Term Paper on

How Digital Transformation is Reshaping Global Supply

Chains

Course: Global Business Environment (M301)

Submitted to

M. Injamam Alam
Lecturer
Institute of Business Administration
University of Dhaka

Submitted by

Rumaisa Younus Wahi

Roll- 12
Section- B
Batch- BBA 30th

Institute of Business Administration, University of Dhaka

Date of submission: January 30, 2025
Letter of Transmittal

January 30, 2025

M. Injamam Alam

Lecturer
Institute of Business Administration
University of Dhaka

Subject: Submission of Global Business Environment (M301) term paper titled, ‘How Digital
Transformation is Reshaping Global Supply Chains’.

Dear Sir,

With due respect, I present to you the term paper titled ‘How Digital Transformation is Reshaping
Global Supply Chains’ as per the course requirement. The term paper is prepared using secondary
data. I hope that this term paper meets your expectations. Please note that this term paper has been
prepared under your supervision and under no circumstances will this report be produced for any
other course as such. No part of this term paper will be shared without your authorization.

Sincerely
Rumaisa Younus Wahi
Roll: 012
Section: B
IBA BBA 30th

ii
Abstract

It’s not been long since the world was introduced to the whirlwind called digital transformation, a
phenomenon that has brought revolutionary changes in businesses and redefined how
organizations operate in a new, interconnected world. Needless to say, it has reshaped how global
businesses manage supply chains as well. This paper explores the magnificent changes we have
seen in the past few years in global supply chains due to digital transformation. It also discusses
the benefits, the challenges and the barely spoken of unintended consequences of such a major
shift.

This report examines real-world examples of businesses that have successfully integrated digital
tools into their supply chains, as well as highlights the challenges they faced in order to achieve
that. It explores how this transformation is not only a mere technological shift but also a strategic
move for businesses to gain a competitive advantage.

Additionally, this report delves deeper into the future prospects. The potential impact of even more
advanced technologies in supply chains, both in a mega and micro-scale, is analyzed and evaluated.
How companies can incorporate these changes into their supply chain management is also
discussed while considering the new ethical and legal concerns these changes might cause.

Ultimately, the paper reviews how digital transformation is bringing unprecedented opportunities
and how companies can rethink their supply chain strategies to get the best possible outcome from
it. It concludes by discussing how businesses can seamlessly match their supply chain operations
with the rapid speed at which the global digital landscape is evolving by strategically reorienting
and developing their entire management and workforce, which will, in turn, increase productivity,
flexibility and ensure sustainability.

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Table of Contents

1. Introduction .................................................................................................................................... 1
1.1. Objective ................................................................................................................................ 2
2. Understanding Digital Transformation ............................................................................................. 2
2.1. Digitalization in supply chains ................................................................................................ 3
2.2. Brief history of digitalization in the supply chain .................................................................... 3
3. Key technologies driving digital transformation in global supply chains today ................................. 5
3.1 Artificial Intelligence (AI) .............................................................................................................. 5
3.2. Internet of Things (IoT)................................................................................................................. 7
3.3. Digital Twins ................................................................................................................................ 7
3.4. Blockchain.................................................................................................................................... 8
3.5. Automation and Robots ................................................................................................................. 8
3.6. Cloud Computing.......................................................................................................................... 9
4. The impact of using digital technologies in global supply chains ................................................... 10
5. The challenges of digitalization in global supply chains ................................................................. 13
6. The ethical and environmental concerns of digitalization in supply chains ..................................... 14
6.1. Ethical concerns.................................................................................................................... 15
6.2. Environmental concerns ............................................................................................................. 16
7. Global landscape of digitalization in supply chains ........................................................................ 16
8. Future of digitalization in global supply chains .............................................................................. 17
8.2. AI enabled no touch/low touch planning ............................................................................... 17
8.3. Electric vehicles and smart logistics ...................................................................................... 18
8.4. Low Code Platforms ............................................................................................................. 18
8.5. ESG and scope 3 emissions ................................................................................................... 18
9. How to digitalize the supply chains effectively .............................................................................. 18
10. Conclusion................................................................................................................................ 19
References............................................................................................................................................. 23
Appendix A. .......................................................................................................................................... 27
Appendix B. .......................................................................................................................................... 28

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Table of Figures

Figure 3.2.1. Wiliot's Bluetooth-based Ambient IoT tags: ......................................................................... 7

