Managing Supply Chain Networks: From Value Chain to Value Network

This chapter is from the book 

Fluid, Complex, and Competitive

Efficient firms were designed to minimize cost, which requires high capacity utilization, minimizing inventory, selecting vendors based primarily on cost and quality, and designing products that are produced at minimum cost. In the early 1980s, when the Efficient Supply Chain Management Model was proposed (Oliveira and Gimeno, 2014), several businesses fit within the following premises:

• Limited range of products; infrequent new product introduction
• Long lifecycle products
• Stable supplier basis
• Small market share variation
• Small demand volatility
• Reliable forecasts
• Small geographical variation
• Capacity optimization

Since then, the interaction with the external operations of multiple interconnected supply chains has created challenging supply networks. Earlier, we discussed the importance of managing these external elements as part of your own business to the point of considering them to be stakeholders. Therefore, the traditional value chain environment, known for the competition between firms, is transformed to fluid and complex supply networks driven by the ability to create enduring alliances. The potential benefits of these alliances include the following:

• Accelerate the development of products, service, or processes: This includes alliance with preferred product or parts’ suppliers or specialist IT or logistics service providers.
• Accelerate market entry: The relationship with key accounts of selected distribution channels, which is detailed in Customer Service Supply Chain Management: Models for Achieving Customer Satisfaction, Supply Chain Performance, and Shareholder Value.
• Maintain leadership in the market: Alliances with noncompeting companies may diversify the portfolio of products or service to provide a complete solution for your customer.
• Set a standard for the segment: The quality of raw material used in a differentiated product may be the result of a long-term partnership with specific suppliers.
• Minimize risks of R&D: Some industry sectors jointly invest to create and maintain research development centers focused on their specific demand. This occurs in diverse industry sectors such as automotive, electronics, pharmaceutical, and banking, although this list is not exhaustive.
• Acquire complementary resources: The automotive industry dealers work closely with the banking industry to offer a financial service to the final consumer. Several dealers define long-term exclusivity-basis relationships with finance institutions of different types.
• Achieve economies of scale: External manufacturing is the trend in the pharmaceutical industry. Small laboratories outsource parts of the packaging process to larger asset-based laboratories with industrial overcapacity.
• Avoid or overcome trade barriers: Local distributors usually eliminate or minimize several barriers found by exporters, in particular in new markets.
• Share capital resources: Some industries offer long-term contracts to haulers so these companies can implement a fleet renewal plan. The long-term contract enables haulers plan their cash flow, keep a fleet with reduced average age, and offer a better service level to the customer.
• Acquire or maintain technology: Partnerships with IT solution providers include license or version updates for various applications such as warehouse management systems, transport management systems, routing systems, and so on.
• Access restricted markets: Local brokers will offer regional knowledge on how to deal with national laws and intrinsic bureaucracy in some countries on even in some regulatory government agents in your own country.

Several questions arise at this point. How do you define the most important connections? What functional architecture should we have? How will functions and people connect with each other? How will they connect to external elements such as suppliers, customers, and service providers? Should we get closer to noncompeting companies for mutually beneficial alliances? Should we extend these alliances to establish relationships with competitors?

By answering these and other questions and by progressing within the Supply Chain Knowledge Management Maturity Roadmap (see Figure 1.6), companies create the necessary environment to deliver business results in different ranges (from the baseline results to sustainable shareholder value):

• Baseline results: Internal focus; deliver the minimum.
• Operational efficiency: Internal focus; deliver balancing attributes.
• Business differentiation: External perspective, search market differentiation.
• Sustainable shareholder value: External perspective, long-term value.

Triggering the Transformation

Despite the apparent complexity of building and managing alliances with the supply network players, the beginning of the virtuous cycle depends on a very small group of people—a group that has the authority and the responsibility to satisfy shareholders and stakeholders: the corporate structures that define business governance such as the board of directors, board committees, the chief executive officer, executive committees, management committee, and independent auditors, as mentioned earlier. These structures must recognize the shift change in the governance model, as illustrated in Figure 1.19.

