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Dong, Y.; Ahmad, S.F.; Irshad, M.; Al-Razgan, M.; Ali, Y.A.; Awwad, E.M. Digitalization and Supply Chain. Encyclopedia. Available online: https://encyclopedia.pub/entry/51766 (accessed on 01 July 2024).
Dong Y, Ahmad SF, Irshad M, Al-Razgan M, Ali YA, Awwad EM. Digitalization and Supply Chain. Encyclopedia. Available at: https://encyclopedia.pub/entry/51766. Accessed July 01, 2024.
Dong, Yan, Sayed Fayaz Ahmad, Muhammad Irshad, Muna Al-Razgan, Yasser A. Ali, Emad Marous Awwad. "Digitalization and Supply Chain" Encyclopedia, https://encyclopedia.pub/entry/51766 (accessed July 01, 2024).
Dong, Y., Ahmad, S.F., Irshad, M., Al-Razgan, M., Ali, Y.A., & Awwad, E.M. (2023, November 18). Digitalization and Supply Chain. In Encyclopedia. https://encyclopedia.pub/entry/51766
Dong, Yan, et al. "Digitalization and Supply Chain." Encyclopedia. Web. 18 November, 2023.
Digitalization and Supply Chain
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This entry is adapted from the peer-reviewed paper 10.3390/su152115627

Digitization has completely changed the landscape of supply chain management, which enables businesses to streamline their processes and attain higher levels of profitability and sustainability. The relationships between digitalization and supply chain elements, particularly integration, communication, operation, and distribution, and their effects on corporate profitability and sustainability are investigated . 

digitalization supply chain management business profitability sustainability

1. Digitalization of Supply Chain

Utilizing digital technology and systems to promote smooth communication, cooperation, and coordination across different stakeholders throughout the supply chain system is known as “digitalizing supply chain” [1]. It includes integrating data, technologies, and processes to increase operational effectiveness, real-time visibility, and decision-making. Business profitability and sustainability have undergone substantial changes due to supply chain digitalization [2]. Companies have changed their old supply chain procedures into highly effective and connected systems using cutting-edge technology like artificial intelligence, big data analytics, etc. [3].
Improved operational efficiency is one of the primary effects of digitalization on corporate profitability. Companies may improve inventory management, shorten lead times, and streamline logistical processes using real-time data tracking and analysis [4]. With digital technologies, firms can accurately estimate demand, optimize production, inventory levels, and cut expenses related to stocking. Digitalization through automation in distribution centers and warehouses increases productivity and saves labor costs [5].
Digitalization also improves the transparency and visibility of the supply chain. Through the supply chain, businesses may follow the movement of products and keep an eye on their status, improving inventory control and lowering losses from theft, damage, or expiry [6]. When suppliers, manufacturers, and customers share real-time data, it promotes cooperation, speeds decision-making, and reduces delays and interruptions [7].
Adopting sustainable supply chain practices is made possible by digitalization, encouraging environmental and social responsibility. Companies may find inefficiencies and optimize routes using data analytics, lowering fuel use and carbon emissions [8]. Increased transparency and traceability support fair labor practices and responsible sourcing, ensuring adherence to laws and moral standards. Customers who prioritize sustainability are more inclined to support companies that use supply chains that are socially and environmentally sustainable [9].
Digitalization brings innovative business concepts, such as manufacturing on demand and customized consumer experiences. Companies may access a larger client base, customize items to specific customer needs, and provide faster and more flexible delivery choices by utilizing digital platforms and e-commerce [10]. This improves consumer happiness while creating new revenue sources and fostering corporate expansion [11].
The digitalization of the supply chain has significantly impacted business profitability and sustainability. Reduced costs, increased income, and higher customer satisfaction result from greater operational efficiency, visibility, and sustainable practices [12]. Businesses that embrace digitalization and use its possibilities will have a better chance of thriving in today’s quickly changing and competitive business environment as technology advances [13].

