Disruptive technologies: Integration in existing supply chain processes

Niehues, Stephanie; Gürpinar, Tan Conference Paper Disruptive technologies: Integration in existing supply chain processes Provided in Cooperation with: Hamburg University of Technology (TUHH), Institute of Business Logistics and General Management Suggested Citation: Niehues, Stephanie; Gürpinar, Tan (2019) : Disruptive technologies: Integration in existing supply chain processes, In: Kersten, Wolfgang Blecker, Thorsten Ringle, Christian M. (Ed.): Artificial Intelligence and Digital Transformation in Supply Chain Management: Innovative Approaches for Supply Chains. Proceedings of the Hamburg International Conference of Logistics (HICL), Vol. 27, ISBN 978-3-7502-4947-9, epubli GmbH, Berlin, pp. 265-296, https://doi.org/10.15480/882.2473 This Version is available at: https://hdl.handle.net/10419/209375 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by-sa/4.0/ Proceedings of the Hamburg International Conference of Logistics (HICL) – 27 Stephanie Niehues and Tan Gürpinar Disruptive Technologies - Integration in Existing Supply Chain Processes Published in: Artificial Intelligence and Digital Transformation in Supply Chain Management Wolfgang Kersten, Thorsten Blecker and Christian M. Ringle (Eds.) September 2019, epubli CC-BY-SA4.0 Keywords: Process Innovations, Blockchain, Additive Manufacturing, Supply Chain First received: 19.May.2019 Revised: 28.May.2019 Accepted: 23.June.2019 Disruptive Technologies - Integration in Existing Supply Chain Processes Stephanie Niehues1, Tan Gürpinar1 1 – TU Dortmund Purpose: Based on technological progress, companies innovate and design a variety of new processes to be implemented in order to gain a competitive advantage. Nevertheless, many companies face issues during the initial integration of these emerging technologies with their existing business processes. This paper will collect and analyze existing procedures to leverage process innovations by means of emerging informationand production technologies with disruptive potential. Methodology: An exploratory research of relevant procedures for the implementation of new processes is chosen to give a systematic overview of existing models. Furthermore, requirements for the technology integration of emerging information technologies and production technologies are collected within a systematic content analysis and based on these requirements, the existing models are compared and evaluated. Findings: None of the existing models meet the requirements of a technology-based integration of process innovations. In order to integrate particularly emerging technology based innovations into business processes, existing models must be further developed, particularly with regard to the flexibility requirements of industry 4.0 process changes. Originality: This paper collects and compares all important models for the implementation of process innovations, based on requirements specific to the integration of emerging informationand production technologies. Blockchain technology and additive manufacturing are used as exemplary current technologies with disruptive potential. 266 Stephanie Niehues and Tan Gürpinar 1 Introduction The development of emerging technologies, especially of those that have a disruptive potential, are increasingly changing existing business processes and affecting the entire supply chain of organizations. In recent years, more and more administrative processes have become obsolete and new processes based on given disruptive technologies have diffused into the processes of organizations. Many of these so called process innovations have been integrated into existing business processes without a strategic approach. One important field to represent process innovations is the field of IT technologies, where we have process innovations like the blockchain technology that has the potential to radically change business processes. Organizations from various industries already started pilot projects to transfer the technology to their specific case of application. The blockchain, representing a ledger of data that gets distributed over several network nodes, builds a base not only for digital money transactions, but also for chaincode, the so called smart contracts, which represent the missing link for the realization of the vision of Industry 4.0 and the Internet of Things. (Xu, Weber and Staples, 2019, p. 3 ff.) Apart from IT technologies, we also have manufacturing technologies with disruptive potential. Building up on the digitalization of processes, new product manufacturing possibilities like additive manufacturing are out into place. The technology also possesses an enormous potential to affect the entire supply chain by creating the ability to save costs and pare down process steps in several stages (Moreira, Ferreira and Zimmermann, 2018, p. 262) Disruptive Technologies - Integration in Existing SC Processes 267 In this paper, the most important models for the integration of processes will be listed in order to evaluate their suitability for the integration of disruptive technologies like blockchain and additive manufacturing along the following research questions:  What requirements can be seen for the integration of process innovations, with emphasis on new technologies?  In which areas do existing integration models have to be adapted, in order to achieve a structured integration of new technologies? 