Information Systems Frontiers

https://doi.org/10.1007/s10796-021-10173-1

Functional Requirements and Supply Chain Digitalization

in Industry 4.0
Lu Han1 & Hanping Hou1 & Z. M. Bi 2 & Jianliang Yang3 & Xiaoxiao Zheng1

Accepted: 16 June 2021

# The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2021

Abstract
Industry 4.0 aims to automate traditional manufacturing and industrial practices with the aids of recently developed information
technologies such as cyber-physical systems, Internet of things, big data analytics, and cloud computing. Implementation of
industry 4.0 in manufacturing leads to the digitization of all manufacturing businesses including computer aided design and
manufacturing, enterprise resource planning, and supply chain management (SCM). This paper focuses on the challenges and
solutions in digitizing supply chains in dynamic, distributed, and decentralized business environments. The complexity and
dynamics of supply chains in industry 4.0 are discussed, the performance of a supply chain is evaluated from the perspectives of
costs and quality of services, and supply chain management is formulated as an optimization problem for higher requirements of
quality of services, efficiency, and timeliness. The challenges of developing digitization solutions to data acquisition, data fusion,
and data-driven decision-making supports are discussed in detail. The potential solutions to these challenges are proposed and the
impacts on supply chain management are assessed using the data from in a list of automotive manufacturers in China. It has been
found the proposed solutions will make positive and significant impact on the digitation of supply chains.

Keywords Supply chain management . Supply chain digitization . Quality of services (QoS) . Data acquisition . Data fusion .
Data-driven decision-making supports . Industry 4.0 . Industrial information integration engineering

1 Introduction big data (Abdirad et al., 2021; Alcacer & Cruz-Machado,

2020, Phuya et al., 2020, Raptis et al., 2021, Bi, 2011, 2017,
Industry 4.0 refers to a phase of industrial revolution featured Bi et al., 2014, 2020, 2021; Xu et al., 2018). Industry 4.0 aims
as automation, networks, artificial intelligence and real-time to automate manufacturing businesses and industrial practices
at all levels and domains of business operations (Li, 2013,
2018; Niu et al., 2013; Xing et al., 2013; Zhao et al., 2014;
* Lu Han Yang et al., 2014; Wang et al., 2014a, c; Cochran et al., 2016).
hanlu_grace@bjtu.edu.cn The success of industry 4.0 implementation in digital
manufacturing relies greatly on the adaption and integration
Hanping Hou
hphou@bjtu.edu.cn of recently developed information technologies such as wire-
less sensor networks (Wang et al., 2014b), cyber-physical
Z. M. Bi
biz@pfw.edu
systems (Bi et al., 2020, 2021; Xu, 2020a, b), Internet of
Things (Kim, 2021; Li et al., 2018; Li, 2013, 2014; Li &
Jianliang Yang Xu, 2021; Liu et al., 2017; Lu & Ning, 2020; Bi et al., 2014;
yangjianliang@mail.buct.edu.cn
Pradhan & Chawla 2020; Xu et al., 2014; Zhao et al., 2020),
Xiaoxiao Zheng big data analytics (Bendre & Thool, 2016; Bi & Cochran,
xxzhengbucea@163.com
2015; Chen et al., 2016; Hassani et al., 2018; Jiang et al.,
1 2014; Li & Xu, 2001; Shi et al., 2007; Xu et al., 2016; Xu
School of Economics and Management, Beijing Jiaotong University,
Beijing 100044, China & Duan, 2019), and cloud computing (Iaksch et al., 2021;
2 Jiang et al., 2014; Wang et al., 2016; Xie et al., 2017). In
Department of Civil and Mechanical Engineering, Purdue University
Fort Wayne, Fort Wayne, IN 46805, USA digital manufacturing (Wang & Bi, 2020; Bi & Zhang,
3 2021; Bi & Wang, 2020; Xu, 2011a, b; Xu et al., 2005,
School of Economics and Management, Beijing University of
Chemical Technology, Beijing 100029, China 2008), industry 4.0 brings the transformation and upgrade of