2. Digitalization and Supply Chain Integration

Digitization improves the integration of the supply chain through enhanced visibility and transparency. Real-time information access is made possible by digital platforms and technologies, enabling stakeholders to trace the flow of products, keep an eye on inventory levels, and learn more about the function of the supply chain as a whole. By increasing visibility and enabling proactive decision-making, greater risk management, and the capacity to handle problems quickly, interruptions and delays are reduced [14].
Digitalization also makes cooperation and communication easier. Suppliers, producers, distributors, and consumers can communicate information, plan activities, and synchronize their operations using common platforms and digital networks [15]. Accurate demand forecasting, inventory optimization, and effective planning are made possible by real-time data exchange, improving responsiveness, and lowering supply chain costs [16].
Digitalization also makes manual supply chain integration activities more automated and efficient. By automating repetitive processes like order processing, billing, and record entry, robotic process automation (RPA) and machine learning algorithms may free up resources for more value-added activities. Automation lowers error rates, expedites processes, and improves operational effectiveness [17].
In summary, supply chain integration has been influenced by digitalization, which has made it possible for more visibility, collaboration, automation, and data-driven decision-making [18]. Due to digital technology, companies can better simplify operations, increase operational effectiveness, and adapt to shifting market dynamics. As companies adopt digitalization, supply chain integration will advance competitiveness and sustainability by becoming more integrated, effective, efficient, and responsive to consumer expectations [19].

3. Digitalization and Supply Chain Operation

Efficiency, agility, and overall performance have all seen considerable improvements due to the digitalization of supply chain processes. Companies have converted their old supply chain operations into efficient, data-driven processes using digital technology and creative solutions [20]. Real-time tracking and visibility have increased because of digitalization in supply chain processes. Due to digital platforms and technologies, companies can track inventories, shipments, and manufacturing processes in real time. This increased visibility makes better coordination possible, lowering the chance of stock-related issues and enabling early action to resolve problems quickly [21].
Digitalization also makes it easier to automate and improve supply chain operations. Automating repetitive operations like order processing, billing, and data entry using robotic process automation (RPA) and machine learning algorithms may lower mistakes and boost operational effectiveness. In addition, anticipating demand, managing inventories, and planning production may all be improved by sophisticated analytics and algorithms, allowing businesses to match supply and demand better, cut costs, and enhance customer service [22]. Digitalization through cloud-based systems offers an adaptable and scalable infrastructure that enables businesses to store and process massive quantities of data, work with partners, and access tools and apps from any location. It makes real-time data sharing possible, lowers IT infrastructure costs, and supports scalability as organizations expand and change [23].
In conclusion, digitalization can transform supply chain operations by strengthening cooperation, allowing automation and optimization, and utilizing emerging technology. Companies with a digital strategy obtain a competitive advantage by increasing productivity, cutting expenses, and improving customer service. The future of supply chain operations will be shaped more by digitalization as technology progresses, allowing organizations to adjust to shifting market dynamics and ensure sustainability [24].

4. Digitalization and Supply Chain Purchasing

The procurement process has been transformed by the digitalization of the supply chain, positively impacting effectiveness, cost reductions, and managing suppliers. By utilizing digital technology, businesses have converted their old buying procedures into efficient, data-driven systems [25]. Digital platforms allow procurement managers to automate several processes, including the selection of suppliers, the development of requests for proposals (RFPs), the assessment of bids, and the preparation of purchase orders. These automated procedures shorten the length of the procurement cycle, speed up the decision-making process, and reduce mistakes [26].
Digitalization also makes it easier to collaborate, manage suppliers, and enable e-procurement. Online supplier markets and portals offer a centralized platform where businesses may look for, assess, and onboard suppliers by predetermined criteria. In addition to facilitating smooth communication, document sharing, and performance tracking, these systems facilitate real-time cooperation and strengthen supplier relationships [27].
Additionally, digitalization encourages transparency and accountability in the procurement process by automating compliance checks, ensuring regulatory conformance, and monitoring supplier performance against preset criteria. These features help risk management in supply chain purchasing. Digitalization improves inventory management through real-time data analytics, and demand forecasting technologies assist in discovering demand patterns, enabling proactive procurement and better inventory planning [28].
Digitalization of supply chain purchasing has improved efficiency, collaboration, accountability, and data-driven decision-making. By cutting costs, fostering better supplier relationships, and promoting strategic sourcing, businesses that use digital technologies in purchasing gain a competitive edge. Digitalization will become more critical in determining the future of supply chain purchasing as technology develops, allowing firms to optimize their procurement procedures and increase value throughout the supply chain [29].

