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Salamah, E.; Alzubi, A.; Yinal, A. Digitalization and Supply Chain Performance. Encyclopedia. Available online: https://encyclopedia.pub/entry/53862 (accessed on 01 July 2024).
Salamah E, Alzubi A, Yinal A. Digitalization and Supply Chain Performance. Encyclopedia. Available at: https://encyclopedia.pub/entry/53862. Accessed July 01, 2024.
Salamah, Esam, Ahmad Alzubi, Azmiye Yinal. "Digitalization and Supply Chain Performance" Encyclopedia, https://encyclopedia.pub/entry/53862 (accessed July 01, 2024).
Salamah, E., Alzubi, A., & Yinal, A. (2024, January 16). Digitalization and Supply Chain Performance. In Encyclopedia. https://encyclopedia.pub/entry/53862
Salamah, Esam, et al. "Digitalization and Supply Chain Performance." Encyclopedia. Web. 16 January, 2024.
Digitalization and Supply Chain Performance
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This entry is adapted from the peer-reviewed paper 10.3390/su16010304

Supply chain digitization (SCD) is a driving force, integrating digital technologies like big data, cloud computing, blockchain, Internet of Things (IoT), and artificial intelligence into supply chain activities. SCD focuses on “data-driven decision-making”, creating operational processes enriched by digital technologies.

digitalization supply chain performance supply chain integration

1. Supply Chain Digitalization

In the evolving landscape of supply chain management, the integration of digital technologies has become pivotal for companies seeking a competitive edge in the digital era [1]. The outbreak of COVID-19 further intensified the need for digitalization, prompting companies to adopt remote working, paperless operations, and reconstruct supply chain structures [2]. To address specific supply chain challenges, companies are embracing distinct digital technologies that offer targeted solutions. One notable example is the application of block chain technology in the food supply chain, enabling core companies and stakeholders to monitor and trace the entire food production process [3]. This innovation enhances transparency and integrity within the supply chain. Companies embarking on the journey of digitalization go beyond introducing digital technologies; they incorporate digital strategy, organizational structure, culture, and talent [4][5][6][7]. This comprehensive approach ensures a holistic integration of digitalization.
Supply chain digitization (SCD) is a driving force, integrating digital technologies like big data, cloud computing, blockchain, Internet of Things (IoT), and artificial intelligence into supply chain activities [8][9]. SCD focuses on “data-driven decision-making”, creating operational processes enriched by digital technologies. Ref. [10] emphasize the significance of digital technologies such as smart contracts, digital storage, and intelligent labels in achieving traceability throughout the product lifecycle. This not only offers a digital traceability service but also significantly improves the transparency and integrity of the supply chain.
Accordingly, digitalization can be categorized into internal and external digitalization [11]. Internal digitalization aims to enhance efficiency in operational processes through technologies like video conferencing and digital training [12]. External digitalization focuses on leveraging digital technology to strengthen interactions with stakeholders, reduce communication costs, and anticipate customer needs [13][14] analyze the steps to achieve digitalization, emphasizing the extraction of valuable knowledge from data analysis results to improve operational processes. Digitalization is reflected in two main areas: digital products/services and digital processes [15]. Highly digital enterprises provide complete digital products/services and operate with mature digital processes.
Digitalization contributes to the servitization of manufacturing companies, creating new digital business models and value-creation opportunities [16][17][18]. This transformative shift toward digital servitization is reshaping the landscape of manufacturing. A macro perspective on digitalization, considering digital connectivity, internet use, e-business, e-commerce, and e-government, showcases a positive impact on the development of financial markets and institutions [19][20] demonstrate that enhancing digital capabilities enables buyer companies to improve information sharing and relationship transparency with supplier firms, reducing opportunistic and unethical behavior and fostering a stronger partnership. In essence, supply chain digitization involves a nuanced adoption of specific digital technologies tailored to address diverse supply chain challenges, reflecting the dynamic nature of the digital era.