supply chains for the high agility, adaptability, personaliza-
tion, and better quality of service (QoS) via digitization
(Schiavone & Sprenger, 2017). Supply chains in industry
4.0 must be capable of dealing with Volatility, Uncertainty,
Complexity, and Ambiguity (VULA) in highly turbulent busi-
ness environments (Adani, 2021). Li (2014), Xu (2013, 2015),
discussed the impact of new technologies on the evolution of
supply chain management (SCM) and found the digitization
of SCM became a key enabler to manufacturers; supply chain
digitalization (SCD) helped in tailoring to customers’ needs
and adapting the changes in dynamic business environments
cost effectively for enhanced system resilience, sustainability,
and flexibility (Sun et al., 2016; Shan et al., 2013, 2017;
Dolgui et al., 2020). Existing works have shown that SCD
has improved flexibility, responsiveness, and quality of ser-
vices in data acquisition, coordination, and data mining
(Baryannis et al., 2019; Dubey et al., 2019; Gudfinnsson
et al., 2015; Ivanov et al., 2017; Li et al., 2014). According
to PWC (2016), SCD led to an increase of 4.1 % efficiency
and 2.9 % revenue annually. Bi and Wang (2020), Bi and
Zhang (2021) and Mckinsey (2021) argued that SCD was an
essential component of digital manufacturing (DM); compa-
nies benefited greatly in gaining market shares and increasing
business revenues. Digitization contributed two-thirds of total
revenue growth and over three-fourths of annual earnings be-
fore interest and taxes (EBIT).
Despite of its importance, the difficulties of digitizing sup-
ply chains were underestimated by many consultants in sense
that the critical challenges in implementation were not aligned
well with available information technologies in their practice
guides. Digitizing a supply chain is far beyond a direct de-
ployment of information technologies (ITs) into supply chain.
Various ITs were adopted by companies for decades, the num-
ber of available technologies was increasing rapidly, while the
cases of successful SCD implementations were still limited.
Owning technologies is a different thing from knowing how to
fully utilizing technologies and at what appropriate levels and
domains. Systematic methods are lacking to match right tech-
nologies to functional requirements (FRs) of SCDs (Cochran
et al., 2017a, b); moreover, quantifiable measures are lacking
to assess the performances of SCD.
The majority of existing works limited their investigations
on the development of enabling technologies (Li, 2011, 2012;
Li et al., 2017, 2012; Tan et al., 2010; Wiedenmann &
Grossler, 2019), information infrastructure (Gorkhali & Xu,
2016, 2019; Kache & Seuring, 2017; Vachara & Derek, 2005;
Xu, 2011a, b, 2016, 2020c), and human machine interactions
(Venkatesh & Bala, 2015; Chen et al., 2015). Numerous stud-
ies incorporated newly developed technologies such as
blockchain technologies, Internet of Things and big data ana-
lytics to improve productivity, qualities of service, sustainabil-
ity, agility and adaptabilities (Viriyasitavat et al., 2021, 2019a,
b, c, d, e, f; Bi & Cochran, 2015; Bi et al., 2014; Wang et al.,
Inf Syst Front
2014a, b, c). To map available technologies with FRs of SCD
appropriately, clear guidelines and transformation roadmap
were needed at the system level (Kittipanya-ngam & Tan,
2020).
Buyukozkan and Gocer (2018) proposed a framework
and roadmap for SCD that consisted of three stages, i.e.,
digitalization, SCM and technology implementation, and
the tasks at each stage were further decomposed and de-
tailed. However, the tasks at the digitalization were isolated
from that of SCM or technology implementation. There was
not a unified measure for the seamless integration of func-
tional modules from three stages. In the real-world applica-
tion, companies must develop the solutions to specific tech-
nological challenges for SCD. In this paper, raw data is
collected from a list of automobile companies in China to
classify functional requirements (FRs) of SCD, and the re-
gression method is used to find the technical solutions to
these main FRs. The rest of paper is organized as follows.
Section 2 provides the rationales why three main FRs are
considered. Section 3 applies the regression analysis meth-
od to evaluate the impact of digitization solutions to three
FRs; the Malmquist index model is proposed as the perfor-
mance measure of SCD, and the impact of technical solu-
tions on three FRs on SCD is examined using a fixed-effect
model. Section 4 summarizes the finding from the present-
ed work and discusses its limitations as well as the direc-
tions of future research on this topic.
2 Functional Requirements (FRs)
and Solutions
With the rapid spread of IoT based applications, the bound-
aries of manufacturing systems and their business environ-
ments become vaguer and vaguer (Bi et al., 2014, 2018; Li
et al., 2008; Xu & Viriyasitavat, 2014). It becomes difficult
and impractical for enterprises to define clear boundaries of
their supply chains. However, any information system is func-
tioned to transfer input data to output data through a series of
processes (Bi & Zhang, 2021); therefore, the functional re-
quirements of SCD are examined from the aspects of data
acquisition, data processing including fusion, and data mining
for decision-making supports.
The big data in Industry 4.0 is characterized as Volatility,
Uncertainty, Complexity, and Ambiguity (VULA). A
real-world supply chain involves in many changes and
uncertainties which are difficult to predict, this poses the
difficulty in making optimal decisions to plan and schedule
jobs in a supply chain since the assessments on decisions vary
over time. A decision and plan must be changeable to
accommodate changes and uncertainties over time. SCM in
industry 4.0 does not have right solutions to some critical
issues such as how to deal with bullwhip effects and ripple
Inf Syst Front