Figure 3.5.2. Amazon's Automated Warehouse ......................................................................................... 9
Figure 3.5.2. Amazon’s Proteus Robot ..................................................................................................... 9
Figure B.2. Reasons why most operations aren't getting what they expect from technologies © PwC ..... 28
Figure B.1. Graph showing cost reduction and revenue increase in different sectors from AI adoption ©
McKinsey.............................................................................................................................................. 28
Figure B.3. Different technology adoption rates © McKinsey ................................................................ 28

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 1. Introduction

In 1995, Apple faced one of the worst supply chain disasters ever in History. That year, the
company was all set to introduce a new product line, the PowerMac PCs. Having incurred huge
losses for the past two years because of excess inventory, the company decided to scale down its
inventory levels. However, the demand for the new product line skyrocketed and the company
faced a huge backlog of $1 billion in orders. The stock price fell and the company slipped into a
cycle of decline. This blunder happened because of a miscalculation in forecasting demand on
Apple’s part. Only 30 years ago, demand forecasting used to be done using less accurate and time-
consuming methods like manual data collection, spreadsheet-based analysis and basic statistical
techniques. 30 years later, we have advanced technologies like AI, machine learning, big data, etc.
dynamic and highly accurate demand forecasting tools at our disposal.

However, demand forecasting is merely one tiny puzzle piece in the vast and complex ecosystem
of global supply chains. Global supply chains are huge networks of individuals and companies
involved in creating a product and distributing it to the buyer; encompassing all the steps, from
sourcing raw materials to delivering the final product to consumers (McKinsey & Company, 2022).
Efficient business operations rely heavily on seamless coordination among the supply chain
processes.

In the past few decades, the rise of digitalization has reimagined how businesses manage their
supply chain systems. Supply chains used to be fragmented and plagued with inefficiencies due to
manual procedures and limited visibility. Digitalization has helped companies overcome these
issues considerably. Every step in a supply chain is now deeply connected and streamlined to
reduce human errors as much as possible. From using expensive resources to run supply chains
smoothly, companies are now using efficient digitalized supply chains as resources to reduce costs
and stay ahead of global competition.

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 1.1. Objective

Broad Objective

This paper aims to explore the impact of digital transformation on global supply chains, supported
by case studies and industry examples.

Specific Objectives

I. To understand what and how digital tools are transforming the supply chain ecosystem
II. To anticipate future innovations and how they can impact global supply chains
III. To evaluate the benefits and challenges associated with the digitalization of the processes
IV. To assess the ethical and environmental concerns associated with the use of digital tools
V. To analyze real-world cases to identify key successes and failures
VI. To propose recommendations to businesses to improve supply chain efficiency using
technologies

2. Understanding Digital Transformation

"Digital transformation is not about technology, it's about strategy.” (Westerman et al., 2014). This
statement perfectly encapsulates the core essence of digital transformation. Digitalization is not
merely adopting technologies to match the pace of the evolving world. It represents the strategic
alignment of technologies with business practices to improve the business model and operational
processes. According to McKinsey & Company (2023),

Digital transformation involves fundamentally rewiring how an organization operates, to

create value by continuously deploying technology at scale. This approach emphasizes the
importance of a clear digital transformation strategy, focusing on specific domains and
enabled by particular capabilities, to build a competitive advantage.

This often necessitates a whole mindset shift and pushes companies to prioritize innovation and
adaptation. While technology is undeniably a blessing, digital transformation requires proper

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alignment with the business focus to impact customer service. Mindless technological integration
will only increase costs and incur losses.

2.1. Digitalization in supply chains

Digitalization in supply chains denotes leveraging advanced technologies to increase the efficiency
of supply chains. Traditional supply chain processes were linear; from sourcing raw materials to
storing, manufacturing and delivering the final product to the customers. These processes used to
operate in silos with minimum data sharing and visibility. Also, the manual handling of these
processes left large room for errors and delays. Another significant point about traditional supply
chains is the limited considerations towards customer preferences. Data collection and processing
capabilities were limited and businesses used to operate as completely separate and disengaged
entities from the consumers. Digitalization bridged this gap between consumers and companies,
resulting in better customer service and higher profits. It connected the fragmented parts of the
chain and boosted efficiency. A McKinsey research suggests that, on average, companies that
aggressively digitize their supply chains can expect to boost annual growth of earnings before
interest and taxes by 3.2 percent—the largest increase from digitizing any business area—and
annual revenue growth by 2.3 percent. (Gezgin et al., 2017)

2.2. Brief history of digitalization in the supply chain

Digitalization was introduced in the supply chain processes in the mid-20th century. Over the years,
it has helped global supply chains to evolve drastically.

