12.1: The Role of IT and Process Improvements in Public Procurement

For a clear understanding of technological advancements in procurement, read the following material adapted from the article The Supply Chain Management Revolution by Agarwal, Shiralkar, Aaher, and Jawade (2021).

Companies nowadays aim to enhance their performance in the industry in terms of adaptability, cost, traceability, trust, reduction in delays, and variety. Thus, supply chain management has now become a cause of concern due to the ever-increasing customer demands in terms of value, quality, etc. To satisfy and adapt to changing customer expectations and needs, the following are some of the technological advancements in supply chain management.

Blockchain

In recent times, blockchain has mostly been associated with cryptocurrency or digital money, such as Bitcoin, Dogecoin, Ripple, etc. However, 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, such as finances or other things. 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, and 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 quite tamper-proof. In a supply 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 be used to record activity logs, ownership of assets, etc. Further, Blockchain also makes an immense contribution to the supply chain, as it 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, blockchain’s transparency makes it easy to access large amounts of data generated in the supply chain. This also increases the visibility of the supply chain. Thus, blockchain in SCM can be a game-changer in the supply chain domain.

Internet of Things (IoT)

The Internet of Things (IoT) is used to connect various devices through a network in order to sense and collect data around the world on the Internet to process intelligent applications with the aid of embedded systems, artificial intelligence (AI), various software and sensors. In this network of connected devices, each has a unique identity and will work harmoniously 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 can transmit data between themselves, devoid of interaction. A traditional supply chain faces many challenges, like lack of visibility, lack of flexibility, lack of trust and security among stakeholders, and many more. Integration of IOT in the supply value chain network may help solve many of the challenges that traditional networks face. IOT helps improve the efficiency of supply chain networks by connecting links between information flow and material flow at various stages of the supply chain 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 third-party logistics, transportation organizations, and multiple tiers of suppliers. These coordination processes are often enhanced by making use of IoT-integrated blockchain systems. Such a system utilizes smart IoT sensors and numerous smart devices, which can track the location/whereabouts of parts and their quantity along with all the other useful information in real time. This advancement has led to various improvements and benefits for the manufacturing supply chain, such as improvements in material and information flow, tracking systems for goods, and better-planned production schedules. Similarly, the suppliers also greatly benefit from this as they experience a reduction of faulty orders, improved inventory and inventory level, reduced 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 supply 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, and a reduction in damaged vehicles. At the same time, dealers and importers also get the benefit of getting a lead time reduction in build-to-order vehicles and a reduction in warehouse costs. Thus, we can say that the integration of the Internet of Things and blockchain can eliminate problems and make the system more efficient and trustworthy.

Big Data

Nowadays, enormous amounts of data are 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 in the year 2010 and 7ZB of data per year by 2014. The main reason for such an enormous rise in data is due to the diverse devices employed in the industrial enterprise of global supply chain networks, which include smartphones, computers, devices, and sensors. All of this data gives rise to new possibilities for obtaining 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 opportunities. Big data in the supply chain promises a very positive impact as supply chains will be able to make more strategic and data-oriented decisions. Big data serves as an instrument to analyze supply chain risks and measure 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 utilized by organizations in various ways to optimize their supply chains, such as by using big data to predict crime, i.e., making the supply chain secure and transparent. Further data can also be used to plan an efficient operational shift 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 also be 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 an expansion of existing product lines. Even with all these benefits of big data, it still seems to be a relatively unexplored asset that industries can use if they have the correct tools and technologies.