Monday, November 24, 2014

Mix & Mingle Online - Social Media Use in Supply Chain Management

Have you ever thought about social media in the context of supply chain management (SCM)? To be honest - I had not. But when we talked about the impact of technology and the web on SCM in class, I started to wonder about the role of Twitter, Facebook, LinkedIn & Co. in modern supply chains. And indeed - social media has become an integral part of SCM across all industries.
A paper by Daniel E. O’Leary on the use of social media in the supply chain explains what the big advantage of social media is from an economist's perspective: the gathering of information in order to reduce asymmetric information (let us remember from economics that asymmetric information is a type of market failure that we love to avoid whenever this is possible!). 
And why is that? Well, in a supply chain, various pieces of information are bound to particular processes and cannot be accessed all at once by any individual. If information is now being drawn from a common basis, i.e. a common information platform, it can be spread more evenly across the different sections of a supply chain. This platform (I named it that way to make the idea more tangible) is then not only fed by experts (which is usually the case) but also by customers (who now become directly involved in the supply chain process).
O'Leary further elaborates on the effects of social media on SCM (I present only four out of five as one of his arguments does not seem to be very compelling):
  1. The integration of information into supply chain transaction processing systems (e.g. RFID)
    • Social media provides a new platform (he calls it "context") via which information about supply chain events can be communicated and shared
  2. The change from unidirectional to multidirectional communication
    • Experts and customers are directly involved in the supply chain process and turn communication between those in the supply chain (company) and themselves into a dialogue
  3.  Insights into [potential] customer's thoughts that could otherwise not be gained
    • [Reputation of company]
    • we remember from statistics - the larger the sample size, the more reliable our findings, i.e. the risk of  asymmetries of information due to a biased source of evaluation can be reduced
  4. The increase in velocity when it comes to the generation and processing of information
    • In particular when knowledge comes in through social media that is directly linked to knowledge management systems (the system is being fed more quickly)
To illustrate some of the results of the aspects mentioned, it might be worth looking at this chart, as it clearly and in a very concise way shows the positive affects on the supply chain:

In addition to the advantages of social media in SCM already described, there are even more benefits. Ed Rusch, who is vice president of corporate marketing at Elemica, emphasizes in his article "Using Social Media In The Supply Chain" the potential for innovation and improvement of existing processes implied in the use of social media in SCM. 

But - can all these findings be quantified? The answer is yes! Apparently, the logistics and supply chain industries can generate profits from the use of social media.
In the area of market intelligence, customer engagement, business intelligence, and leads, companies reported a significant impact of social media use (based on a survey: click here):

Also very interesting is that these companies found LinkedIn and Twitter very beneficial (55 - 60%), while only 15% made the same statement about Facebook.

Although I tried to base this blog article this time less on personal experience but more on academic papers and professional articles, there are still some questions for which the answer does not seem to be obvious:
  1. Apart from the increased velocity of generating and processing information due to its easy accessibility - is social media really the unique tool described in O'Leary's paper? When a company uses Facebook or Twitter, it still needs followers in order to be able to spread its message. So where is the big difference to, let us say, frequent updates on the company's website or e-newsletters? 
  2. A company, as already mentioned in question 1, needs followers. And the followers should and will be in particular customers and potential customers. But - I need a very good reputation already BEFORE I can use social media tools efficiently due to the fact that only if the company and its products were popular, people would like to or at least consider to follow it.
  3. Also, especially when the company IS popular, there might be some people who just try to use the company's profile for their own purposes. The more people (and this holds true for a virtual room, too!) are gathered in one place, the higher the risk of uncontrollable events.
  4. And finally, although the impact-study mentioned in the last paragraph of my blog gives some basic information on the benefit of social media use in SCM, it does not provide us with "real" facts and figures. It would be very interesting to know what an impact of 80% means in financial terms.
Have a great day and please contact me if you know the answers to any of these questions! :-)


  • file:///C:/Users/reisefreak/Downloads/SSRN-id1963980.pdf

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