 Mid-20th century:

Basic data processing systems and barcoding technology were invented during that time. It enabled
businesses to track and manage inventory more efficiently. A lot of manual processes got
automated, hence, more standardized.

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  1960s-1970s

DHL, FedEx etc. logistics providers entered the industry. Businesses started to exchange documents,
purchase orders, and invoices electronically which sped up the process and reduced errors. Also, IBM
developed the first automated inventory management and forecasting system, which streamlined and
enhanced productivity tremendously.

 1980s
JCPenney created the first real-time Warehouse Management System (WMS), which offered real-
time tracking and updating. Planning tools like spreadsheets and map-based interfaces were
introduced in supply chain management. Also, SAP, Oracle, JD Edwards etc. contributed to
developing the early ERP (Enterprise Resource Planning) system, which helped in data
centralization and provided actionable insights.
 1990s

Internet came into the picture and every process became easier and more convenient. Global
collaboration, Real-time communication, and broader connectivity brought a revolution in global
supply chain management. Online services and service provider companies like Amazon were
established in this era. Also, some companies started using robots in their production facilities to
standardize the processes.

 2000s
Cloud computing and tracking technologies like Radio Frequency Identification (RFID), and
GPS-enhanced inventory tracking were introduced. Cost-effective storage and data processing of
large data sets made supply chain management much simpler. RFID and GPS tracking improved
logistics by automating item tracking and providing real-time shipment monitoring.

 2010s-present

Artificial intelligence (AI), Internet of Things (IoT), Blockchain, big data analytics etc. major
inventions happened in this era. These technologies provided unprecedented levels of real-time
visibility and predictive insights. Demand forecasting, process automation, and risk mitigation
became more accurate and efficient.

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 3. Key technologies driving digital transformation in global supply
chains today

3.1 Artificial Intelligence (AI)

AI is the buzzword in today’s technological landscape. Businesses are adopting it to a great extent
to gain a competitive advantage. As of 2022, approximately 50% to 56% of companies worldwide
have adopted Artificial Intelligence (AI) in their operations, including supply chain and
manufacturing sectors. (Ozan Unlu, 2024). AI is used in different ways in supply chains.

 Demand forecasting: AI and machine learning are being increasingly adopted by

businesses to predict demand with greater accuracy and efficiency. Traditional demand
forecasting methods use historical data and basic statistical techniques, which leads to
inaccuracy and inefficiency. However, AI-driven solutions analyze vast amounts of data,
including real-time market trends, weather patterns, and consumer behavior, to generate
more precise forecasts. AI uses technologies like NLP (Natural Language Processing) to
analyze customer feedback in text form or social media posts, Image recognition to analyze
customer behavior etc. Applying this forecasting method to supply chain management, for
example, can reduce errors by between 20 and 50 percent. (Amar et al., 2022). Zara, the
mega fashion retail brand, uses AI to analyze user feedback and social media channels to
understand customer preferences and emerging fashion trends.

 Production Planning: AI helps firms optimize production schedules, cut waste, and
enhance overall operational effectiveness by evaluating large datasets. AI-powered systems
can precisely analyze large amounts of data, which leads to more precise production
schedules. AI doesn’t only predict; it can also reorder stock when necessary. This lessens
the possibility of stockouts, overproduction, or scheduling mistakes. It also reduces human
errors which has a 1% average error rate. (Gentz, 2022) GE and BMW use AI for predictive
maintenance and production optimization.

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 Logistics Optimization: Logistics and transportation are frequently the root cause of
supply chain interruptions and can have a rippling effect. Artificial intelligence (AI) is used
to optimize transportation routes for cost and delivery time reduction, danger prediction,
and alternate route suggestions when new circumstances arise. AI-powered logistics
management can assist in striking the ideal balance between delay risks, client
responsiveness, and transportation expenses. German shipping company CMA CGM has
partnered with Google to optimize their routes using AI.

 Risk Management: Businesses are using AI-driven analytics to assess and mitigate risks
such as supply chain disruptions, market volatility, and supplier failures. Three capabilities
are necessary to build resilience: (1) detecting a disruption quickly, (2) designing an
effective solution in response to the disruption, and (3) deploying the solution swiftly.
(Sodhi & Tang, 2012) AI assists businesses in comparing and assessing various response
tactics through simulations. These simulations evaluate the effects on supply and demand,
as well as the time it takes to recover from disruptions, of every potential response. AI can
suggest modifications to a business's supply chain policies depending on a variety of
variables, including macroeconomic trends and seasonality. AI is also able to determine,
for example, the ideal number of suppliers, their locations, the best supply chain structure,
and the best conditions for supply chain contracts.

