Brian Carr, Faculty Lecturer, AIM Business School

Introduction

Efficiency in supply chains has been critical to successful operations in organisations for centuries. From ancient military operations to modern corporations’ supply chains have been the lifeblood of success. The ultimate goal of the supply chain manager is to create value for the organisation by ensuring the correct number of raw materials are available at the right time, in the right place, and at the right price. Supply chain processes have evolved from rough paper-based management systems to computer-based systems. The shift to globalisation ushered in a new approach to operations. This, together with the rapid technology shift, drove the focus towards process integration, which, according to Wiser et al. (2019), means sharing information and coordinating resources to jointly manage processes. The key changes in technology were the shift from analogue systems to digital systems, the Internet of Things and Industry 4.0 (i4.0).

This paper aims to investigate the implications of modern technology on supply chain management (SCM). The direction will consider the contemporary literature in the area and a case study for the purposes of application for students and practitioners.

Digitalisation, the Internet of Things, and i4.0

The digital revolution is the most profound technological shift of our time. It has implications for all parts of our lives. Social, environmental, and business have all seen changes in different ways. In terms of business models, digital startups have disrupted traditional industries dramatically. For example, Netflix (video distribution/rental), Uber (passenger transportation), and Airbnb (lodging). Along the same lines, established companies use digital technology to transform their supply chain (SC) operating models, implementing SC strategy and specifying major enabling factors through which they provide value to customers (Stevens & Johnson, 2016, as cited in Hahn, 2019).

Internet of Things (IoT)

The Internet of Things is a novel paradigm shift in the IT arena. It is a network of networks comprising millions of private, public, academic, business, and government networks of local to global scope that are linked by a broad array of electronic, wireless, and optical networking technologies (Nunberg, 2012). Today, more than 100 countries are linked to exchanges of data, news and opinions through the Internet. The Internet is the key platform for integration. In order to achieve maximum potential, organisations need to have internal integration between departments and external integration with supply chain partners (Wisner et al., 2019). With the Internet, working with supply chain partners has become more efficient with paperless ordering and invoicing. However, integrating external supply partners comes at a cost (proper training, trust, compatible information systems), especially when global supply chains are in the mix.

Description Characteristics and Costs of Digital Enablers in SCM

Radio Frequency Identification (RFID)

The first example is the Radio Frequency Identification (RFID). This device uses radio waves to transmit data between a reader, that is, a scanner, and items such as a carton or a container. The RFID is a small electronic tag that allows organisations to track their inventory items worldwide. Russell and Taylor (2006) highlight the RFID capabilities which are:

• Reads inventory items at a distribution centre and in transit, providing a real-time inventory state.
• Employees can better manage stock in bins, check arriving truckloads for security, and update inventory.
• Keeps track of items on planes and ships across the globe.

Wisner et al. (2019) agree with Russell and Taylor (2006) regarding the benefits of RFID; however, they point to the costs of implementing RFID. Depending on volume, the passive RFID can range from $0.50 - $1.00 each. These can be utilised in such areas as containers, pallets, or stock-keeping units. On the other hand, active RFIDs have a built-in battery, which comes at a greater cost of $10.00 - $70.00 depending on battery type and volume. Evidence of results from RIFD is seen in the rapid uptake of users to a level of 73% by 2016. Inventory efficiency has grown to over 25% when using RFID.

A more recent innovation introduced by Apple in 2021 is the air tag. This is Apple’s competitive response to RFID. It achieves the same thing in terms of tracking. For example, some major airlines are experimenting with passenger baggage tracking. It is the first time that RFID has been challenged on cost, with indications in the literature that for RFID to remain integrated into all workplace environments and with all end-users, RFID must stay affordable while integrating robust security mechanisms and abiding by RFID standardisation procedures.

Blockchain

A more recent digital application is blockchain. It is an end-to-end application and is described by Dutta et al. (2020) as a technology with a unique combination of features such as decentralised structure, distributed notes and storage mechanism, consensus algorithm, smart contracting, and asymmetric encryption to ensure network security, transparency, and visibility. Blockchain has immense potential to transform supply chain (SC) functions, from SC provenance and business process reengineering to security enhancement. A simple way to see blockchain is shown in Table 1 below:

Table 1. The blockchain supported the transaction journey.

