A platform can be used in several
generations of products”. As the authors argue, it can be considered as “a technical system for standa
rdization including both technical and organizational aspects. It is a module that can be used in a wide
range of products. The platform has degrees of freedom to be adapted to application specific requ
irements”. Meyer and Lehnerd (1997) define a product platform as “a set of subsystems and interfaces
that form a common structure from which a stream of derivative products can be efficiently develo
ped and produced”. “A platform is a group of technologies that are used as a base upon which other
applications, processes or technologies are developed. In personal computing, a platform is the basic
hardware (computer) and software (operating system) on which software applications can be run”
(Techopedia, 2020).
(2) Conversely, ‘indirect network effects’ take place when the value of a
platform depends on two or more user groups, such as buyers and sellers.
When the use of a platform by one group increases so, too, do the ad-
vantages for other groups. With ride sharing (arranged by means of a
website or app), if there is an increase in the number of passengers
that want to travel with a private vehicle driven by its owner for a
fee, the number of those who offer to transport others with their
own vehicles will also increase. Parker et al. define this rule as the
‘two-sided network effect’, and underscoring that “the importance of
these effects for stimulating network growth is so great that platform
businesses often spend money to attract participants to one side of the
market” . “They know that, if they get one side to join the platform,
the other side will follow” (Parker et al., 2017).
To better explain this latter concept, the Authors remind us that hu-
manity has known for millennia the advantages of bringing together
in the same place both producers and consumers, thereby creating value
for both. “After all, what is the traditional open-air marketplace found
in villages and cities from Africa to Europe if not a platform in which
farmers and craftspeople exchange sell the wares to local consumers?”.
The fundamental difference between the traditional platform business
and modern platforms is the breaking in of digital technology, which
has greatly increased both the speed of execution and efficiency.
According to the Harvard Business School course, the underlying principles
of network effects imply that the business, Website, or platform with the
highest market share will be more successful in the long run. This means
that its market share is likely to grow more substantially. For this reason,
it is customary to say that when network effects take on significant weight
in a market, the best performers acquire dominant positions at the expense
of the also-rans.
How was it possible for the Chinese giant to suddenly become the first
major threat to U.S. Internet dominance, defeat eBay in China, successfully
bring Chinese products to world markets, and open up the Chinese con-
sumer market to global companies such as Nike and Apple? Various factors
have contributed to this. In addition to the strategic prowess of CEO Jack
Ma, the explosion of demand from the Chinese middle class, and the Chi-
nese government protection from foreign competition for Alibaba that
allowed it to grow while sheltered from the foreign competition have all
contributed. However, the speed and size of growth were in great part a
function of the new reality of platform competition.
Alibaba’s dizzying growth in international markets is due to fierce
network effects and economies of scale. Companies from all over the world
have been able to source goods, products, and parts from Chinese manufac-
turers through Alibaba.
Another advantage of platforms is that they can quickly incorporate the
resources and connections of outside partners and of logistics, warehousing,
and shipping companies. In previous decades, success in retail required
strong investments and years of competition, with timing and results not
even remotely comparable to the speed with which Alibaba has gained po-
sitions in the market.
The Authors consider the development of platforms (thanks to advances
in technology) as a radical change in competition. For years, they argue,
Porter’s ‘five forces’ model has dominated the world of strategic thinking.
According to the model, the goal of corporate strategy is to control five
forces above all: (1) the threat of new entrants to the market, (2) the threat
of substitute products or services, (3) the bargaining power of customers,
(4) the bargaining power of suppliers, and (5) the intensity of competitive
rivalry in the industry. For decades, businesses have used this model to
decide and support their strategies. However, over the years, competition
has become much more complicated than the Porter model shows.
According to the Authors, many of the forces remain valid, “but two
new realities are now shaking up the world of strategy” (Parker et al., 2017).
(1) First of all, companies that can act through platforms can manipulate
network effects to recreate markets, not just respond to them. It is no
longer a question of devising strategies to divide a cake of roughly the
same size among competitors (as in the Porter model), but often of
dividing a larger cake. The action on the Airbnb and Uber marketplaces
is proof of this: because of the use of platforms, these two markets, hos-
pitality, and car riding, have grown in size.