 Customer Experience Enhancement: AI-powered chatbots and tailored delivery

alternatives are enhancing the consumer experience by providing real-time delivery
updates and automated notifications. About 90% of customer queries can be solved within
10 minutes and lower using AI chatbots. (Anoushka Chopra, 2019)

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3.2. Internet of Things (IoT)

A network of physical items, or "things," that are integrated with sensors, software, and other
technologies that link and exchange data with other devices and systems via the Internet is known
as the Internet of Things (IoT). Integrating IoT devices and sensors into supply chain management
gives real-time information on the whereabouts, state, and status of equipment and items. Better
shipment monitoring from warehouse to delivery, preventative equipment maintenance to extend
equipment lifetime, and quick reaction to interruptions are all made possible by this increased
visibility. Additionally, it lowers the chance of delays and facilitates just-in-time (JIT) inventory
management, which reduces waste and increases efficiency. (Slack et al., 2019) IoT use in supply
chains is expanding, and by 2033, the industry is expected to reach US$41.8 billion due to the need
for more efficient logistics and better routes for transportation. (IoT in Supply Chain Market, n.d.)
Companies like UPS and Royal Mail use IoT devices, such as RFID (Radio Frequency
Identification) tags and Bluetooth, to improve operational visibility and lower delivery network
faults. Royal Mail has implemented Wiliot's Ambient IoT
technology. The company tags its roll cages with Wiliot's
Bluetooth-based Ambient IoT tags. As the containers
travel across the network, these battery-free tags—which
look like tiny stickers—automatically provide real-time
data on their location and environmental conditions.
Figure 3.2.1. Wiliot's Bluetooth-based Ambient
IoT tags:

3.3. Digital Twins

Digital twins are software representations of assets and processes that mimic actual operations to
assist businesses in risk assessment, performance optimization, and decision-making. This
approach assists in decision-making, identifies bottlenecks, and improves overall efficiency.
Digital twins streamline product development by integrating data from previous models with new
concepts. Product testing too can be done digitally without wasting time and resources in
developing a physical version. Combined with predictive AI, digital twins can become self-
monitoring and self-healing systems. Digital twins are increasingly being used in supply networks.

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Market analysis indicates the global market for digital twins will grow about 30 to 40 percent
annually in the next few years. (Oca et al., 2024)

3.4. Blockchain

Blockchain is a distributed, decentralized ledger technology that safely logs transactions on several
machines. Using cryptographic hashing, each transaction is kept in a "block" and connected to the
one before it, creating a "chain." Blockchain is a reliable instrument for tracking and confirming
digital and physical assets since it guarantees data integrity, transparency, and resistance to
tampering. As blockchain is decentralized, no single party has control over the data. Also, it is
nearly impossible to alter the transaction data in Blockchain. Supply chains are quickly adopting
blockchain technology. Blockchain makes it possible to monitor goods from the point of origin to
the point of destination by generating a secure ledger of transactions. It also guarantees that all
supply chain participants have access to a verified record of the goods' trip. Many companies like
Unilever, Walmart, Nestle, De Beers use Blockchain technology for their supply chain operations.
The global blockchain supply chain market was valued at USD 2.26 billion in 2023, according to
a Grand View Research analysis, and is projected to expand at a compound annual growth rate
(CAGR) of 90.2% between 2024 and 2030. (Blockchain Supply Chain Market Size & Share
Report, 2030, 2023) This growth rate indicates how blockchain technology is being used more and
more in supply chain applications.

3.5. Automation and Robots

A few years ago, just around 5% of warehouses in the United States were highly automated.
However, the business incentive for deploying automation has grown stronger due to rising labor
costs. Up to 30% of a worker's time is spent traveling inside a large, non-automated warehouse.
This transit time can be decreased significantly by implementing automation. (Sensing, 2022)
Automated Storage and Retrieval Systems (ASRS) are a kind of warehouse automation in which
machines and robots store and retrieve products through a completely automated process. These

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systems are usually connected with other warehouse management software (WMS) to maximize
inventory handling and logistics, these. Amazon uses ASRS to increase speed and efficiency.
Companies use automation for high-risk tasks to protect workers from injury and avoid associated
costs too. For example, Amazon's Proteus robots work alongside human employees, carrying
heavy loads and enhancing safety. Robotic Process Automation (RPA) is another game-changer in
the automation industry. It is the process of automating repetitive, rule-based processes that are
usually completed by humans using software robots. RPA systems use interfaces like keyboards,
displays, and software programs to interact with digital systems in a similar way a human does.