Source: Dutta et al. (2020)

Despite the opportunities and benefits, blockchain does not come without its challenges in supply chain systems. Recent research by Wang et al., (2019a); Kumar et al., (2020); Hartley and Sawaya, (2019); and Allen et al., (2019), shows that challenges exist in a range of areas in organisations, which include:

Organisational requirement and readiness:

• Lack of understanding of benefits and technicalities involved.
• Limited knowledge of the complex technology
• Still an emerging technology, and hence, not many successful implementation references are available.
• A perception that most problems can be solved using traditional information and database systems and that there is no need for blockchain.

Data collection and management:

• Assuring the integrity of input data is a difficult task.
• Convincing all stakeholders to share information is a challenge.
• Organisation of such vast amounts of data and making efficient use of it is a problem.

Interoperability of systems:

• Multiple efforts are being taken in silos, and various blockchain systems are being developed.
• Standardisation of all these systems to ensure smooth interoperability is a must. Otherwise, it will make things very complicated and challenging instead of making it simpler.

Cost, security, privacy and legal concerns:

• Organisation-wide technology change and adoption are costly and time-consuming.
• Privacy and security of models and data need to be ensured as the technology is still very immature and vulnerable.
• Regulatory uncertainty can cause a lot of unwanted complications.
• Potential for organisation-wide hit if the system fails.
• Blockchain should be applied selectively after weighing the economics of implementation in terms of both cost and risk.

Transition and integration of people, processes and technology

• It is a huge change in all aspects of an existing business.
• Large numbers of stakeholders are involved, and changing age-old mindsets, culture and work methodologies are a big issue.
• There can be conflicting objectives for different stakeholders.
• Intermediators involved at various levels might be eliminated, which can create rifts.
• Uncertainty and lack of awareness hamper acceptance.

A perception that blockchain implementation might lead to a loss of jobs What is clear from the literature is that implementing blockchain is technically demanding and expensive. To see the application of digital technology in practice, a short case study is described to illustrate the opportunities and benefits.

Digitalisation in Practice: A Case Study - California-based Intelleflex Corp

California-based Intelleflex Corp is one company offering a temperature-monitoring RFID tag that can be read from 100 metres. Placing the tags throughout a load of perishables, for instance, the labels can record and record temperature variations across the load. The ability to monitor down to the pallet or container can reduce product waste.

In one example, using tags placed in pallets of fruit coming from the field, the temperatures of the different pallets were monitored and recorded as the fruit was loaded and transported to the packing house. The temperatures of the pallets of fruit varied based on the time of day when they were harvested and loaded and other factors. Using the data collected on the temperatures, the shelf life of the different pallets could be estimated. It was found that 70% of the fruit maintained an optimal shelf life of 14 days based on the condition at harvest and during transport. The other 30% of the load had dropped below the optimal 14 days. Thus, instead of a first-in-first-out approach, the shipper was able to use a first expiry-first-out approach, so the fruit with the shorter estimated shelf life was prioritised and shipped to close distribution centres (Wisner et al., 2019).

Conclusion

Technology continues to evolve at an increasing rate. It has had enormous implications for all areas of business, the environment, and society. Supply chain management has not been spared the waves of change, and a range of initiatives has been introduced to improve the way organisations manage their inventory assets. The main shift from analogue to digital technology has driven change. This short paper has explored a small number of initiatives, such as RFID, IoT and blockchain. There is some good evidence that these initiatives have saved money and improved SCM outcomes. However, it does not come without risks and costs. Blockchain is expensive to implement compared to RFID. The one common problem to be resolved in all systems is security. When a new technology emerges, there is always the threat of a sinister few who will be there to exploit weaknesses and corrupt systems and hold organisations to ransom. In going forward, organisations will need to be vigilant in a complex technical world.
 

Reference List

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Dutta, P., Choi, T. M., Somani, S., & Butala, R. (2020). Blockchain technology in supply chain operations: Applications, challenges, and research opportunities. Transportation Research Part E: Logistics and Transportation Review, 142, 102067.

Hahn G. J. (2019). Industry 4.0: A supply chain innovation perspective, International Journal of Production Research, 58(5), 1425–1441. https://doi.org/10.1080/00207543.2019.1641642

Hartley, J. L., & Sawaya, W. J., (2019). Tortoise, not the hare: Digital transformation of supply chain business processes. Business Horizons, 62(6), 707–715.

Kumar, A., Liu, R., & Shan, Z., (2020). Is blockchain a silver bullet for supply chain management? Technical challenges and research opportunities. Decision Sciences, 51(1), 8-37. https://doi.org/10.1111/deci.12396

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