Although governance structures must be able to concurrently deliver value to shareholders and stakeholders, some firms still ignore influential stakeholders and sustain strategies and policies exclusively in favor of the shareholders. Shareholders and boardroom disputes are not a new theme. Common causes of disputes include “disagreements over the company’s strategy, the level of dividends, salaries paid to shareholders who also work for the business, disproportionate contributions of money and/or time from each shareholder, dealings between the company and a private business owned by one of the shareholders, the price to be paid when a shareholder is bought out. The problems can be particularly acute where one shareholder, or group of shareholders acting together, can override the wishes of a minority shareholder.”¹⁷

Friedman’s stockholder theory states that a firm’s only responsibility is to increase its profits, which is inconsistent with the idea of any level of responsibility for stakeholders (Friedman 1962). According to Smith,¹⁸ “scandals at Enron, Global Crossing, ImClone, Tyco International, and WorldCom, concerns about the independence of accountants who are charged with auditing financial statements, and questions about the incentive schema and investor recommendations... have all provided rich fodder for those who question the premise of shareholder supremacy. Many observers have claimed that these scandals serve as evidence of the failure of the shareholder theory - that managers primarily have a duty to maximize shareholder returns - and the victory of stakeholder theory, which says that a manager’s duty is to balance the shareholders’ financial interests against the interests of other stakeholders such as employees, customers, and the local community, even if it reduces shareholder returns.”

However, Freeman (not to be mistaken for the previously cited Friedman) recommends that management can give due regard to the interests of stakeholders¹⁹ to address the “Principle of Who or What Really Counts” (Freeman 1984). Some authors have addressed the influence of stakeholder theory in the management of supply chains. Henry discussed a framework for analyzing stakeholder-management strategies in supply chain collaboration to “to show how prior dyadic relations with a stakeholder and perception of situational demands on the relationship determine the choice of aggressive versus cooperative strategies in managing stakeholder relationships.”²⁰

Regardless of any theoretical dispute, real-world practice indicates the changing agent should be the company’s CEO. The CEO must have the power to influence other governance structures and rebalance the organizational focus to approximate stakeholders as a means of establishing alliances and creating an environment with wise competitors, which are, as cited before, the conglomerate of complementary businesses that work together to win in the market and to deliver value to their shareholders and stakeholders.

Visibility allows organizations to sense market oscillation and anticipate strategies, policies, and practices. The basic knowledge dynamics are founded upon three building blocks (Oliveira and Gimeno, 2014), which are typical of the traditional value chain:

1. Irreversible continuous expansion
2. Reactive segmentation
3. Structured specialization

Knowledge expansion results from everyday interactions within the members of an organization or between them and members of other organizations. This continuous mechanism transforms the cumulative knowledge base. As the organization’s combined knowledge is in constant expansion, it requires a more elaborate informational architecture capable of assuring the progress of flows.

Knowledge segmentation is an almost automatic reaction in order to accommodate the immense inflow that permanently influences any business. This unplanned reaction has limited effectiveness to facilitate a value adding decision-making momentum. The blocks of knowledge recently created are quite heterogeneous due to the lack of a precise filtering mechanism.

The immediate consequence of this early knowledge segmentation is the formation of disconnected knowledge islands. The boundaries of these islands are initially defined both by the hierarchical levels (horizontal layers) and the departmental structures (vertical layers) most companies have. This effect is not restricted to a single company’s boundaries.

As illustrated in Figure 1.23, there is no difficulty in understanding the multiplying effect as we consider suppliers, customers, logistics service providers (LSPs), and other elements of our immediate supply chain or even our extended supply network.

Knowledge specialization requires a deeper understanding of companies’ operations and a clear view on how to adequately allocate people in order to deliver process performance and business goals.