2. Digitalization and Supply Chain Performance

Digitalization, involving the incorporation of digital technologies into business processes, is recognized for its transformative potential in improving organizational performance [5][21][22]. In supply chain management, digitalization entails the implementation of digital systems for seamless transactions across the supply chain network [23][24][25]. This integration enables real-time information exchange, enhances communication, and fosters collaboration among supply chain partners. These advancements increase supply chain responsiveness and agility, helping businesses navigate market fluctuations and meet evolving customer demands [13][26].
The impact of digitalization on supply chain performance is a nuanced area of study, reflecting divergent findings and complex dynamics [27]. Some scholars argue that digitalization fosters greater efficiency and collaboration across the supply chain, leading to improved performance. Ref. [8] contend that digitalization enables real-time interaction and communication, enhancing overall productivity. Ref. [1] further support this perspective by highlighting how digitalization enhances supply chain agility and responsiveness. On the other hand, there are concerns about the potential downsides of digitalization. Ref. [28] points out that disparities in digital capabilities among supply chain partners can lead to imbalances and challenges in integration. Ref. [23] underlines the increased investments in IT infrastructure that digitalization might necessitate, potentially affecting the cost structure of supply chain operations [29].
A notable finding from recent studies underscores the positive influence of digitalization on supply chain performance outcomes [10][30][31][32][33][34]. The infusion of digital technologies, such as data analytics, Internet of Things (IoT) devices, and automation, empowers firms to optimize processes, minimize bottlenecks, and reduce lead times [35][36]. Consequently, supply chains become more agile and capable of swiftly adjusting to changes in consumer preferences or disruptions in the operational landscape. Furthermore [37] have highlighted how digitalization can enhance supply chain collaboration and coordination, leading to improved overall performance. By facilitating real-time data sharing and transparency, digitalization fosters stronger relationships among supply chain partners and reduces information asymmetry [38][39][40]. This not only enables more accurate demand forecasting but also allows for better inventory management and efficient resource allocation, contributing to enhanced supply chain efficiency and effectiveness. Firms that actively engage in digital collaboration with partners tend to experience growth, lower operating expenditures, and higher customer satisfaction [22] aligning with the holistic perspective presented by the integrated theoretical framework.