5. Digitalization and Supply Chain Distribution

The movement, storage, and delivery of goods have all been revolutionized by the digitalization of supply chain distribution. Through digitalization, companies have converted their old distribution operations into efficient and data-driven systems [30].
Due to digital technologies, Businesses can automate various distribution processes, including order processing, managing warehouses, and logistics planning [31]. Automation shortens lead times, boosts productivity, and simplifies processes, resulting in better distribution efficiency overall and quicker order fulfilment. Businesses may optimize inventory levels, reduce stockouts or surplus inventory, and boost supply chain efficiency by integrating distribution data with other supply chain operations [32].
Furthermore, digitalization facilitates the use of sophisticated logistical techniques. Large datasets can be analyzed using optimization algorithms, offering the best scheduling, and routing options. As a result, distribution operations become more sustainable, transportation costs are decreased, and carbon emissions are reduced, ensuring enhanced load planning, transportation efficiency, and cost optimization [33]. As a result of the digitalization of supply chain distribution, efficiency, visibility, and client experiences have all improved how items are delivered. Adopting digital technology enables businesses to streamline distribution procedures, increase visibility, improve inventory control, and deliver individualized customers [34].

6. Digitalization of Supply Chain (Integration, Communication, Operation, and Distribution) and Business Profitability

The integration, communication, operation, and distribution of the supply chain through digitalization have significantly and positively impacted business revenue [35]. Opportunities emerge for businesses to improve their profitability and acquire a competitive advantage due to adopting digital technologies. For example, operational efficiency has grown as a result of digitalization. Businesses may quickly make information-based decisions by optimizing inventory levels, manufacturing schedules, and distribution channels via real-time data exchange [36]. Automating repetitive tasks increases productivity, lowers costs by eliminating human mistakes, and frees up important resources. Reduced costs and increased profitability are the immediate results of these optimized operations. Additionally, supply chain partners may collaborate better because digital integration reduces the possibility of stock-related issues, improving inventory control and lowering carrying costs [37]. Additionally, enhanced digital communication increases consumer happiness and loyalty. Businesses may offer better customer service with better insight into order progress, shipment information, and delivery schedules. Satisfied customers will be more inclined to make more purchases, which boosts sales and profitability. Companies may target a wider audience through digitalization, which increases sales volumes and income streams [38]. This is made possible through E-commerce platforms and digital marketing methods. Additionally, data-driven insights from digital platforms assist firms in better understanding consumer habits and developing market trends so they can better modify their products and services to match changing customer needs. Additionally, it improves response times and reduces lead times, giving organizations a competitive edge and leading to greater sales and revenue by swiftly adjusting to market changes and obtaining new opportunities. Despite the initial expense of adopting digital technology, it increases profitability in the long run [39]. It makes businesses function more effectively, use resources more effectively, and respond to market needs more quickly, eventually resulting in more sales and better financial results. Companies that adopt these technologies into their supply chains are more likely to succeed in a competitive and dynamic market, further increasing their profitability [40].

