Traditional vs Digital Supply Chain Processes

Traditional vs Digital Supply Chain Processes
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  • 0:05 Supply Chain Processes
  • 1:14 Traditional Supply Chain
  • 3:04 Traditional vs Digital
  • 6:22 Lesson Summary
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Lesson Transcript
Instructor: Natalie Boyd

Natalie is a teacher and holds an MA in English Education and is in progress on her PhD in psychology.

The rise of digital products has made getting products to consumers even simpler and quicker. But how has the supply chain changed with digital products? In this lesson, we'll look at the difference in traditional and digital supply chain processes.

Supply Chain Processes

Imagine for a moment that your best friend comes to you and tells you about this great new book that she's reading. She tells you that you would love this book and that you should read it right away. Now imagine that it's 1985 and your best friend tells you the same thing. How would you get and read the book then, versus now? Would it be any different? The world is rapidly changing. Thirty years ago, if you wanted to read a book, you had to get a physical copy of the book and read it. That could involve getting in the car and going down to the store or library, getting the book, and lugging it home again before reading it. Now if you want, you can just download a copy of the e-book to your tablet or e-reader and be reading it in seconds.

From a business perspective, digital products like e-books are both very different and very similar to physical products, like a paperback book. One way in which businesses think about products is by thinking about the supply chain process, or the different steps businesses must go through in order to get a product into the hands of consumers.

Let's take a moment to look at the traditional supply chain process for physical products and then compare that to the supply chain process for digital products.

Traditional Supply Chain

Let's say that you want a paperback book to read. You go to the store and buy it, but where did that book begin? What hands have touched it and what process did it go through to get to you? The traditional supply chain process involves taking raw materials and making a physical product that is then transferred to a consumer. There are several steps in a traditional supply chain process. They include:

1. Gathering of raw materials

Whether it's the lumberjack's cutting down trees to make paper or the author slaving away on her computer late at night, the first step in any supply chain process is the gathering of the raw materials.

2. Acquiring materials

Next up in the process is for the manufacturing company to acquire the materials. Sometimes this is straightforward, like when a publishing company buys an author's book. Other times, the raw materials have to be made into something, like making paper from trees, before the materials can be acquired by the manufacturer.

3. Manufacturing

After the materials have been acquired, the company now needs to assemble them into a product. In the case of our book, that means putting the words onto the paper and binding the paper together into a book.

4. Distributing

Next up, the manufacturer has to distribute the products to their customers. Often, the manufacturers customers are not the end consumer but a middleman. For example, the publishing company that has manufactured the paperback book isn't going to sell it directly to you. Instead, their customers the bookstore, which buys the books from the publisher.

5. Selling to end user

Finally, the customer, in this case, the bookstore, can sell the product to the end user, you. This occurs when you finally purchase the book.

Traditional vs Digital

The traditional supply chain process is pretty straightforward. But what happens if you don't want a paperback but instead want an e-book? There are some differences in the supply chain process for digital products as opposed to traditional products. The digital supply chain process involves creating a digital product and delivering it to the customer.

To understand the difference in the two processes, let's look at the supply chain again but this time, examine how it runs with digital products.

1. Gathering of raw materials

As we saw, traditionally this involves gathering physical materials and creative ones. But in the digital supply chain, this only involves nonphysical materials, such as the author writing the book. There's no need for trees because we don't need paper.

2. Acquiring materials

As with the gathering of raw materials, this step involves nonphysical materials only in the digital supply chain. For example, the publishing company can buy the book but not paper. So far, even though there are no physical materials gathered, the supply chain is pretty much the same, as far as process. But here's where it really gets different.

3. Manufacturing

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