3. Digitalization and Supply Chain Integration

As scholars delve into the transformative impact of digitalization on supply chain dynamics, a particular focus emerges on its role in fortifying supply chain integration (SCI). The literature presents a multifaceted exploration of how digital technologies contribute to bolstering various dimensions of SCI, offering valuable insights for businesses navigating turbulent scenarios. SCI stands as a cornerstone in contemporary business strategy, epitomizing a firm’s collaborative alliance with major supply chain partners to orchestrate and streamline various supply chain activities [41][42]. SCI operates through two fundamental dimensions—supplier integration and customer integration—as a holistic approach that embodies cooperative relationships for effective supply chain management [19][41][43].
In the realm of supplier integration, the objective is to cultivate symbiotic collaborations with major suppliers, fostering mutual understanding and synchronized supply chain processes. This entails comprehensive processes such as information sharing, joint planning, and collaborative product development [43][44]. The benefits are multifold, encompassing timely production plan adjustments, swift material delivery, and reductions in supply cycle time, inventory levels, and potential conflicts [45][46]. High levels of supplier integration confer strategic advantages, allowing firms to curtail operational costs, bolster profitability, accelerate new product development, and create additional value for customers [3][47].
On the customer integration front, the emphasis is on streamlined information sharing and collaboration with major customers, with a focus on enhancing overall business performance. This collaborative effort includes sharing market insights, understanding shifts in buyer preferences, and co-developing market-oriented offerings [45][48]. The dividends of robust customer integration are evident in the efficient flow of information and products, leading to shortened lead times, reduced inventory obsolescence, and lowered operational costs, thereby improving business performance [49]. Moreover, customer integration facilitates agile responses to market changes, enhances customer satisfaction, stimulates sales growth, and augments market share [3][48].
In essence, SCI emerges as a strategic imperative for firms seeking to thrive in dynamic markets. The collaborative dimensions of both supplier and customer integration position companies to navigate the intricacies of the business landscape with agility and resilience. The strategic alignment with key supply chain partners, characterized by mutual understanding and effective collaboration, not only fosters efficient supply chain processes but also delivers superior value to customers. As such, SCI becomes not merely a logistical necessity but a transformative force that propels businesses toward enhanced operational efficiency, increased profitability, and sustained market competitiveness.
Thus, digitalization emerges as an intelligent and data-driven technology network, plays a pivotal role in fostering greater SCI by enabling seamless communication, real-time data sharing, and enhanced collaboration among supply chain partners [50][51][52] note that digital supply chain systems enable the integration of data from multiple sources, creating a transparent and interconnected information flow. This real-time data exchange is foundational for SCI as it enables partners to access and share critical information instantly, fostering a shared understanding of supply chain dynamics [39]. Ref. [53] emphasize that digitalization provides stakeholders with real-time visibility into supply chain operations, allowing them to monitor the status of goods, inventory levels, and production processes. This visibility minimizes delays, reduces the risk of disruptions, and fosters better coordination among supply chain partners, ultimately contributing to heightened integration. Furthermore, digitalization supports enhanced collaboration [52][54] highlight that digital tools enable partners to collaborate on joint projects, share demand forecasts, and synchronize their efforts. This collaborative environment fosters tighter supply chain integration as it promotes mutual understanding, trust, and a shared commitment to achieving common supply chain goals [55].
Numerous studies recognize the substantial advantages of digitalization in enhancing supply chain integration. For example, [31] emphasize digitalization’s pivotal role in cultivating internal supply chain integration. Empirical validation from previous research [39][56][57] demonstrates that IT integration capabilities lead to enduring enhancements in firm performance by fostering supply chain process integration. Ref. [58] further support this concept, indicating that digital technologies facilitate integration across functional domains within firms, aligning teams toward shared objectives such as material management, planning, and scheduling. While theoretical foundations support the positive association between digitalization and supply chain integration, additional empirical investigation is needed [39].

4. Digitalization and Supply Chain Efficiency

Digitalization’s profound impact on supply chain efficiency is evident through its transformative influence on various aspects of business processes [59]. Digitalization, defined as the incorporation of digital technologies into supply chain processes [8][24][25][30] plays a pivotal role in enhancing various dimensions of supply chain efficiency, contributing to improved performance and competitiveness. Ref. [60] emphasize how digital technologies such as advanced analytics, IoT devices, and automation contribute to streamlined processes, optimized resource allocation, and reduced waste, thereby increasing overall supply chain efficiency. For example, [9] emphasize how digital technologies enable the automation of routine and repetitive tasks within the supply chain, reducing manual labor and the potential for human error. Automation not only speeds up processes but also minimizes the risk of delays, ensuring smoother and more efficient supply chain operations [35]. As noted by [61] digital technologies, coupled with data utilization, minimize breakdowns and enhance the manufacturing process’s intelligence. Predictive analytics, for instance, can identify bottlenecks and inefficiencies, enabling firms to allocate resources where they are most needed [62][63]. This optimization leads to cost savings, reduced waste, and improved supply chain efficiency [64]. Moreover, digitalization contributes to cost reduction within the supply chain [42][65] emphasizes how digital technologies allow firms to identify cost-saving opportunities through data analysis. By optimizing transportation routes, managing inventory more efficiently, and reducing energy consumption, firms can significantly lower their operational costs, resulting in enhanced supply chain efficiency.
Refs. [66][67] corroborate this by highlighting how digitalization enhances operational efficiency through predictive analytics, enabling firms to preemptively address disruptions and minimize delays. The customer-centric benefits of digital transformation further contribute to supply chain efficiency. Supply chain digitalization enhance the customer journey by enabling personalized service delivery and efficient transactions [31][68]. Additionally, improved supply-side digitalization reduces the cash conversion cycle, directly impacting profitability, competitiveness, and value creation for firms [23]. This phenomenon reinforces the positive relationship between digitalization and supply chain efficiency. While the literature generally acknowledges the benefits of supply chain digitalization, there remains a limited academic exploration into the mechanisms driving these performance gains [10][13][30][56].