The knowledge specialization process looks at the knowledge structures created during the segmentation phase and adds specific expertise to establish a minimum set of rules for the informational flows.

Once the company has reached knowledge management leadership in its industry or in a given functional area, this position should be preserved for an extended period, nurturing a virtuous cycle that builds well-balanced governance. There are eight strategies that support long-term knowledge management, as shown in the next image. Figure 1.24 shows the basic dynamics of an enduring knowledge management (KM) strategy.

The simplified roadmap for the application of knowledge strategies begins with the evaluation of the environment which is affected by the permanent inflows of information. Usually the evaluation of the environment and the identification of required knowledge the organization needs to respond to the challenges of this environment are solely led by specialists in their functional areas. More mature companies will offer additional support to these strategies, usually originating in the human resources area or equivalent. As the desired knowledge is acquired, the new challenge will be to retain it.

The second phase of the strategies focuses on knowledge retention. As organizational turnover appears to be the ultimate driver for knowledge leakage, it is addressed in detail in this phase. The third phase delivers the ability for the proper use, development and sharing of knowledge, combined with the enterprise’s corporate governance.

The role of the human resource department in the supply chain governance requires specialist attention. The human resources business partner is a professional with specially trained eyes for the supply chain people and processes. In less-mature organizations, this partner will primarily have two major roles: (1) knowledge acquisition and (2) turnover mitigation. In more-mature organizations, they may have an additional role in evaluating the knowledge needs—prior to the definition of the acquisition strategy. Several other dimensions²¹ of human resources are applicable to the management of supply networks. These dimensions are as follows: talent retention, career plan, succession plan, performance indicators, mapping competences, mapping abilities, managing change, team design, downsizing, unit relocation, job description, salary and benefits, and business intelligence systems.

It is important to notice that the use of knowledge in traditional value chains is firm centered. In other words, despite any external influence, a few selected people from within the organization are responsible for capturing and interpreting the signals of the business. These signals feed a mechanism based on what to do, such as the previously discussed Five Forces Model, and trigger strategy definition and risk management practices, as introduced in Figure 1.10 and detailed in Figure 1.25. Note in Figure 1.25 that the influence of stakeholders is extremely limited.

As the CEO, board, and shareholders accept the fact that sustainable competitive advantage can only be achieved through alliances with stakeholders, a different cycle starts. The commitment to create an environment capable of capturing continuous, massive, and diffuse signals from the firm and the stakeholders is determinant in using knowledge as the changing force that alters the perception of business dynamism and provides unprecedented visibility.

As the initial knowledge inventory defined by traditional value chain dynamics is transformed due to permanent structures that continuously capture the signals from the business environment, coordinated wise competitors can manage knowledge continuously and take advantage of market visibility to create adjusted future versions of current strategy and enable the dynamics illustrated in Figure 1.26.

The more diverse the contribution from stakeholders and the more integrated it is with shareholders’ value, the more accurate will be the strategies drawn up by the governance structures led by the CEO. Although sustainability (finance, social, and environmental) is one of the five pillars of tactic integration in the SNAR Model (see Figures 1.7 and 1.8), this approach is not related to any initiative that differs from those, which suggest a pragmatic acceptance that the organization should maximize profit for extended periods.

The management of stakeholders does not occur based on any altruistic belief that community matters. It is, in fact, a means to achieve the ultimate goal of shareholder value. It is no longer possible to maximize shareholder value by maximizing its influence in the organization.

These dynamics result from the fact that the winners are the supply networks, no longer the firms. Therefore, by reducing shareholder influence, it is possible to maximize supply networks’ profitability which enables each firm’s shareholder to increase their gains. The mechanisms that define the rules to share the value created by the supply network must be agreed by the governance structure of each company that is part of the alliance of wise competitors defining, therefore, the need to structure a supply network governance board.