effects. A bullwhip effect causes an excessive inventory, and a
ripple effect causes an interruption of material supplies. SCM
should match its intelligence level to that of Industry 4.0 in
sense that supply chains will be lean, agile and flexible to deal
with all uncertainties and changes with minimized additional
costs. Panahifar et al. (2014) proposed a method so called
Collaborative Planning Forecasting and Replenishment
(CPFR) but found the difficulty to overcome managerial bar-
riers in implementation.
In this section, a SCM is generalized as an information
system, and its FRs are discussed at three aspects. The objec-
tive to digitalize a SCM is to plan and schedule jobs to better
satisfy internal and external customers with minimized costs;
note that the VUCA characteristics of a business environment
has brought more and more stringent requirements for SCMs
to sustain better performances. The technological solutions to
SCD must be selected based on FRs of SCM and associated
with the system-level objectives. Doing this helps companies
determine where to budget their assets and investments and
gain their SCM systems explicitly rather than implicitly.
Understanding on data acquisition and data processing
turns gray or black box into a white box for a SCM system.
Understanding data mining for decision-making supports
maximizes the potentials of manufacturing resources for direct
enhancement of performances of manufacturing systems.
Moreover, the dependences of three FRs are explored to sup-
port the continuous improvement (CI) of SCM in its lifecycles
(Cochran et al., 2016, 2017a, b).
2.1 FR1 − Data Acqusition
Similar to raw materials in material flow, data is the basic to an 2014b). Similar to other manufacturing resources,
information flow. A manufacturing system is meaningless if
the raw material in material flow, or the data in information
flow, is unknown. For SCM, a primary FR is to collect all
accessible data from different sources such as supplies, prod-
ucts designers, plants, inventories, warehouses, customers,
and collaborators over the Internet (Qi & Tao, 2018). As mat- and supporting collaboration and cooperation among enter-
ter of fact, the importance of acquiring abundant and reliable
data has been emphasized in many IoT applications such
cyber-physical systems (CPSs), Industrial IoT (IIoT), and dig- may only visible to the participators, and the information rel-
ital manufacturing (Viriyasitavat and Bi, 2020). IoT infra-
structure allows companies network with partners to utilize
manufacturing resources even without physical accesses
(Verdouw et al., 2013, 2016). Integrating cyber-physical sys-
tems in IoT supports the reconfiguration of a supply chain
when changes occur over time (Dolgui et al., 2020). In digital mate complex supply chain activities (Liu et al., 2013; Xu,
manufacturing, every physical object in material flow has its
virtual model in information flow to represent its role in a
manufacturing system (Ivanov & Dolgui, 2020; Wang et al.,
2007; Xu et al., 2012, 2014).
Despite of the respective emphases of aforementioned ap-
plications, all of them are information systems that require
collecting sufficient and reliable data for the
decision-making supports to achieve corresponding strategi-
cal objectives. For example, data from Global Positioning
Systems (GPS), point-of-sale (PoS), Radio Frequency
Identity (RFID) or other smart things in IoT can be utilized
in SCM to reduce lead times of products, reduce inventories,
save material-handling costs, and prompt cooperation, coordi-
nation and collaboration among business partners (Sarac et al.,
2010; Bi & Cochran, 2015).
The first step of SCD is to figure out the methods to access
all data in supply chains. Ignoring relevant data was viewed as
the wastes of manufacturing resources (Mckinsey, 2016).
Examples of raw data relevant to SCM are the information
for materials, inventories, processes, logistics, and marketing
and sales. Collecting raw SCM data requires sensing and net-
working resources such as RFID, WSNs, and smart sensors
(Niu et al., 2013; Wang et al., 2014a, b, c); these technologies
support transparency and traceability of information in supply
chains and build the information infrastructure to digitize sup-
ply chains. On the other hand, SCM integrates the information
from both of material and information flows, any occurred
changes might affect subsequent processes, and this causes a
ripple effect at the micro level. To minimize the ripple effect
and avoid interruption, changes in a supply chain must be
detected and processed in real-time.
2.2 FR2 − Data Fusion
The acquired data affects SCM indirectly, and the data cannot
be fully utilized until it is cleaned and processed and mined for
decision-making supports (Bi & Cochran, 2015; Wang et al.,
multi-source data shows its value only when data from differ-
ent sources are integrated, shared, and utilized among share-
holders and partners (Brandon-Jones et al., 2014). Data-driven
SCM benefits to the financial performance of enterprises by
improving the responsiveness and promoting data exchanges,
prises (Yu et al., 2018a). A supply chain involves in numerous
operations and connections, Information at each connection
evant to this connection used to be a black box to others and
even enterprises. To practice industry 4.0, a black box should
be transferred into a white box, so all of information can be
shared and integrated over the supply chain (Yu et al., 2018b).
Business integration enables companies to simplify and auto-
2015). Through collaborative planning and synchronizing
business processes, buyers and sellers participate in the busi-
nesses in supply chains in an active manner rather than tradi-
tional passive manner. Cisco proved the effectiveness of
bi-channel information exchanges with its suppliers in inte-
grating operational businesses, reducing delivery times, and