2 Theoretical background 2.1 Innovation Innovation, as defined by Porter, includes both technological improvements and better methods or ways of doing things. This can manifest itself in product changes, process changes, new marketing approaches, new sales forms and new concepts on scope and reach. (Porter, 2014) In the result-oriented view, innovations are consequently understood as "technological, economic, legal and social innovations in the form of products, processes, contract forms and distribution channels". (Corsten and Gössinger, 2016, p. 6 ff.) The various innovations are differentiated in more detail by describing the subject of innovation (performance, process, market or social), the degree of innovation (incremental or radical) and the reference unit for determining the novelty characteristic (business-oriented, customer-oriented, competitive) (Schallmo and Brecht, 2017, pp. 23–24). 268 Stephanie Niehues and Tan Gürpinar 2.2 Process Innovations Process innovations can be described as process improvements which include product creation process procedures and/or information distribution procedures. This type of innovation focuses on technologies that make processes more effective and consistent (Winkler and Kaluza, 2008). In combining the terms "process" and "innovation", process innovations can thus be understood as the renewal of an entire process or of individual process components (e.g. tasks and services). With regard to the degree of innovation, it should be noted that both radical and incremental further developments of processes occur. (Schallmo and Brecht, 2017, p. 25) To build the link to disruptive technologies, blockchain technology can be seen as a radical process innovation by influencing the entire settlement of payment processes that can be secured and automatized (Holotiuk, Moormann and Pisani, 2019, p. 199 ff.). Furthermore, a process innovation can be represented by the adoption of technically new or significantly improved production methods (OECD, 2005, p. 53; Raymond and St-Pierre, 2010, p. 48). Thus, the introduction of additive manufacturing can be seen as a radical process innovation for organizations and supply chains. (Marzi, et al., 2018, p. 185). 3 Methodology To evaluate existing models for the integration of new process, in a first step, existing models are collected within a systematic review following the approach of Fettke & Loos. After the systematic collection, the models are documented, in order to evaluate them on the basis of set criteria. (Fettke and Loos, 2004, p. 3) Disruptive Technologies - Integration in Existing SC Processes 269 In a second step, the requirements to evaluate the models are collected. Therefore we take into account requirements for the integration of innovations in general and requirements of ITor rather production technologies for their integration in supply chain processes. Based on those requirements, the existing models are compared in regard to their suitability for the integration of disruptive technologies in existing supply chain processes. 3.1 Existing models for process management 3.1.1 Allweyer The business-process-management-cycle of Allweyer (Figure 1) is primarily focused on IT-related processes, but can also be simultaneously applied to different fields (Allweyer, 2012, p. 89). Figure 1: Business process management cycle (Allweyer, 2012, p. 91) 270 Stephanie Niehues and Tan Gürpinar The first phase of the cycle, strategic process management, essentially refers to the design of the company and its relations with the environment. The next phase, "process design", has the task to identify, document and analyze the business processes of a company (Allweyer, 2012, p. 91 ff.). The third phase of the business process cycle deals with the question of how the designed business processes will be put into practice. (Allweyer, 2012, pp. 145, 314-315). The last phase, "process controlling", closes the business process management cycle. Essential tasks are the planning, monitoring and evaluation of the processes carried out during operation. (Allweyer, 2012, p. 385). 3.1.2 Brecht Brecht's process model (Figure 2) contains five total phases, each of which is based on one another. These five phases are comprised of multiple subsections. Figure 2: Procedural model by Brecht (Schallmo, Brecht and Ramosaj, 2018, p. 38) Disruptive Technologies - Integration in Existing SC Processes 271 In the first phase of strategic process design, the strategic business areas of the company are analyzed with the help of process architecture planning. In the second step, the strategic process design is refined until it is possible to collect the necessary reference variables needed to measure the new process performance. This is done so that not only will the processes of the developed process map be implemented as far as possible in the strategic process control phase, but they will also be regularly examined with regard to their output. In the phase of operational process control, the developed processes of process design are planned and implemented (Brecht, 2002, p. 207 f.). The process development phase represents the activities that evaluate the process potential gained while also initiating possible process optimizations. (Brecht, 2002, p. 202) 3.1.3 Davenport The process model of Thomas H. Davenport can be divided into five phases, as shown in the figure below (Figure 3). Figure 3: Procedural model by Davenport (Davenport, 1997, p. 25) In the first phase, the processes that are to be improved or adapted must be identified. As such, all processes of the process map are examined with regard to this aspect. In the second phase the central question is where to start improving and changing processes in order to achieve the greatest possible effect. (Davenport, 1997, p. 36). In the third phase, the goal is to determine the future characteristics of processes and then generate specific, measurable criteria for said processes. It 278 Stephanie Niehues and Tan Gürpinar overarching strategy needs to be developed