This different approach alters the design of the organization’s risk management strategy. The International Organization for Standardization (ISO) suggests²² the following principles of risk management should:²³

• Create value (meaning that resources expended to mitigate risk should be less than the consequence of inaction)
• Be an integral part of organizational processes
• Be part of the decision-making process
• Explicitly address uncertainty and assumptions
• Be a systematic and structured process
• Be based on the best available information
• Be tailorable
• Take human factors into account
• Be transparent and inclusive
• Be dynamic, iterative, and responsive to change
• Be capable of continual improvement and enhancement
• Be continually or periodically reassessed
  

  Figure 1.28 Value network knowledge dynamics

The traditional value chain uses the risk assessment snapshot to elaborate a mitigation plan and a contingency plan. Because these plans (1) are designed periodically, typically on a yearly basis, and (2) disregard the contribution from influential stakeholders, it is not possible to state that this approach actually follows risk management principles. Except, eventually, for item 7 (competitors), all others are not fulfilled by firm-centered risk management strategies in supply network environments.

Instead of having yearly-basis frozen mitigation and contingency plans, the supply network must base its risk management strategy on two other pillars:

1. A business continuity plan
2. The management of innovation

The business continuity plan (BCP) focuses on the recent past, on the present, and on the approximate future to guarantee early on a sense of the environmental oscillations based on the inputs from within the firm and from within the supply network (stakeholders). More than a what-to-do methodology as in Porter’s five strategies theory, the BCP defines organizational culture as it has no end-to-end defined cycles.

As the organization manages its continuity plan, knowledge from inside and outside its boundaries update the decision-making process and enable frequent, small adjustments to the main business strategy. The BCP is a consequence of how people do things within an organization rather than a risk assessment snapshot. This approach reduces dramatically the occurrence of disruption valleys which are swapped for small business oscillations, as illustrated in Figure 1.16.

The management of innovation anticipates the future and guides the BCP to redirect focus as appropriate. The creation of an innovative planning environment cannot be addressed as an immediate goal. It is the ultimate consequence of long-term multi-contribution-based knowledge management.

Innovative Planning

As already explained, the traditional value chain periodically assesses the available knowledge inventory to define its strategy for competition. Through a firm-centered governance model, this organization manages risks using equally periodically updated mitigation and contingency plans that are built from the limited perspective of a few people highly biased by shareholder goals. This governance structure is led by the CEO who aims to increase business competitiveness as a means to deliver shareholder value. It has also been discussed that this alleged competitiveness is in fact limited to the same extent that the influential stakeholders are ignored.

It has been presented that in modern fluid and complex supply networks the formula to maximize one firm’s shareholder value depends on the early capacity to create value to all wise competitors within the alliances that form this network. Business competitiveness arises when the firm delivers and adds value to shareholders.

The Supply Network Innovation Roadmap (SNI Roadmap) suggests a three-stage sequence that is triggered by the creation of a collaborative environment originated by the proximity of shareholders and stakeholders of the different companies that form each supply network:

1. Enable
2. Develop
3. Use

The enabling stage observes the interaction between shareholders and stakeholders of each wise competitor to understand the presence of collaborative basic factors, enabling factors and disabling factors. The basic factors include cultural alignment, history coherence, values, and principles synchrony. The enabling factors include the potential benefit the wise competitors can receive from each other, the commitment each firm’s governance structure has with the concept of supply network management and the agreement on the time expected to follow a collaborative learning curve. The disabling factors are compiled into risks, including the risk that trust will not be achieved and sustained in the long term. Depending on how this environment is formed, collaboration is possible, or not.

The second stage of the SNI Roadmap occurs if collaboration is possible within the supply network firms. The maturity learning curve directs wise competitors to an environment where visibility is available. In the early moments of this learning curve, the organizations define limited-scope initiatives to test collaboration. Pilot initiatives increase complexity as trust grows within these firms. Although this process takes a few years to become fully developed, sound results can be delivered through preliminary joint initiatives.