improving quality of service (Zhou & Benton, 2007). In SCM,
streamlining flow of inventories allowed to shorten delivery
times, reduce bullwhip effects, and smooth cash flows
(Sanders, 2008). Data fusion allowed to share point-of-sale
information between customers and suppliers to gain a thor-
ough understanding of causality of pricing, volume, and com-
petitor behavior for them to reduce circulating fund for inven-
tories and respond market changes (Liu et al., 2018; Manthou
et al., 2004; Vanpoucke et al., 2017).
Decisions in a supply chain are relevant with each other,
and the quality of decisions depends on abundance and reli-
ability of data. The more data is collected, the better a decision
can be made. With numerous software tools such as material
resources planning (MRP), enterprise systems or called enter-
prise resources planning systems (Xu, 2011a, b), customer
requirements management (CRM) (Yang et al., 2001), and
supplier relations management (SRM) in the information
era, more and more supply chain businesses such as purchas-
ing, transportation, and warehousing become digitalized. In a
supply chain, every software tool needs to access data from its
connections to fulfill its functions. However, software tools
are technically encapsulated and have their boundaries to dis-
tinguish internal and external information, and there will be
some barriers to transmit and share data. This brings the dif-
ficulty to fuse data. It is necessary to remove shackles of
cognition, appreciate the importance of data sharing to maxi-
mize the potential of globalized supply chains (Prajogo &
Olhager, 2012, Zimmermann & Foerstl, 2014).
2.3 FR3 − Data-Driven Decision Making Supports
Decision-making activities are data-driven, and
decision-making occurs to all stages and domains of supply
chains in particular for demands forecasting, inventory man-
agements, and selections of suppliers. The emerging technol-
ogies such as artificial intelligence (AI), big data analytics
(BDA), and cloud computing (CC) have been gradually
adopted to mine data in reaching decisions to reduce product
lead-times, optimize freight and inventory schedules, and im-
prove the agility of supply chains (PWC, 2016; Kwon et al.,
2014; Waller & Fawcett, 2013).
With an increasing scale and popularity of Internet of
things, available data in a supply chain trends to be big in
terms of its volume, variety, and velocity (3 V). Data driv-
en decision-making supports needs BDA and other ad-
vanced data mining tools to deal with a large amount of
data for customer behavior analysis, trend analysis and
demand forecasting (Seyedan & Mafakheri, 2020). The
evolution of BDA in SCM was investigated by
Arunachalam et al. (2018) where the evolution of data
mining applications was divided into five stages from sta-
tistical techniques, data mining techniques, business intel-
ligence (BI 1.0), business analytics (BI 2.0), and recently
Inf Syst Front
to big data analytics (BI 3.0). With an increase of complex-
ity and dynamics of available data, and the constitutive
property of data decreases. Therefore, BDA becomes crit-
ical to effectively deal with big data in SCM (Gudfinnsson
et al., 2015).
Traditionally, decision-making optimizations in SCM
were classified into: (1) predictive optimizations such as
predicting demands based on real-time data and (2) diag-
nostic optimizations such as diagnosing faults and acting
preventive actions for anticipated changes. In this article,
we focus on the third category on operative optimizations
for time-sensitive planning and scheduling, and controls in
supply chains. Operative optimizations include
decision-making supports for production plans, inventory
managements, and schedules of product deliveries that
may need be adjusted over time.
Note that a predictive optimization tackles with anticipated
changes in external business environment that are beyond the
controls of enterprises; a diagnostic optimization tackles with
the historical changes of internal enterprise systems. In con-
trast, an operative optimization makes the decisions that affect
current business operations. Among three types of optimiza-
tions, operative optimizations are fundamental, and the values
of two other types of optimizations should be reflected
through the effectiveness of operative optimizations.
Therefore, the concept “Intelligent Optimization (IO)” is pro-
posed to integrate three types of optimizations. IO aims to
achieve a global solution not only over the entire supply chain
but also a perceivable time domain. IO will be an integrated
solution for supply chain managers to access all necessary
information to make optimal decisions in SCM. In addition,
IO can be utilized to develop a checklist of deficiencies for