7. Digitalization of Supply Chain (Integration, Communication, Operation, and Distribution) and Sustainability

The integration, operation, communication, and distribution of the supply chain through digital means is revolutionizing businesses and significantly impacting sustainability. Businesses have increased supply chain efficiency and transparency by utilizing advanced technologies like IoT, AI, and blockchain. Real-time data analytics and sharing allow for better-informed decision-making, improving lead times, lead reduction, and overall productivity [41]. Decreased environmental impact is one of supply chain digitalization’s most significant effects on sustainability. Digitization enables more exact resource monitoring and management, which reduces waste and energy usage. Businesses may identify areas with the biggest environmental footprints and undertake targeted solutions to decrease them through increased insight into supply chain activities [42]. Sustainable practices, such as environmentally conscious purchasing and packaging, may be easily incorporated and enforced across the supply chain to promote a greener and more socially conscious approach to business. Adopting sustainable ideas and practices is promoted through digitalization, fostering cooperation and information exchange among stakeholders [43]. As a result, more things are made to be durable, repairable, and recyclable, which lessens the demand for natural resources in the long run [44]. Electronic monitoring and tracing technology also make it possible to identify ethical labor practices, sustainable suppliers, and compliance with environmental rules, assuring a better social responsibility [45].
In short, there has been a significant and positive influence on sustainability from the digitalization of supply chain integration, operation, communication, and distribution. Businesses may link their operations with environmental and social responsibility objectives by optimizing processes, cutting waste, fostering circular practices, and enforcing ethical standards. Companies must maintain a thoughtful and ethical attitude to digitalization as technology develops, making the most of its ability to promote sustainability. Table 1 shows a summary of the literature and research gaps.
Table 1. Literature summary and gap analysis.
Ref Future Research Direction/Gap
[1] Conducting the study in similar industries in other countries can increase the validity and generalizability of the results.
[2] This work can be extended with framework development and practical tools other than qualitative inquiry.
[3] We encourage academicians to conduct future studies for formulating suitable strategies to integrate and augment resilience and sustainable aspects through technological implementation.
[7] Further researchers should develop and explore a framework in depth, including the development of digital systems and their implementation in industrial manufacturing.
[9] Future research could gather data from multiple settings to investigate how digitalization facilitates supply chain management.
[10] Further study should explore how digitalization will improve the firm processes.
[11] The impact of digitalization should be explored in the context of organizational sustainability.
[17] Digital automation will improve operational effectiveness, so its effect must be confirmed on business profitability.
[22] Digitalization has improved several industries’ operations, so it should be checked into other industrial contexts.
[25] Digital technology in businesses has converted their old buying procedures into efficient data-driven systems to be tested in business distribution and operations.
[27] Digitalization also makes collaborating, managing suppliers, and enabling e-procurement easier, so its impact can be tested into overall supply chain management.
[28] Digitization encourages transparency and accountability in the procurement process by automating compliance checks.
[32] Automation shortens lead times, boosts productivity, and simplifies processes, resulting in better distribution efficiency, so it is expected also to increase business profitability.
[35] Communication, operation, and distribution of the supply chain through digitalization have significantly impacted business profitability; their impact must be tested for sustainability.
[38] Companies may target a wider audience through digitalization, which increases sales volumes and income streams. Its impact must be tested on business profitability.
[42] Decreased environmental impact has increased sustainability. Further researchers are recommended to test the effect of digitalization on it.
[44] Durable, repairable, and recyclable materials lessen the demand for natural resources in the long run. Hopefully, they will impact business sustainability and profitability.

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Subjects: Operations Research & Management Science
Contributors MDPI registered users' name will be linked to their SciProfiles pages. To register with us, please refer to https://encyclopedia.pub/register :
Yan Dong
,
Sayed Fayaz Ahmad
,
Muhammad Irshad
,
Muna Al-Razgan
,
Yasser A. Ali
,
Emad Marous Awwad
View Times: 223
Revisions: 3 times (View History)
Update Date: 29 Dec 2023
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