It is during this period that the wise competitors start to create a common governance structure, represented by the Supply Network Governance Diamond (SNG Diamond) Model. Each firm assigns one or more representatives to build a multicompany structure focused on the long-term success of the entire network environment. The mechanisms that create this governance structure are discussed in Chapter 2, “Managing Supply Networks.” The higher the number of firms that belongs to the supply network, the higher will be the number of people in this structure. Governance policies and rules currently applied to one firm’s business have to be reviewed, adapted, and then reapplied to this new multicorporate board.

Only through visibility is it possible to deliver innovation. The third stage refers to the use of the business environment visibility achieved in the second stage of the SNI Roadmap to support initiatives for environment visibility to support initiatives for the near future and for the long term. The diversity of ideas forms the premium raw material that produces innovation. The wise competitors collaborate and build a common governance structure capable of promoting knowledge transfer and strategic decision making. This creative environment continuously produces new ideas to respond to all sorts of challenges that test the performance of the supply networks. Risks, opportunities, problems, and trends are the filters to select the most appropriate ideas that are tested, deployed, and experienced by the wise competitors.

The maturity of the SNG Diamond requires wisdom from the supply network players; this is the reason why they are referred to as the wise competitors. The fundamentals of knowledge management suggest an evolutionary path from the capture of unstructured business information to the level of wisdom. Once information captured from diverse sources within the supply network is structured according to syntaxes defined by the organization, it assumes a given shape, typically called data. Data usually comes in the format of a report, an organized spreadsheet, or screens in the organization’s ERP²⁴ systems. For example, while random algorithms represent information, a syntax (rule) applied will define that 14:00 is 2 hours after midday (data as result of a rule applied to information).

The concept of knowledge is associated with knowing “how to do.” It is closely related to the capacity for interpreting data in the context of the business to decide what is the best alternative in any specific moment. People acquire and develop knowledge over time by the coordination of skills (how to do), attitudes (wish to do), and by experiencing an ever-expanding collective knowledge environment, which happens to be the firm and the supply network of which this firm is a part.

Looking back at the previous example, how many people will be at 14:00h (data) inside the cockpit of a Formula One car for the next race? While a very few people have the knowledge to be a Formula One driver, millions of people can interpret the data that the race occurs at 14:00h and will watch it from their homes. While data is available to many people, just a few have the knowledge to properly use it. Business intelligence systems propose organizing information into data to facilitate decision-making processes. These systems basically reduce the level of knowledge a person (or organization) needs to have accumulated to interpret data and make decisions.

When the organization is capable of using the knowledge (the sum of what is known²⁵) from diverse elements of the supply network to project reliable business scenarios as the trigger for long-ranging decision-making process, wisdom has come (the quality of having experience, knowledge, and good judgment).²⁶ The wise competitors use wisdom to sense market fluctuations to adjust their supply network strategy as a means of preserving and maximizing its value to be shared within shareholders and stakeholders. It is in this state of a firm’s relationship nirvana²⁷ when knowledge flows are intense, structured, selective, and driven to contribute to the decision-making processes regarding the present and the future of the supply networks, where the innovative environment creates roots.

The value-added innovation rate is proportional to the ability of transferring knowledge within supply network firms (the wise competitors). To innovate means to “make changes in something established, especially by introducing new methods, ideas, or products,”²⁸ which is not difficult at all. But to make things differently and simultaneously add value (to shareholders and to stakeholders), this is quite a challenge. The players of the innovative supply network are the wise competitors capable of creating permanent knowledge flows that allow business visibility to the point of sensing even the smallest environmental oscillations. Therefore, innovative supply networks anticipate strategy adjustments prior to the creation of disruption valleys by preserving and increasing shareholder and stakeholder value.

Impacted Knowledge Areas

As fluid and complex environments substitute the traditional dynamic experienced since a few decades ago, the management of product or service offered has changed in many ways: lifecycle, customer expectation, profitability, shelf life, value, and volume are just some examples.