continuous improvement (CI) of SCMs.
2.4 Relationships of Three FRs
To practice Industry 4.0, traditional supply chains will be
evolved into supply chain ecosystems. Three basic FRs of
SCD determine the corresponding solutions at the aspects
of hardware, software and mathematic modelling.
Moreover, SCD solutions also depend on the interactions
of these three FRs. Data acquisition provides raw data for
data fusion and processing, and the fused and processed
data further makes IO possible. The relations of FRs are
cyclic. Optimizing supply chains helps enterprises to catch
more marketing opportunities. In return, more products are
demanded from enterprise, and this further force the im-
provement of SCD on data acquisition, data fusion, and
data-driven decision-making supports by IO. Therefore,
the cyclic relations of three FRs provide the means for
continuous improvement in a spiral path (Bi & Wang,
2020; Bi & Zhang, 2021). Figure shows the progressive
and cyclic relationships of FRs in SCD (Fig. 1).
Inf Syst Front
Fig. 1 Relationships of three FRs
and corresponding solutions: (a)
Progressive relationship; (b)
Cyclic relationship
(a)
3 SCD Evaluation
SCD and its CI can be treated as an optimization problem,
where a number of design alternatives are analyzed, evaluated,
and compared to determine the best solution. Therefore, the
solution to SCD depends on the evaluation criteria.
Unfortunately, most of existing methods for the evaluations
of SCD are subjective: a list of questionnaires is constructed
for respondents, and the answers from respondents are easily
biased due to their roles at different levels and stages of supply
chains. In this section, we propose to manually collect direct
data from annual reports and websites to evaluate the perfor-
mances of SCD. Figure 2 shows the general procedure for the
evaluation of SCD.
To illustrate the application of the proposed evaluating pro-
cedure, the Malmquist productivity index was calculated
based on the logistic data in the years of 2013 to 2019 from
73 automobile manufacturing companies in China. ‘Techch
‘in the Malmquist index was used as the measure to evaluate
SCD. A fixed-effect model was developed to evaluate of the
solutions to three FRs based on 6 years of the panel data.
3.1 Performance Measure of SCD
SCD is an emerging concept, and no systematic method has
been developed to evaluate the solutions to SCD.
Alternatively, we adopted the Total Factor Productivity
(TFP) that was introduced as a productivity index for the ca-
pabilities of an enterprise in converting inputs into outputs
(Tiruvengadam et al., 2021). An increase of TFP corresponds
to the improvement of efficiency of SCM. Therefore, the
change of TFP (TFPch) is evaluated as a measure of SCD.
By using the Malmquist index method, ‘TFPch’ is the
product of efficiency change (‘Effch’) and technical change
(‘Techch’) (Haider et al., 2020). Note that ‘Effch’ is the prod-
uct of pure technological change (‘Pech’) and scale efficiency
(b)
change (‘Sech’); interested readers might find the details of
‘Effch’ in the aforementioned reference. ‘Techch’ is the
change of the production frontier that represents the possible
maximum output subjected to given input level. ‘Techch’ is
our focus since it is fully depended on technological progress;
moreover, ‘Techch’ is used to evaluate supply chains at ab-
stract levels.
In using ‘Techch’, the ratio of production frontier per year
is calculated based on the historical data in the previous year.
This is valid when the technical capabilities of an enterprise
are improving, i.e., the value of ‘Techch’ will be greater than
1. Digitizing supply chains will more or less improve the
efficiency of supply chains. In other words, when ‘Techch’
> 1, the enterprise is moving towards the direction of SCD.
The greater ‘Techch’ is, the better performances SCD brings
to the enterprise.
3.1.1 Selection of Input and Output Variables
Following common industrial practice, Table 1 shows the se-
lection of input and output variables in calculating ‘Techch’:
Total Revenue is selected as the output variable, and the costs
for Capital Stock, Labors, and Materials are selected as input
variables. Materials cost is calculated by subtracting labors
cost from Total Operation Cost. This study cited the financial
statement data from the CSMAR database (http://cndata1.
csmar.com/).
It is worth to comment that Capital Expenditure can also be
included as an input variable. However, it is ignored here since
Capital Expenditure and Capital Stock are overlapped.
3.1.2 Techch Calculation
Both of ‘Techch’ and ‘TFPch’ are calculated by using
the DEAP 2.1 software for data envelopment analysis
 Inf Syst Front