Figure 3.5.2. Amazon's Automated Warehouse Figure 3.5.2. Amazon’s Proteus Robot

3.6. Cloud Computing

Cloud computing is the delivery of computing services like servers, storage, databases,
networking, software, and analytics over the internet, called "the cloud". Businesses can access
and pay for these resources on demand instead of owning and maintaining physical data centers
and servers. It offers businesses the flexibility to scale their operations up or down in response to
demand. For instance, businesses can modify their resources during peak times without having to
make huge additional investments. Also, cloud systems provide real-time data, allowing businesses
to make decisions promptly.

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 4. The impact of using digital technologies in global supply chains

The impact of using digital technologies in global supply chains has been profound and disruptive.
It has significantly reshaped how businesses track, manage, conduct, and optimize their operations.

 Cost reduction and resource optimization:

Digital transformation greatly impacts cost reduction and resource optimization across global
supply chains. By predicting demand with high accuracy, AI-powered inventory management
systems can help businesses reduce the costs associated with overstocking or stockouts. Accurate
forecasting translates into a reduction in lost sales and product unavailability of up to 65 percent.
Continuing the virtuous circle, warehousing costs can fall by 5 to 10 percent, and administration
costs by 25 to 40 percent. (Amar et al., 2022) Additionally, research from Deloitte shows that
organizations that implement predictive maintenance strategies can achieve a 10-20% reduction in
maintenance costs and a 70-75% decrease in breakdowns. (Cătălina Mărcuță, 2024) By automating
order placing, supplier negotiations, and invoice processing, businesses can drastically cut down
on procurement expenses and administrative strain. Siemens’s cloud-based procurement platform
enabled it to cut procurement cycle times by 25% and reduce procurement costs by 10%. Deloitte
estimates that companies using digital procurement tools can reduce procurement-related costs by
up to 20-25%. (The Future of Procurement in the Age of Digital Supply Networks, n.d.) Real-time
monitoring and tracking using supply chain visibility software and IoT allow businesses to
optimize routing and scheduling and thus, reduce transportation costs as well.

 Improved efficiency and precision:

IoT, cloud computing and blockchain technology enable real-time tracking of goods and assets
throughout the supply chain, which provides end-to-end visibility. It helps businesses monitor
shipments, inventory levels, and manufacturing progress, which reduces delays and enhances
decision-making. Companies using IoT-enabled tracking systems report a 20-30% improvement
in delivery times due to real-time visibility. (Gartner, 2022) Also, Walmart reported that blockchain

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technology reduced the time it took to trace the origin of its mangoes from 7 days to 2.2 seconds.
(Hyperledger Foundation, 2023) Using Robots and automation also reduces errors and increases
precision. According to KPMG research, implementing RPA in supply chains reduces errors by
21%, increases speed by 19%, and improves the quality of routine tasks by 21%. (KPMG
Consulting Co., Ltd, 2018) Predictive AI and advanced analytics have increased planning accuracy
and efficiency. DHL reports that its AI applications have led to a 15% improvement in delivery
times. (AI and Supply Chain: Cutting Delivery Times by 25%, 2024)

 Enhanced visibility and transparency

Blockchain increases supply chain efficiency, improves traceability, and lowers fraud by
increasing transparency. Companies adopting blockchain technology report a 50% reduction in
fraud. (vorecol.com, 2020) It is extremely crucial in the food, health and luxury goods sectors.
Luxury goods manufacturer De Beers uses blockchain technology to trace diamonds from mine to
market, ensuring they are ethically sourced. The World Economic Forum projects that over the
next decade, the use of blockchain for supply chain management could create $3 trillion in value
by enhancing traceability and efficiency (vorecol.com, 2020) The decentralized aspect of
blockchain ensures data safety as well.

