Traditional vs Digital Supply Chain Processes - Video & Lesson Transcript | Study.

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Activity 5: Read the following text and answer the questions inside it.

Traditional vs Digital Supply Chain Processes

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? We'll look at the difference between traditional and digital supply chain processes.

1º) Which Digital products do you know?

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?

2º) Would be different to get a book nowadays than 30 years ago? What differences do you see?

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 rst 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.

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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

While there is still some manufacturing that gets done with digital products, it is done very differently than the
traditional manufacturing. In the case of a physical product, like a paperback, the company must have space to store
the materials, like paper and ink that they will use in manufacturing. Plus have a factory or plant to turn those
materials into a product.

With digital products, most of the manufacturing can be done in an office and there are no physical materials to store.
For example, manufacturing of a physical book involves designing a book cover, setting the words with the font and
images that the publisher and author want, and then sending the digital copy over to the factory. The factory, which is
often near or connected to a warehouse for supplies, then prints physical copies of the book and binds them.

But in the digital process, once the digital copy with the cover and type set is finished, that's it, there is no factory and
no warehouse with materials.

4. Distributing

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 Traditional vs Digital Supply Chain Processes - Video & Lesson Transcript | Study.com

Besides manufacturing, distributing is also another area that is very different for digital products compared to physical
ones. With physical products like a paperback, the manufacturer and customer usually must have space to store the
inventory or finished product waiting to be sold.

For example, a bookstore must have to the space to store books that are not on the shelves. Likewise, the publisher has
warehouses to store books that are ready to go as soon as the bookstores order more. But with digital products, there's
no need to store inventory in a warehouse. Instead, it is stored on a computer server and passed on from there.

5. Selling to end user

As we've seen with traditional supply chain processes, the manufacturer generally does not sell directly to the end user.
You don't buy a physical book from a publishing company but from a bookstore. But with digital products,
manufacturers can sell directly to the end user. For example, you could go onto the website of the publisher and buy
the book, or buy it from them via an online retailer, like Amazon. The point is, there are choices that aren't there with
physical products.

3º) Following the steps showed in the text, DRAW a traditional supply chain and a digital supply chain and
mark the main differences between them.

Summary
The supply chain process is the different steps businesses must go through in order to get a product into the hands of
consumers. The traditional supply chain process involves taking raw materials and making a physical product that is
then transferred to a consumer. In contrast, the digital supply chain process involves creating a digital product and
delivering it to the customer.

Traditionally, the supply chain process involves fathering of raw materials, acquiring materials, manufacturing,
distributing, and selling to the end user. With digital products, these steps change. In particular, manufacturing does not
require physical materials and factories, distribution does not require storing a physical inventory, and companies have
the option of selling digital products directly to the consumer.

4º) In your opinion, which supply chain is easier to manage? What kind of different experts needs each chain?

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