Fig. 2 General procedure for evaluation of SCD

(DEA). 7-year data from 2013 to 2019 of automotive distribution of the Malmquist index means was found
companies with complete datasets were used, and the in Table 2.
Inf Syst Front

Table 1 Selected input and output variables

Variable Source

Input 1 Capital Stock Cost Balance sheet

Input 2 Labors Cost Balance Sheet
Input 3 Materials Cost Total operation cost (from income statement)- Labor
Output Total Revenue Income statement

3.1.3 Results companies with incomplete or abnormal data are excluded,

Table 2 has shown that ‘Techch’ of Chinese automobile com-
panies has exhibited a downward trend from 2013 to 2019
with an overall declining percentage of 15.4 %. The reason-
able explanations are (1) technological upgrades in enterprises
have failed in catching up the markets’ demands and (2) prac-
ticing industry 4.0 and IP have increased the complexity of
supply chains to the level that beyond the management capa-
bilities of enterprises for effective SCM. ‘Sech’ has shown a
fluctuating trend but a slight increasing percentage of 1.4 %
from 2013 to 2019; however, this is insufficient to compensate
the decline by ‘Techch’. ‘Pech’ has shown an increase in the
first three years (2013–2016), but turned into a decline in
following years (2016–2019). According to the annual data
of each index, only the fluctuation trend of ‘Techch’ and
‘TFPch’ have followed the same trend pace, and it has showed
that ’Techch’ is the main indicator to determine the trend of
‘TFPch’.
3.2 Regression Analysis
3.2.1 Data Acquisition
The manufacturing industry has highly diversified types of
products and business modes of supply chains. To make ge-
neric observations with less impact by differences of products
and processes, automobile manufacturers are selected since
they make similar products with similar technologies and pro-
cesses. Since adopting new technologies usually takes some
ramp-up time to stabilize business operations, annual data was
used instead of quarterly data. For the completeness, the
and the data of 73 companies is used for regression analysis.
Table 3 shows the samples of descriptive statistic data.
3.2.2 Input, Output, and Control Variables
As discussed in the previous section, the selected output var-
iable is ‘Techch’. The result of ‘Techch’ in 6 years is gener-
ated by the Malmquist index. Accordingly, the panel data of
regression will also be in 6 years from 2014 to 2019.
Raw data of input variables are manually collected from
annual reports and publically accessible websites. Since lim-
ited data is available on technological implementations and
stages, input variables are treated as ‘dummy’ rather than
‘continuous’ variables. If the enabling technologies relevant
to FRs are cited in a data source, the value of the input variable
is set as ‘1’; otherwise, it is set as ‘0’. For example, when the
technological implementations include Internet of things (IoT)
or blockchain technology (BCT), the value for data acquisi-
tion is set as ‘1’. When the technological implementations
include Information Integration, Process Integration,
Enterprise Architecture, Technology Platform, or Industrial
Internet, the value for data fusion and processing is set as
‘1’. When the technological implementations include Data
Mining (DM), Cloud Computing (CC), or Big Data
Analytics (BDA), the value for Intelligent Optimization is
set as ‘1’. Certainly, the objectives of using these enabling
technologies are aligned with the corresponding FRs.
Other than input and output variables, enterprise scale is
selected as a control variable in regression, and it is quantified

Table 2 Distribution of Malmquist Index means Table 3 Descriptive statistic sample by total revenue
Year ‘Effch’ ‘Techch’ ‘Pech’ ‘Sech’ ‘TFPch’ Total revenue Median (billion) Mean (billion) S.D. (billion)
Year
2013–2014 1.087 0.916 1.02 1.066 0.996
2014–2015 0.996 0.965 1.008 0.988 0.961 2014 0.908 3.03 6.10
2015–2016 1.007 0.99 1.003 1.003 0.997 2015 1.01 3.38 6.87
2016–2017 0.992 1.009 0.985 1.007 1.001 2016 1.18 3.98 8.17
2017–2018 0.966 0.99 0.995 0.971 0.957 2017 1.31 4.47 9.59
2018–2019 0.936 0.982 0.953 0.982 0.919 2018 1.47 5.07 10.8
2013–2019 0.978 0.846 0.964 1.014 0.827 2019 1.62 5.53 12.3
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by the natural logarithm of the Total Assets. Table 4 lists all Table 5 Result of correlation analysis
variables used in regression analysis. Techch X1 X2 X3 Lncon