 Enhanced collaboration and supplier relation

Digital collaboration platforms and Supplier Relationship Management (SRM) tools improve
communication and transparency. Cloud-based platforms like SAP Ariba enable real-time data
sharing between suppliers, manufacturers, and logistics providers, which helps in decision-making
and reduces delays. Siemens uses SAP Ariba to streamline supplier management. SRM tools like
Oracle Procurement Cloud help monitor supplier performance and assess risks. General Electric
(GE) reduced procurement costs by 10-15% by using SRM. (Stawan, 2022)

 Resilience and risk management

Digital tools like AI and advanced analytics enhance supply chain resilience by providing real-
time risk assessments and suggesting proactive mitigation strategies. For instance, DHL's
Resilience360 technology gives prompt reactions to interruptions by tracking threats like political

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unrest and natural calamities. AI-powered "what-if" scenario simulations support backup planning
by tackling problems like shifting demand or supply shortages. It helps Unilever to maintain its
supply seamlessly even when the market shifts. According to a survey, 43% of executives see AI
as a game-changer for reducing supply chain risks. (Morningstar, 2025)

 Customer-centricity
McKinsey reports that 71% of consumers now expect personalization, making it a competitive
necessity. (McKinsey & Company, 2021) Digitalization helps companies to get closer to their
consumers by making their businesses customer-centric. For example, Nike's use of data analytics
allows customers to design personalized products. Real-time tracking and responsive support build
trust between businesses and consumers too. FedEx’s real-time tracking tools update customers
about shipment statuses. Amazon’s AI-powered chatbots provide instant support.

 Sustainability
Digital tools can help to ensure sustainability in supply chains through green logistics and eco-
friendly practices. Green logistics optimizes transportation routes, lowers fuel consumption, and
reduces CO2 emissions by utilizing technology like AI and IoT. For example, DHL used AI-driven
route optimization to reduce emissions by 30%. Digital solutions that monitor emissions, waste,
and energy consumption help eco-friendly supply chains by facilitating sustainable behaviors like
recycling and ethical sourcing. Unilever is using blockchain to guarantee sustainability in their
palm oil supply chain. These developments improve sustainability and operational efficiency.

 Improved compliance

Automation keeps records, certifications, and reporting procedures up to date, ensuring that
businesses comply with regulations. Digital tracking and reporting help companies to trace
products from the point of origin to the point of delivery.

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 5. The challenges of digitalization in global supply chains

As beneficial as digitalization is to global supply chain management, it is not without drawbacks.

Digitalization poses multiple challenges for businesses, which might lead to excess cost, waste of
resources and lost productivity.

 High implementation cost

Implementing digital tools and infrastructure, such as IoT sensors, AI, and blockchain systems,
can be very costly. According to a PwC survey, 63% of business owners cite high implementation
costs as a major hindrance to digitalization. (PwC, 2022) This is one of the key challenges
preventing many companies, especially small and medium-sized enterprises (SMEs), from
adopting digital technologies in their operations.

 Cybersecurity issues

The risk of cyberattacks and data breaches is rising as more supply chains include digital
technologies. Sensitive data, including operational specifics, intellectual property, and consumer
information, can be targeted by hackers. Also, as most data these days are in digital form, it puts
businesses and consumers at greater risk of data theft. In 2021, the SolarWinds cyberattack
compromised several big companies’ supply chains, including Microsoft and Cisco. On average,
the attack cost companies 11% of their annual revenue. (Fortinet, 2023)

 Skills gap

Supply chain digitalization requires skilled professionals in areas like data science, AI, and
machine learning. Many companies struggle to recruit and retain talent in these fields, slowing
down their digital efforts. Unskilled professionals result in companies not having expected returns
on their technological investments. In PwC survey, 27% of the respondents cited that they aren’t
getting expected results from technology integration due to employee incompetency. (PwC, 2022)

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  Resistance to change
Most companies face resistance within the organization to significant change in the existing
procedures. This is listed as one of the major reasons why 70% of digital transformations in
organizations fail, according to a McKinsey study. (Robinson, 2019)

 Regulatory complications
As supply chains increasingly rely on digital tools to process vast amounts of data, maintaining
compliance with regulations becomes a significant challenge. There are laws like the General Data
Protection Regulation (GDPR) in the European Union and the California Consumer Privacy Act
(CCPA) in the U.S. that set strict guidelines on data privacy, security, and protection. These
regulations vary across regions. For global supply chains operating across borders, these rules
become even more complex.

 Risks of service disruptions

Companies rely on third-party service providers a lot. It increases the risk of service disruptions.
Any issues with their systems can halt operations in the entire supply chain system. Also, tracking
multiple suppliers, production sites, and distribution channels can overwhelm systems. This may
lead to data overload or inconsistent reporting.