The demand planning and forecasting knowledge areas face new challenges starting from the definition of to which items forecasting will be applied. The pattern of a product’s lifecycle in an industry will change—from introduction through growth, maturity, and stagnation, to decline. In fact, the industry cycles themselves have reduced. Demand concentration patterns may change within a short period of time.

From the sourcing perspective, the optimum balance that provides best-possible total ownership cost needs to be reviewed more frequently by the procurement planning and purchasing teams. Strategic sourcing, global sourcing, offshoring, intercountry sourcing, and low-cost countries are some of the buzzwords that reflect this new business environment.

The strategic dimensions of procurement organizations are affected as the definition of needs constantly changes and supplier basis volatility requires new evaluations. Cost variables that are subject to frequent oscillation include transportation routes and costs from supplier (domestic or international), terminal handling costs (ports, airports), brokers fees, international taxation, domestic transportation; intermediary warehousing/depot costs; insurance; inventory carrying costs; supplies for quality control (laboratory analysis); and cost of quality (nonconforming items).

The challenge to plan and control inventory demands a redesign of the balance between the different types within the supply chains’ networks and through distribution channels. These types include raw material, packaging material, work in progress, MRO (maintenance, repair, and operations), and finished goods.

Production planning will revise strategies considering diverse dynamics: make to order (MTO), assemble to order (ATO), configure to order (CTO), finish to order (FTO), engineering to order (ETO), or queuing.

The impact on operational areas such as transportation, warehousing, manufacturing operations (which differs from production planning), and distribution is significant.

Distribution is a knowledge area closely connected with customer service. The management of distribution channels is a discipline of sales, marketing, and the supply chain. The dilemma between standardization and segmentation must be carefully addressed. Although treating distribution channels with a single a single strategy reduces operational complexity and delivers lower overall costs, it becomes more difficult to respond to customers’ requirements and frequently offers average, smaller service levels.

In contrast, highly fragmented (extreme segmentation) models tend to offer higher and customized service levels and create an adequate environment for collaboration between suppliers and customers. However, operational complexity requires more resources and overall cost to serve increases. The challenge, though, is to build and sustain a balanced scenario to offer some degree of customization at an acceptable cost to serve. This requires profound operational and market knowledge.

The knowledge of customers’ preferences and attributes combined with the right perception of market trends enables powerful distribution channels management. Some characteristics of these traditional channels must be mastered by any customer service professional. The following examples do not refer to business-to-business types of operation when, for instance, an industry supplies its customer, which is another industry.

Major changes have impacted on the relationship with customers. This has influenced customer segmentation, distribution channels, and customers’ service levels. Other attributes involve the geographical presence of customers, geographical interest of the supplier; customer concentration per product, region, application, and so on; distribution channel’s importance today and in the future; product value versus composition in the customer’s mix; product volume versus composition in the customer’s mix; sensibility to competition in key accounts; product profitability versus customer, distribution channels, and so forth; carbon footprint, customer’s sustainability policies; product image versus distribution channels; and customer lifecycle.

Information technology solutions are present in all areas mentioned. Some of the well-known applications include advanced planning systems, bar codes, customer relationship management, demand planning and forecasting, distribution requirement planning, e-procurement, fleet management, freight management, international trade, inventory management, manufacturing execution systems, materials requirement planning, order management, production planning, purchase management, routing, sales and operations planning, simulators, smart tags (EPC), supplier relationship management, transport management systems, and warehouse management systems.

Other areas in the businesses affected by fluid and complex environments are project management offices, sales, finance, controllership, human resources, quality assurance, engineering, R&D, HE&S, marketing, and regulatory. External interactions involve all significant suppliers, all significant customers, all significant service providers, some selected noncompetitors, and a few preferred competitors.