3.2.3 Regression Model for SCD Evaluation
The Panel Least Squares Method is used to evaluate the out-
come of SCD. Relationships of input, output, and control var-
iables are modelled as,
Y ¼ β0 þ β1 X1 þ β2 X2 þ β3 X3 þ β4 Lncon þ μ
Where Y is the performance indicator of SCD. X1, X2, and
X3 are the indicators for technological adoptions of data ac-
quisition, data fusion and processing, and IO, respectively,
Lncon is the natural logarithm of Total Assets, and µ is an
offset constant.
The correlation test has been performed on all variables,
and Table 5 gives its result. All of the correlations of the
output variable to input variables are significant, and it shows
that there exist causal relationships between input and output
variables.
Table 6 shows the result of the multicollinearity test for the
dependence of output variable on control variable. It has
found that there is no multicollinearity since all of VIF values
are much less than 10.
Eviews 10 is used to run the Hausman Test and Table 7
gives the outcome that tells the P-value is less than 1 %; there-
fore, a fixed effect model is used in regression analysis and is
results are given in Table 8.
3.2.4 Discussions
Table 8 shows that adopting enabling technologies for data
acquisition has a significant positive impact on SCD, the
Techch 1.000
X1 0.340*** 1.000
X2 0.345*** 0.681*** 1.000
0.242*** 0.321*** 0.342***
X3 1.000
-0.058 -0.076 -0.065
Lncon 0.032 1.000
*significant at the 0.10 level; **significant at the 0.05 level; ***signifi-
cant at the 0.01 level
ð1Þ
coefficient value 0.021705 verifies the importance of FR1.
Digitization data acquisition allows companies to collect
more data to track the states of raw materials, products,
material-handling tools, and inventories. Even if data is
analyzed and decisions are made in traditional ways, digi-
tizing data acquisition benefits to companies in (1) improv-
ing information granularity for better precision of SCM
and (2) promoting collaboration and cooperation among
shareholders by sharing and exchanges of dynamic data
over supply chains.
The positive effect of data acquisition digitization can be
magnified by exchanging and sharing data among partners.
With an increasing popularity of IoT, companies should dig-
itize data acquisition as early as possible since it becomes
inevitable in ever fiercely competitive business environments.
Data exchanges and shares help managers understand better
about their functional units since all of participators are
interacted and affected with each other in networked supply
chains.
Table 8 shows that adopting enabling technologies for data
fusion and processing has a significant positive impact on
SCD, the coefficient value 0.025038 verifies the importance
of FR2. Among enabling technologies for three FRs, the co-
efficient for FR2 is the maximum and its P-value is the min-
imum. This finding is logic and follows the rules of business
operations. Besides the initial value of acquired data, it can be
further fused, processed, integrated, and utilized to functional

Table 4 Variables used in regression analysis

Name Variable Connotation Type Relevant key words / Calculation

method

Data X1 The collection of all data that describes changes in entities or status Dummy Internet of Things; Block Chain etc.
Acqusition (such as data of materials, productions, operations, machines, and
transactions)
Data Fusion X2 Sharing all valuable information among all links and partners Dummy Information Integration; Process
and Integration; Platform; Industrial
Processing Internet etc.
Intelligent X3 Predictive optimization, diagnostic optimization and operative Dummy Data Mining; Big Data etc.
Optimization optimization
Firm size Lncon Continuous Ln(Total assets)
SCD Y Continuous Techch
Inf Syst Front

Table 6 Result of multicollinearity analysis Table 8 Result of regression analysis

Variable VIF 1/VIF Variable Coefficient Std. error t-Statistic Prob.