8 The Digital Transformation of Supply Chain Management
Language: French
MIETTE ET NORÉ
TROISIÈME ÉDITION
CORRIGÉE
AUGMENTÉE D’UNE PRÉFACE
ET D’UN ÉPILOGUE
PARIS
G. CHARPENTIER, ÉDITEUR
13, RUE DE GRENELLE-SAINT-GERMAIN, 13
1880
Tous droits réservés.
DU MÊME AUTEUR
POEMES DE PROVENCE
OUVRAGE COURONNÉ PAR L’ACADÉMIE FRANÇAISE
1 vol. Charpentier
3e ÉDITION AUGMENTÉE
LA CHANSON DE L’ENFANT
OUVRAGE COURONNÉ PAR L’ACADÉMIE FRANÇAISE
3e ÉDITION (ÉPUISÉE)
(La quatrième édition est sous presse.)
EN PRÉPARATION :
PROVENCE LÉGENDAIRE
Histoire. — Légendes. — Chansons populaires.
Cette idée d’une Première d’un livre fut vraiment fort goûtée et le
mot fit fortune, répété par toute la presse qui rendit compte du
succès.
Peu de temps après, M. Jean Aicard donnait publiquement des
lectures de son poème en Belgique ; puis en Suisse, où déjà, l’année
précédente, il avait porté des fragments de Miette et Noré, alors
inachevé.
Dans ces diverses lectures, l’auteur rattachait entre eux les
morceaux qu’il citait de son poème, par des réflexions critiques
quelquefois fixées au crayon, un peu au hasard, en marge de son
manuscrit.
Il nous a semblé intéressant de réunir un certain nombre de ces
notes, au choix du poète. On y trouvera un point de vue personnel
sur les choses de son art. Ici, il explique ce qu’il entend par poésie
populaire ; là, il touche un point curieux de prosodie nouvelle, etc.
Nous avons même, au milieu de ces notes, laissé quelques
strophes inédites [2] qui, un jour, entre deux passages de Miette et
Noré, furent citées par l’auteur à seule fin de ne pas redire en prose
ce qu’il avait déjà exprimé en vers.
[2] Voir pages XXIV et XXVIII.
Voici donc ces diverses notes telles à peu près qu’elles ont été
prononcées, mais dépourvues du lien des citations :
« Il a paru à l’auteur qu’un sujet neuf en poésie était le
paysan moderne, vu directement dans la vie, non plus dans les
belles traditions de Virgile et de Théocrite, poètes qui,
directement, s’inspiraient de la vie.
Le paysan, fils des temps nouveaux sans les connaître, —
affranchi par une idée qu’il ne saurait expliquer, patient
conquérant du sol, être passionné et simple, de race saine et
toujours jeune comme la nature même, — le paysan moderne
est une figure aux grandes lignes qu’a dessinée déjà la noble
prose de George Sand, mais qui n’est pas entrée encore,
semble-t-il, dans un projet poétique.
Avec le paysan arrive la poésie qui l’entoure, l’horizon sans
cesse varié, et les seuls poèmes qu’il connaisse, — admirables
d’ailleurs, objets d’une étude et d’un mouvement littéraires
nouveaux en France — les chansons populaires. »
Le pauvre laboureur
Est tout décourtisan ;
Est habillé de toile
Comme un moulin à vent.
Le pauvre laboureur
Est toujours méprisé…
. . . . . . . . .
Faut prendre patience,
O pauvre laboureur,
Si ta misère est grande
C’est pour te faire honneur.
[3] Mélusine.
« Mgr Miollis [6] , qui fut évêque de Digne, est une figure
populaire en Provence, et les paysans des Basses-Alpes
racontent encore bien des traits de sa vie évangélique. Mgr
Miollis a servi de modèle à Victor Hugo quand le maître a tracé,
dans les Misérables, la figure de Mgr Myriel, évêque de D… »
Dans les vers très bien faits qu’on me lit chaque jour,
Je ne le trouve plus, ce souffle qui soulève,
Ce mouvement du cœur qui s’élance à l’amour,
Ce rythme qui prend l’âme et la berce d’un rêve.
. . . . . . . . . . . . . . . . . . .
« Le peuple parle. Il dit : « Mon travail est trop dur !
A l’action ! il faut des cœurs, des bras, des têtes,
Et faire un bien terrestre en oubliant l’azur !… »
Ah ! j’ai senti pourquoi les bannières de fêtes
Au mot de liberté flottent dans l’air plus pur !
Mais que ferons-nous là, misérables poètes !
L’Éditeur.
A PARIS
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