Expert’s Opinion

SCM and IT Integration: Key Success Factors and New Trends

Enrique Motilla²⁹

“The only constant is change.” —Heraclitus³⁰

Global and local operations are no longer independent; neither big nor small business processes are supposed to be distant on performance or cost. The influences shaping business and competition in a technology-fueled global environment are calls to action for governments, businesses, and individuals who must stay ahead of these trends in order to remain competitive.³¹

Can technology be considered a key success factor? Sometimes this question can be very obvious and sometimes not. It becomes obvious when there are costs, including total cost of ownership (TCO) and other relevant measures, such as competition response time, volume, and geolocation of operations, that could not be compared in any way to a manual operation.

Everyone has been faced with the complexity involved in the upgrade from old technologies, data conversion, and the problems that arose from incompatible platforms, formats, and methodologies yet still expected to continue an operation at the same time. At a corporate level, it becomes clear that technology is only part of the equation, since the human factor can be the most crucial aspect to take into account in order to achieve a successful technology implementation.

The next table illustrates the aspects to take into account from three perspectives: technology/human/corporation.

It is clear that the human factor and the company commitment will be the breaking point, because technology can be evaluated objectively, and even discarded or changed, but the personnel must be aware of the benefits and act accordingly, embrace the change and move together with the company’s mission, and then benefit the organization and its relationships inside and outside the supply chain.

Eventually, once the change is taking place and the users are aware of the benefits of the implementation of any new technology, the success will be determined by the continuity, usage, and maintenance of the hardware/software/telecoms in place on any given project.

The increasing availability of tools, software paradigms, social networking, mobility, and Internet accessibility over the last years has reshaped the supply chain, sometimes even to the point of turning it into a digital supply chain.

There are many technologies to consider, but it is easier to choose when the evaluation is based on the project’s needs, current availability, cost/benefit, security, and level of maturity. Sometimes, to innovate and to face current competition, the evaluation must consider the impact of not having a specific technology in place, rather than the direct cost or level of maturity (for example, having a Twitter account for corporate communications). But most of the time, it is not that simple; so let’s enumerate and briefly describe recent technologies to consider for the SCM.

SaaS, Cloud Computing, and the SCM

SaaS stands for software-as-a-service, which is regarded as “on-demand software” supplied by independent software vendors (ISVs) or application service providers (ASPs), and is a software delivery model in which the software and associated data are centrally hosted on the cloud. SaaS is typically accessed by users using a thin client via a web browser.³²

This concept is NOT new, and there are numerous options to select from. Hence, the point is to make a wise selection between on-premises software, SaaS, or Cloud based on the TCO, rapid deployment, and improved security, plus functionality and control factors.

Big Data

The definition of big data is as follows: “Extremely large data sets that enable companies to sense, analyze, and better respond to market changes.” These data sets are usually larger than a petabyte of data and involve data from disparate data sources: structured and unstructured data, sensor data, image data, and other forms of visualization.³³

The opportunity here is to be aware of the potential use of this amount of information that can be used for demand planning, order management, price management, tactical supply planning, and production planning; the supply chain visibility and product traceability, however, are regarded as the most important issues as well as their performance compared to other areas, such as RFID transmission, voice and video data, data from social media, geolocation, and mapping and mobile applications.

As companies are moving into the future, it is better to realize the importance of focusing on the end-to-end transactions and building cross-functional teams to benefit from the use and treatment of big amounts of data, rather than the hype of technology itself, because data remains data, but data becomes information when properly managed.

Conclusions

There are several buzzwords and technologies emerging that appear often in magazines and Internet news, such as The Internet Of Things (IoT), RFID, NoSql and graphical databases, geolocation-based applications, and so on.

Hence, the potential benefits for the supply chain derive from the correct selection of tools and implementation of each technology, a proper evaluation of direct and indirect costs, a high level of integration, and the overall expected performance. There is no simple formula for this, nor is there a common solution for all the cases, because each individual and organization has its own perspectives, level of maturity, and unique vision.