and integrated in a flow-oriented way. (Wellbrock and Göpfert, 2015, p. 291) 3.2.2 Technology-centered requirements Consideration of challenges and opportunities Integration challenges and opportunities can be identified by the organization through an assessment of the existent technologies and their environment. For IT technologies this would also include business applications and supporting infrastructure. Required for a consideration in terms of challenges, it is necessary to raise one-time and time-phased costs, as well as risk related information(Nahass, Smith and Curragh, p. 4) Technical decisions As a further requirement category, the organization needs to take professional decisions regarding the actual technical integration. Therefore, it is necessary to consider adaptions to the current technological infrastructure and possible upgrades to be applied in order to fulfill future needs. (Delany and D'Agostini, 2015, pp. 22–25) Another aspect of interest would be the degree of autonomy that plays a particularly important role for IT technologies. Therefore, (Hasselbring, 2000, p. 35) it is a frequent requirement to have technologies that are about to be integrated, remain autonomous. (Nahass, Smith and Curragh, p. 4). Process and product innovation In many areas where innovations take place, they do not take place independently. Various innovations are mutually dependent. This applies in particular to the implementation of process innovations. Thus, the introduction of new process technologies, such as additive manufacturing, is a Disruptive Technologies - Integration in Existing SC Processes 279 component of process innovations. (Pleschak and Sabisch, 1996, pp. 20– 23). "Process and product technologies often are equal partners in innovation because process technology has to be in place to support new product innovations and without this capability new product developments will fail." (Brown, 2001, p. 467) Under this assumption it follows that a profound coordination between product and process innovation is necessary in a reciprocal relationship (Lischka, 2011, pp. 18–23). Strategy to integrate the technology In order to finally introduce and manage new technologies, it is important to develop a vision that is easily transferable to a technological strategy. This strategy will also strongly support the aforementioned aspect of staff involvement, because only those who know the purpose and the goal of process change will fully support the integration process (Harrison, 1990, p. 165). Furthermore, a technological edge over competitors can only happen if the supply chain is formulated with a broad production strategy and is implemented together with all its partners (Birasnav and Bienstock, 2019, pp. 143–144). 3.2.3 Organizational-centered requirements Planning and structured approach First and foremost for the organizational aspects, early planning activities and a clear understanding of the technology's attributes and functions are essential requirements for a successful integration. This stage is strongly connected to the organization's business model and builds the basis for several existing integration approaches to be chosen from. (Hasselbring, 2000, pp. 33–36) 280 Stephanie Niehues and Tan Gürpinar To get a clear understanding of the technology, the organization should examine key attributes, considering all areas from which various requirements may possibly originate. Following Gollapudi, these ten attributes are key for an examination of the proposed technology: usability, interoperability, common business views, agility, scalability, reliability, openness, manageability, infrastructure and security (Gollapudi, Jangeti and Kotapati, 2012). Holistic approach Moreover, an important aspect is that the integration approach supports all aspects of the process innovation: from planning to introduction phase. A holistic approach to the integration of disruptive technologies is necessary. Through a holistic approach and thus given transparency throughout all phases of the innovation project, necessary corporate structures that are affected by the innovation are taken into account and can be included in the transformation process (Wilfling, 2013, p. 44). Complexity reduction For most companies, innovation processes are unique because they cannot be structurally located in the normal organizational structure. They run parallel to most processes and usually affect several departments. As a result, projects and especially innovation projects are conspicuously complex due to their structure (Ahsen, 2010, p. 10). Finding the right measure of complexity is therefore a major challenge. An important aspect of complexity control is therefore to break down the core task and divide it into several sub-tasks. (Pleschak and Sabisch, 1996, p. 29) Disruptive Technologies - Integration in Existing SC Processes 281 Control mechanism Control of the process is an important instrument in process management and in every management task. Controls are used to check the effectiveness of actions and ensure the quality of results. Often, the control of an activity takes place after its completion. Due to the long period of strategic processes, such as innovation processes, a final check alone is not sufficient. Further controls during the course of the project are necessary (Hungenberg, 2014, p. 369; Wellbrock and Göpfert, 2015, p. 291). So-called milestones in the course of the project are planned as control points. These can be seen as points at which sub-sections are completed. Hence, these milestone checks are necessary to determine if there is satisfactory progression within the project (Hungenberg, 2014, p. 306). Methodological instruments Methodological competence is particularly