X2 1.93 0.51838 C 1.018918*** 0.042142 24.17829 0.0000

X1 1.9 0.525504
X3 1.16 0.865255
Lncon 1.01 0.989865
Mean 1.5
units at all levels and domains of businesses. Digitizing data
fusion and process adds values of acquired data over their
visibilities from own sources by others since fused data help
understand the correspondences of information from multi-
ple sources.
The results from regression analysis also implies infor-
mation islands are still the challenging issues to be ad-
dressed. Mutually isolated functional units create artificial
barriers for communication, coordination, collaboration,
and interoperation. Seamless data integration allows func-
tional units to obtain real-time data and respond changes
and uncertainties at their reaches at the earliest time to
increase the resilience of SCM (Zhang and Luttervelt,
2011). Digitizing data fusion and processing supports bet-
ter decision-making activities and consequently improves
the system performance in terms of the utilization of enter-
prise resources and adaptability and agility for changes and
uncertainties.
Table 8 shows that adopting enabling technologies for
integrated optimization (IO) has a significant positive im-
pact on SCD, the coefficient value 0.021989 verifies the
importance of FR3. Although the importance of IO is ver-
ified, the coefficient value is below our initial expectation:
when an enterprise fulfils the first two FRs, IO could be the
most important factors to affect the outcomes of SCD.
However, it sounds that existing techniques for IO seem
underperform partially due to insufficient data from the
physical world and biased and subjective optimization
criteria. Most of SCMs still rely on human managers to
make some decisions based on their experiences and au-
thorities. With an increasing level of automated
decision-making in SCM, the impact of IO on SCD is ex-
pected to be increased over time. By all means, enabling IO
will become the most critical task in maximizing the eco-
nomic values of SCD, enterprises are highly encouraged to
invest more on the digitization of IO for long-term poten-
tial benefits.
Table 7 Result of Hausman test
Test Summary Chi-Sq. Statistic Chi-Sq. d.f. Prob.
Cross-section random 16.754298 4 0.0022
X1 0.021705* 0.008898 2.439351 0.0152
X2 0.025038** 0.008736 2.866072 0.0044
0.021989*
X3 0.008936 2.460703 0.0143
-0.002524
Lncon 0.001848 -1.365705 0.1729
0.242643
R-squared
0.083199
Adjusted R-squared
F-statistic
1.521808
Prob(F-statistic)
0.006311
*significant at the 0.05 level; **significant at the 0.01 level; ***signifi-
cant at the 0.001 level
4 Discussion and Future Research
In this paper, the functional requirements of SCD are classi-
fied into three aspects: FR1− data acquisition, FR2− data fu-
sion and processing, and FR3− data-driven decision-making
supports, the digitizing solutions to these three FRs are iden-
tified; in particular, IO is identified as the solution for data
driven decision-making supports. The regression analysis
over the data from 73 Chinese automobile enterprises has
shown the positive effects of digitizing data acquisition, data
fusion and processing and IO on SCD. Developing digitized
solutions to these FRs can not only help enterprises in making
decisions for various business operations at the current stage,
but also help them cope with internal and external changes and
uncertainties over time. Digitized supply chains are expected
to meet markets’ demands dynamically for enterprises to gain
the competitiveness in the ever-changing market. The sug-
gested digitizing solutions to three FRs can be used the guides
for enterprises to advance supply chain management by
digitation.
As a future research plan, we will verify our hypotheses on
the impacts of developing digitization technologies to three
FRs based on data collected from the enterprises other than
those in the automobile industry. In addition, the level of IO
will be considered as a design variable to further explore the
impact of IO on the performance of SCD. It is out argument
that SCD can maximize its benefits only when the fully func-
tioned IO solutions become available, while existing tech-
niques on IO are still unsystematic and fragmented.
Author Contributions Conceptualization, L.H. and H.H.; methodology,
J.Y.; software, X.Z.; validation, L.H. and H.H.; formal analysis, investi-
gation, L.H.; resources, L.H.; writing—original draft preparation, L.H.;
writing—review and editing, L.H.; supervision, H.H.; project administra-
tion, L.H.; funding acquisition, H.H; re-organizing, editing and polishing,
Z.B. All authors have read and agreed to the published version of the
manuscript.

Funding This research was funded by National Key R&D Plan of China
under Grant No. 2016YFC0803207 and Chinese National Foundation for
Post-doctoral Scientists under Grant No. 2019M650455.
Data Availability This data can be found here: (http://cndata1.csmar.
com/)
Declarations
Informed Consent Statement Not applicable.
Conflicts of Interest The authors declare no conflict of interest.
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Publisher’s Note Springer Nature remains neutral with regard to jurisdic-
tional claims in published maps and institutional affiliations.
Lu Han is a Ph.D. student in the Department of Logistics Management
and Engineering at Beijing Jiaotong University. Her current interest lies in
Digital Supply Chain Management. Her papers have been published in
journals and international conferences.
Hanping Hou received his Ph.D. in Management from Beijing Jiaotong
University in 2009. He is a Professor in the Department of Logistics
Management and Engineering and serves as the Executive Director of
Logistics Research Institute at Beijing Jiaotong University. His current
research interests include Emergency Logistics, General Logistics
Engineering, Logistics Information Management, etc. He has presided
over a number of National Research Projects. His papers have been pub-
lished in numerous journals and international conferences.
Zhuming Bi received the Ph.D. degrees from the Harbin Institute of
Technology, Harbin, China, and the University of Saskatchewan,
Saskatoon, SK, Canada, in 1994 and 2002, respectively. He has interna-
tional work experience with the Nanjing University of Science and
Technology from 1994 to 1998, the City University of Hong Kong in
1997, the National Research Council Canada from 2003 to 2007, the
Northern Ireland Technology Centre (NITC) in 2008, and the National
Institute of Standards and Technology (NIST) in 2016. He is currently a
Professor of Mechanical Engineering at Purdue University Fort Wayne,
Fort Wayne, IN, USA, and his current research interests include industry
4.0, robotics, mechatronics, Internet of Things (IoTs), digital manufactur-
ing, automatic robotic processing, and enterprise information systems.
Jianliang Yang received his PhD in the Department of Logistics
Management and Engineering at Beijing Jiaotong University in 2018.
He is a Lecturer in School of Economics and Management at Beijing
University of Chemical Technology. His main research fields include
Intelligent Emergency Logistics, General Logistics Engineering,
Innovative Ecology, Green Manufacturing, etc. He has published many
papers in Library Hi Tech, Industrial Management & Data Systems,
Journal of Beijing Jiaotong University (Social Science Edition), and other
journals.
Xiaoxiao Zheng is a Ph.D. student in the Department of Engineering and
Project Management at Beijing Jiaotong University. Her current interest
lies in Project Management. She has published a paper in Journal of
Business Economics and Management.