6. The ethical and environmental concerns of digitalization in supply

chains

The ethical and environmental implications of digitalization in supply chains are deeply
concerning. As digitalization is rapidly increasing, these issues are becoming more alarming.

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6.1. Ethical concerns

 Data security: Large-scale data collection via digital systems raises worries about the
misuse or theft of personal data, potentially impacting workers and consumers involved in
the supply chain. In the 2018 Facebook-Cambridge Analytica controversy, the political
consulting firm Cambridge Analytica unlawfully collected personal information from
millions of Facebook users. These data were used to influence voter behavior during the
2016 U.S. presidential election. The incident raised major concerns about data privacy, user
consent, and how personal information can be exploited for political and commercial gain.

 Algorithmic bias: When AI systems base their choices on distorted or insufficient data, it
is known as algorithmic bias and can lead to unjust or discriminating results. For example,
an AI algorithm might prioritize suppliers based on historical performance data that reflects
past biases, such as favoring large suppliers over smaller, more diverse ones.

 Lack of Accountability: Lack of accountability in digitalized supply chains can occur

when complex systems obscure transparency, making it difficult to trace decisions or
actions back to specific individuals or entities. Since it’s difficult to hold anyone
responsible for decisions made by algorithms or digital platforms, this lack of
accountability can result in problems like labor exploitation, environmental damage, or
regulatory infractions.

 Unfair competition: Big players in the same industry might get unfair competitive
advantage over the small ones using technologies. It might even lead to monopoly or
monopolistic conditions.

 Job loss: Digitalization calls for skilled labor forces. As it is rapidly increasing, many jobs
are becoming obsolete. At the same time, it is becoming increasingly hard for unskilled
workers to enter the job market. Unemployment leaves them with little resources to train
themselves, which again results in not getting employment opportunities. A large number
of people, therefore, get stuck in a vicious poverty cycle.

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6.2. Environmental concerns

 Increased Energy Consumption: Increased energy consumption is a major concern

linked to digitalization in supply chains. The extensive use of cloud computing, data
processing, running automated machines and AI tools, consumes a significant amount of
energy. A report from the International Energy Agency (IEA) states that Data centers and
data transmission networks account for approximately 1% to 1.5% of global electricity
consumption. (Data, 2024) This huge amount of energy consumption poses threat to offset
the energy technological integration is supposed to save in operations.

 E-Waste Generation: Digital technologies in supply chains generate a considerable

amount of electronic waste (e-waste). These discarded electronics present challenges in
terms of proper disposal and recycling. E-waste often contains hazardous materials like
lead, mercury, and cadmium, which can harm the environment if not managed responsibly.
According to the Global E-Waste Monitor 2020, the world generated 53.6 million metric
tons of e-waste in 2019, and it is projected to rise to 74.7 million metric tons by 2030. (Forti
et al., 2020)

 Transportation optimization issues: Using digital tools for transportation optimization,

can reduce costs and improve efficiency. However, they may not always prioritize
sustainability and focus on the quickest and cheapest routes, potentially leading to higher
carbon emissions and fuel consumption.

7. Global landscape of digitalization in supply chains

The adoption of technologies in supply chain is rapidly increasing around the world. However, the
adoption rate varies from country to country and from technology to technology. According to a
McKinsey report, over 65% of global companies already use AI in their operations. (McKinsey &

16
Company, 2024) North America holds a dominant market position in the AI in supply chain market,
capturing more than a 37.9% share. (AI in Supply Chain Market Size, Share | CAGR of 42.7%,
n.d.) Germany is ahead in using digital tools in their supply chain as well. Companies like
Siemens, Volkswagen have been using IoT, robotics, AI for years. Technological infrastructure,
economic and political landscape, regulations play a huge role in digitalization. Regions like Sub-
Saharan Africa have below 10% digital adoption rate. Also, adoption rate varies from technology
to technology. A McKinsey report suggest that older technologies have a higher adoption rate. As
a result, cloud computing has the highest rate of implementation. While, management seems to
reluctant in investing in quantum technologies.

8. Future of digitalization in global supply chains

Newer technologies are being developed every day. It is predicted to bring paradigm shift in supply
chains. We are going to enter a new world of supply chain management where companies can have
less errors, achieve better efficiency and improve their day-to-day work quality. There are a few
technologies and trends that are leading this transformation.