5. The Mediating Role of Supply Chain Integration

Supply chain integration, comprising both supplier integration and customer integration, defined as “a firm’s collaboration with major supply chain partners to manage various supply chain activities” [30][41]. Supplier integration involves collaboration with major suppliers to coordinate crucial supply chain activities, including product development, planning, and information sharing [69]. This collaboration yields numerous operational and strategic benefits. For instance, its faster material delivery, reduced supply cycle, and enable timely production plan [45]. Such efficiency enhancements lead to cost reductions through lower inventory levels and optimized supply chain operations [31]. Moreover, supplier integration catalyzes new product development and improves product delivery efficiencies. This value addition not only boosts customer satisfaction but also contributes to market share growth [30]. The alignment of products with customer needs, driven by supplier integration, translates into improved business performance. Customer integration further reinforces cost-cutting measures by reducing lead times and inventory obsolescence [49]. It streamlines information sharing and collaboration with customers, driving cost reduction while creating customer value [48].
Furthermore, customer integration allows firms to be responsive to shifts in buyer preferences and market trends, facilitating market-oriented offerings [45]. This responsiveness, combined with enhanced customer satisfaction, leads to increased sales growth and market [3][48]. The literature underscores the pursuit of the highest level of supply chain integration tailored to diverse markets [70]. While achieving high integration levels is desirable, it involves costs, persistence difficulties, risks, and context-specific considerations [64]. Therefore, achieving supply chain integration requires a strategic balancing act [71].
In essence, supply chain integration, encompassing both supplier and customer integration, serves as a crucial mediating mechanism between digitalization efforts and supply chain performance outcomes. By facilitating effective coordination, mutual understanding, and innovation within supply chains, supply chain integration bridges the gap between digitalization’s potential and tangible performance improvements [72]. This comprehensive perspective underscores the importance of considering supply chain integration as a mediating factor when exploring the impact of digitalization on supply chain performance, aligning with recent studies [22][39][73]. Recognizing that seamless collaboration with supply chain partners is fundamental for enhancing efficiency, reducing costs, and delivering value to customers, this mediation effect highlights the strategic significance of supply chain integration in the context of the evolving digital landscape. This aligns with the broader perspective of supply chain digitalization discussed earlier, where firms adopt and deploy digital technologies to transact with various supply chain players, thus transforming traditional business practices.

6. The Mediating Role of Supply Chain Efficiency

Efficiency, as defined by [59] underscores an organization’s ability to produce goods and services with minimal costs by minimizing waste and optimizing resource utilization. This definition extends to the supply chain context, where stakeholders engage in coordinated activities aimed at minimizing waste and optimizing resources across the entire chain [59][74]. Efficiency is a critical component for organizations seeking a competitive advantage, aligning with the RBV theory. Efficient operations result from timely and cost-effective production of products or services [75] ultimately contributing to a competitive edge [76]. In the supply chain context, the pursuit of efficiency is particularly pronounced, with the aim of achieving the lowest possible costs while meeting customer standards, including accuracy in delivery and lead time [77].
Efficient supply chain management requires a comprehensive understanding of relationships at various levels of the supply chain to mitigate costs and elevate service quality [78]. The growing focus on supply chain efficiency is evident as organizations recognize its pivotal role in supply chain performance improvement [64][79]. In the context of today’s rapidly evolving markets with short product life cycles and high demand variability, the importance of supply chain efficiency is underscored by the need for a “market-responsive supply chain strategy” [80]. Recent studies have extended [80] model, emphasizing the role of technology in enhancing supply chain efficiency [81][82]. For example, [83] found that technology interventions can enhance the effectiveness of supply chains, albeit with potential trade-offs in efficiency, highlighting the nuanced relationship between technology adoption and supply chain efficiency.
This background lays the foundation for understanding the role of supply chain efficiency as a mediator between digitalization and supply chain performance. The existing literature has established a positive relationship between digitalization and supply chain efficiency [64][78][83][84][85]. Efficiency, in turn, has been identified as a critical determinant of supply chain performance [20][33][59][74][76][86][87][88][89][90] with streamlined processes and reduced resource wastage contributing to enhanced overall supply chain outcomes. However, the intricate interplay between supply chain digitalization, efficiency, and their collective impact on performance remains relatively unexplored, forming the focal point of the present study.

