9.3 ICT and the Global Value Chain

Consider This: Blockchain

The following material adapted from Blockchain Technology’s Impact on Supply Chain Integration and Sustainable Supply Chain Performance: Evidence from the Automotive Industry by Kamble, Gunasekaran, Subramanian, Ghadge, Belhadi & Venkatesh, (2021) under a Creative Commons Attribution License.

Let’s take the example ICT and automotive sector in India. The automotive sector is one of the driving forces of the Indian economy, contributing about 49% to the country’s manufacturing gross domestic product (GDP) and employing over 32 million workforces. Indian automotive industry is highly competitive and challenging, under pressure to continuously improve its sustainable supply chain performance (SSCP). Achieving SSCP needs the firms to be innovative in providing value to their customers.

(Kamble et al., 2021) CC-BY-4.0

The following material adapted from the article The Supply Chain Management Revolution by Agarwal, Shiralkar, Aaher, & Jawade (2021) under a Creative Commons Attribution License.

Companies are nowadays targeting to enhance their performance in the industry, in terms of adaptability, cost, traceability, trust, delays and variety, thus the Global Value Chain (GVC) has now become the concept of concern due to the ever- increasing customer demands in terms of value, quality etc. GVC influences numerous day-to-day and economic activities. GVC has been considered as a major strategy for incorporating suppliers and consumers, to enhance responsiveness and flexibility of manufacturing and service organizations. Thus, to satisfy and adapt to changing customer expectations and needs, the following are some of the technological advancements in GVC.

1. Blockchain

In recent times, blockchain is mostly referred to as a cryptocurrency or digital money such as Bitcoin, Dogecoin, ripple etc. But in practice blockchain applications are not limited only to cryptocurrencies or finance. Blockchain is a decentralized digital ledger. Ledgers are used to keep a record of important things, financial or something else. Blockchain is nothing but a database or in other words, a collection of information stored on a computer system. The blockchain is a collection of blocks or nodes. These nodes are connected, all the transactions are stored throughout the network. If there is a new transaction or if there is even a slight change in any of the transactions, then it gets verified immediately through the consensus of the nodes. Information cannot be altered, added, or removed without this consensus. This makes blockchain fraud-proof. In a global value chain, this kind of system (decentralization) may provide a much better foundation of trust as well as benefits due to the absence of a centralized authority. Similarly, blockchain could further be used to record the activity logs, ownership of assets etc. Further, Blockchain also holds an immense contribution to a global value chain, as Blockchain ensures information continuity and traceability. This is due to its irrevocable and immutable nature, which helps to share important information among stakeholders so that products and information can be tracked without risk. In addition, blockchains transparency makes it easy to access large amounts of data generated in the global value chain. This also increases global value chain visibility. Thus, blockchain in GVC truly can be a game-changer in the global value chain domain.

2. Internet of Things (IoT)

Internet of things is used to connect various devices through a network in order to sense and collect data around the world on the internet to process various intelligent applications with the aid of embedded systems, artificial intelligence (AI), various software and sensors. In this network of all the connected devices, each device has a unique identity and will work in harmony with others. The role of the IoT platform for an organization is to enable devices / objects to observe, recognize, and understand situations and surroundings without relying on human help. Devices connected through the internet of things possess the ability to transmit data between themselves devoid of any interaction between them. A traditional global value chain faces many challenges like lack of visibility, lack of flexibility, lack of trust of security amid stakeholders and many more. Integration of IOT in the global value chain network may help to solve many of such challenges that the traditional networks face. IOT helps improve the efficiency of GVC networks by connecting links between information flow and material flow at various stages of the GVC network. For instance, if we consider the automotive supply chain, the main goal of the manufacturing plant is to deliver the parts at the right time and to maintain an optimum inventory. This is only possible if there is good coordination amongst 3rd party logistics, transportation organisations, and multiple tiers of suppliers. These coordination processes are often enhanced by making use of the IoT integrated blockchain systems. Such a system utilises smart IoT sensors and numerous smart devices, which have the ability to track the location/whereabouts of parts as well as their quantity along with all the other useful information in real time. This advancement leads to various other improvements and benefits for the manufacturing supply chain, such as improvement in material and information flow, tracking system of goods as well as a planned production schedule. Similarly, the suppliers also greatly benefit from this as they experience reduction of faulty orders, improved inventory and inventory level, reduction in warehousing costs etc. the above explanation was in the context of incoming logistic services to the plant. Next, we will consider the benefits of IoT in the global value chain of outbound distribution services. The main goal of the manufacturing plant is to distribute outbound vehicles to all dealers and importers at the right time, while effectively coordinating many third-party logistics and transportation companies. All of this can be achieved using the IoT integrated blockchain system. As mentioned earlier, the system uses IoT sensors and many smart devices that can be used to track vehicle location and other important details in real time. This improvement leads to many benefits to the manufacturing plant itself. This means that the system can achieve just-in-time logistics, improvement in inventory controls as well as reduction in damaged vehicles. At the same time, dealers and importers also get the benefit by getting a lead time reduction in build to order vehicles and a reduction in warehouse cost. Thus, we can say that the integration of the internet of things and blockchain can eliminate the problem and make the system more efficient and trustworthy.

3. Big Data

Nowadays there is enormous amounts of data being generated every-day. It has been predicted that the amount of data collected will keep increasing in the coming years in this digital era. Hence the term Big Data has been coined. The world generated/created more than 1ZB of data within the year 2010, and 7ZB of data per year by 2014. The main reason for such an enormous rise in data is due to diverse devices employed in the industrial enterprise of global value chain networks, which include smartphones, computers, devices, sensors. All of this data gives rise to new possibilities to obtain more value. We can hence define Big data as extremely large sets of data or fast growing amounts of data from different sources that present industrial organizations with a variety of storage and analysis issues. Big data in GVC promises a very positive impact as supply chains will be able to take more strategic and data-oriented decisions. Big data serves as an instrument to analyse global value chain risks and measuring the supplier performance with extremely high accuracy. Big data also enables the organization to identify and focus on credible areas for optimization. Big data can be utilised by organizations in various ways to optimize their supply chains, by using big data to predict crime, i.e. making the supply chain secure and transparent. Further data can also be used to prepare an efficient operational shift planning to achieve appropriate staffing for maximum output and good process quality. Big data in the supply chain can also avoid out-of-stock conditions and increase customer satisfaction. Customer retention analysis can be also carried out using big data to maintain good customer relations and to increase customer trust. Creation of new business models or products becomes easy by using big data analysis along with expansion of existing product lines. Even with all these benefits of big data, it still seems to be a relatively unexplored asset that the industries can still make use of if they have the correct tools and technologies.

(Agarwal et al., 2019) CC-BY-4.0