8.1. Generative AI (GenAI)

Generative AI is a branch of AI that has the potential to transform supply chain management,
logistics, and procurement. GenAI-powered software engines can process significantly larger
datasets than traditional machine learning models and can assess an almost limitless range of
variables. GenAI also has the ability to learn and adapt autonomously to the unique characteristics
of a company's supply chain ecosystem, which enables it to continuously improve its analysis over
time and adjust to shifting trends.

8.2. AI enabled no touch/low touch planning

Existing planning and forecasting methodologies have limited ability to meet the needs of a
complex, multi-tiered supply chain. AI enabled sales and operational planning (S&OP) and
Integrated Business Planning (IBP) can help address this issue. Low touch planning will further

17
minimize human workload in supply chain and therefore, reduce human errors. AI itself will be
able to analyze large datasets, identify discrepancies, search for patterns and provide solutions.

8.3. Electric vehicles and smart logistics

Use of autonomous and electric vehicles is increasing rapidly. As organizations focus on emissions
reduction and battery technology advances, the electrification and automation of transport will
increase more, particularly in air freight processing and last-mile delivery. Autonomous vehicles
are transitioning from human-monitored to fully automated. Smart logistics will be enhanced by
AI, IoT, data analytics, and cloud technology and improve efficiency, customer experience, and
sustainability through predictive and sensing capabilities.

8.4. Low Code Platforms

A low-code platform is a software development tool that allows users to build applications with
minimal coding required by utilizing visual drag-and-drop interfaces, pre-built components, and
templates.

8.5. ESG and scope 3 emissions

Businesses have up until now prioritized the collection of their Scope 1 and Scope 2 emissions
data, the focus has now shifted decisively toward Scope 3 emissions – that is, emissions incurred
throughout the entire value chain. Although mainly voluntary, many countries require mandatory
collection and reporting of Scope 3 emissions data.

9. How to digitalize the supply chains effectively

Companies are digitalizing their supply chain but very few companies actually realize the benefits
of it. Ineffective planning, technological inefficiencies etc. result in unnecessary huge investments

18
in technology that does not reap any substantial value. To effectively integrate digital tools,
companies need to follow through the following steps-

 Identify the specific goal (eg. Cost reduction, efficiency boost etc.)
 Assess current position and risks
 Do proper research
 Analyze long-term benefits
 Train workforce beforehand
 Invest in areas your workforce and facility can offer benefits

Following these steps can ensure seamless integration of technology in operations and thus, boost
efficacy.

10. Conclusion

Digitalization is an unstoppable force. Its development will continue in the coming days.
Businesses can not but integrate it in their everything, be it, operations, planning, research and
development practices. The supply chain is one of the major sectors that are impacted greatly by
digitalization. It has transformed into its most optimized version due to digitalization. As more
technologies appear, innovations grow. The need for embracing digitalization intensifies more.

Global supply chains have benefitted a lot by integrating digital technologies. In future, more
research will be conducted to improve this integration process, and thus, to improve efficiency.
More sustainable practices will be taken into account. It will drive the adoption of more eco-
friendly practices. Advanced technologies like AI, blockchain, and IoT will further streamline
operations. As a result, supply chains will become more agile, resilient, and environmentally
responsible. Through digitalization, we are looking forward to a even brighter future where human
lives will be more improved.

19
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Appendix A.

E-waste (Electronic Waste): E-waste, or electronic waste, is a term for discarded electrical or
electronic devices. It includes items with cords, plugs, and electronic components.

Green Logistics: Green logistics, also known as sustainable logistics, is a business practice that
reduces the environmental impact of a company's logistics network. It involves using eco-friendly
practices to transport and distribute products, services, and information.

Just-in-time (JIT) inventory: An inventory management technique that minimizes inventory

costs by obtaining products only as needed for production.

Scope 1 emissions: Scope 1 emissions are greenhouse gas emissions that a company directly
controls or owns. These emissions come from sources like vehicles, boilers, and furnaces.

Scope 2 emissions: Scope 2 emissions are indirect greenhouse gas (GHG) emissions that occur
when a company purchases energy from a utility provider. These emissions include electricity,
heating, cooling, and steam.

Smart logistics: Smart logistics is the use of technology to improve the efficiency and visibility
of logistics operations.

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 Appendix B.

Figure B.1. Graph showing cost reduction and revenue increase in Figure B.2. Reasons why most operations aren't getting
different sectors from AI adoption © McKinsey what they expect from technologies © PwC

Figure B.3. Different technology adoption rates © McKinsey

28