important in project management. Project planning and controlling instruments must be understood and applied. These competencies are a particularly important means of achieving project goals and adhering to time and resource constraints. (Hölzle, 2007, pp. 15–17). A well planned, methodological approach to problems aids in both reducing and structuring the workload (Ahsen, 2010, p. 72). The importance of sufficient planning and targeted control methods in project management can be statistically proven in most cases (Albers and Gassmann, 2011, p. 494). Flexibility Enhancement Another evaluation criterion is the freedom associated with a flexible innovation process design. In general, many different solutions can be applicable in this regard. However, in order to achieve the best possible solution, 282 Stephanie Niehues and Tan Gürpinar subject-specific decisions are necessary (Pleschak and Sabisch, 1996, p. 57). Thus, an ongoing adaptation of the project to the developing conditions is essential in order to prevent disruptions over the course of the project (Pleschak and Sabisch, 1996, p. 168). It is often a challenge to find the balance between the necessary freedom and the necessary room for maneuvering. Additionally, a sufficient structure with measurable and tangible goals helps to achieve the best possible project result. As a final step of the chapter, the requirements can be summarized and assigned to the higher level HTO-categories, as can be seen in Figure 8. Disruptive Technologies - Integration in Existing SC Processes 283 Figure 8: Summary of requirements The integration of technological process innovations requires employees within the entire supply chain to develop a precise understanding of the technological components and their characteristics. Furthermore, it is important to pursue a clear integration strategy to consider challenges and opportunities. On the organizational side, a clear determination of existing 284 Stephanie Niehues and Tan Gürpinar processes and responsibilities has to be achieved. How these aspects are addressed by current models will be analyzed in the next chapter. 4 Model Evaluation In order to examine the different models and make them comparable, the following table compares them with regard to the requirements for the integration of technologies as process innovations in corporate structures. The evaluation is based on the above-mentioned literature sources, which were also used for their brief introduction. Three categories are used in the evaluation in order to ensure the clarity of the valuation and to obtain unambiguous evaluations without much dispersion (Ahsen, 2010, p. 49f). The three evaluation categories for the models are "fully satisfied" (+), "partially satisfied" (0) and "not satisfied" (-). Disruptive Technologies - Integration in Existing SC Processes 285 Table 1: Model Evaluation Allweyer, 2012 Brecht, 2002 Becker, 2012 Davenport, 1997 Österle, 1995 Schallmo, Brecht, 2017 Schmelzer, Sesselmann, 2013 Motivation of the Staff - - + 0 - 0 + Strategy to Adapt Changes - 0 + - 0 0 0 Consideration of Challenges and Opportunities - - 0 + + + - Technical Decisions - 0 + 0 + + 0 Process and Product Innovation - 0 + - 0 0 0 Strategy for Technological Integration 0 - - - + + - 286 Stephanie Niehues and Tan Gürpinar Allweyer, 2012 Brecht, 2002 Becker, 2012 Davenport, 1997 Österle, 1995 Schallmo, Brecht, 2017 Schmelzer, Sesselmann, 2013 Planning and Structured Approach + 0 + + + + 0 Holistic Approach + 0 + 0 0 + + Complexity Reduction - - - - 0 0 0 Control Mechanism + + 0 + + + + Methodological Instruments + + + + + + + Flexibility Enhancement 0 0 - - 0 - 0 Disruptive Technologies - Integration in Existing SC Processes 287 5 Findings The evaluation table shows that a model, holistically oriented towards technological process innovations, is not yet available. It becomes obvious that especially aspects from the technology cluster are underrepresented in current models. Especially in terms of challenges and opportunities, as well as technological decisions to be made, organizations have to consider much more far-reaching aspects. In particular blockchain technology contrasts with traditional technologies that used to aim at the optimization on operational level. In contrast, technical decisions related to the blockchain architecture, rights and obligations of the network nodes and the related consensus algorithm affect the supply chain on a much more strategical level. (Vasilievich Babkin, et al., 2018; Queiroz, Telles and Bonilla, 2019) Also when considering the integration of additive manufacturing, it is particularly important to formulate technical decisions precisely in advance and to select a suitable processing method on that basis. (Dwivedi, Srivastava and Srivastava, 2017, pp. 975-977) In addition to the processing method, the procurement structure of materials in the supply chain, as well as the after-sales services, the logistics and expenses are further aspects integration models would need to consider. (Lindemann, et al., 2012, p. 179) Above all, the integration challenges of additive manufacturing lie in the production process itself. It is important to note that production speed and quality cannot be compared with other processing methods. (Dwivedi, Srivastava and Srivastava, 2017, p. 975) 294 Stephanie Niehues and Tan Gürpinar Hungenberg, H., 2014. Strategisches Management in Unternehmen. Ziele - Prozesse - Verfahren. 8th ed. [e-book]. Wiesbaden: Springer Gabler. <http://dx.doi.org/10.1007/978-3-658-06681-9>. Kamble, Sachin; Gunasekaran, Angappa; Arha, Himanshu (2019): Understanding the Blockchain technology adoption in supply chains-Indian context. 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