The Moderating Role of Supply Chain Dynamism

Supply chain dynamism (SCD) is a crucial concept in supply chain management, representing the pace of changes in products and processes within the supply chain [91]. The constantly evolving nature of supply chains, driven by shifting business landscapes and technological advancements, has brought SCD to the forefront of research, especially in understanding how digitalization impacts supply chain outcomes [10]. The COVID-19 pandemic emphasized the critical role of SCD in contemporary operations [32] highlighting the need to explore the intricate interactions between SCD and digitalization.
In today’s dynamic business environment, characterized by the need for adaptability and rapid responses to changes, digital technologies play a pivotal role in enhancing SCI [33][69][92][93]. The literature also calls for further exploration of how digitalization can lead to supply chain performance improvement in crisis scenarios within SCI [94][95][96][97]. Researchers emphasize that achieving digitalization demands a holistic approach, requiring companies to gain market insight, adopt new technologies and management styles, transform core business processes, and leverage digital technologies to create value [98].
Digitalization acts as a catalyst for improved information sharing and collaboration throughout the supply chain, ultimately contributing to enhanced SCI [31][39][51][52][56][58][99][100] also support the idea that SCD positively influences information-sharing practices and inter-organizational relationships, resulting in improved supply chain performance. In this dynamic environment, where products and processes rapidly transform, digital tools enable heightened communication and collaboration among supply chain partners [91].
In a supply chain marked by rapid changes in products and processes, agility and responsiveness become imperative. Digitalization is recognized as a facilitator for meeting these demands [10] Recent studies emphasize the need to understand the extent of Supply SCD to formulate resilient strategies and enhance supply chain performance [91][101][102]. Scholarly investigations consistently highlight SCD as a precursor to supply chain resilience and disruption orientation, with discernible impacts on financial performance [32][91][103][104]. These insights underscore the intricate connections between dynamism, resilience, and overall supply chain performance. In this context, the moderating role of SCD in the relationship between digitalization and supply chain performance becomes increasingly crucial. As the supply chain environment becomes more dynamic, the transformative influence of digital technologies on supply chain processes can potentially be amplified, resulting in heightened improvements in overall performance. 
In a dynamic supply chain environment characterized by rapid and continuous transformations in products and processes [32], the interaction between digitalization and supply chain dynamism (SCD) holds the potential to yield amplified efficiency improvements. This proposition is rooted in the recognition that digitalization’s efficiency-enhancing capabilities can be especially potent in environments marked by constant change [105]. To comprehensively explore this interaction, insights from diverse industries where supply chain efficiency enhancement has been a focal point are crucial. Prior research has scrutinized how digitalization interfaces with SCD and its implications for efficiency and collaboration [33][99][106]. Additionally, empirical examinations of artificial intelligence’s (AI) impact on supply chain resilience and performance under SCD conditions underscore the significance of technological interventions on supply chain efficiency [32]. However, despite these valuable contributions to the field, the specific moderating role of SCD within the intricate relationship between digitalization and supply chain efficiency remains relatively unexplored territory [10].

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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 :
Esam Salamah
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Ahmad Alzubi
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Azmiye Yinal
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Update Date: 17 Jan 2024
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