Digital Supply Chain

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Ladies and Gentlemen, Goodmorning. I am Siddharth Chandrasekar and in the next few minutes I am going to help you understand the digital supply chain! I want to start of with a show of hands…In this room how many of you have downloaded music on to your computers or mobile phones? And how many of you have heard if not used iTunes! Thank you…

So as this dip stick survey revealed…the days when Robinson Crusoe lived with his Man Friday are over. Traditionally people watched videos, movies on television and read the newspaper.

However today the personal computer and the mobile phone have replaced the TV. This is the age of the digital consumer – you and me. The consumer tha listens to music from iTunes on his phone, listens to an audiobook in his iPod and watches movies on his laptop!

IBM’s 2008 global online survey of consumer digital media and entertainment habits revealed that people are adopting digital content services, such as social networking and videos, on mobile phones and personal computers at an accelerated pace. The graph shows that there is a high adoption of premium video services for the traditional TV with U.S. topping the chart. The US also had high adoption of online TV/video sites such as HULU, or YouTube, at close to 40 percent. Japan, Germany and India had the highest adoption of mobile services, including Internet data plans and mobile content plans for video and music.

The demands of digital consumers of anytime-anywhere content, via portable media, broad band and wireless services are felt predominantly in the media and entertainment industry that includes music, movies, games, books, stock photography etc. Other industries include e-learning and software. With new devices and new methods of storing and delivering file based content, it seems like the time has come to reconsider supply chains.

So what is a digital supply chain?A digital supply chain can be defined as the process of delivery of digital content like music and videos from the supplier (content provider) to the end consumer. So the supply chain has three main components – content, capability and the consumer.

Encoding and ingesting The first stage of the digital supply chain involves converting the media from a variety of sources to a high-resolution file. Since automation of this encoding process is difficult human intervention is required to handle the media. After the conversion the file is enhanced with metadata and is stored in a digital vault. Metadata is filing system – For example an episode of Apprentice will be given the tag- Australia, Apprentice, Episode 10.VaultingThe digital vault is a large virtual storage area from which files are retrieved for receiving an order from a customer. Content processing and transformationContent processing involves transcoding, watermarking, cropping etc. that is usually automated.Packaging and distributionFinally the media file is packaged with the appropriate metadata for delivery to the customer.

Just like in a traditional supply chain, a digital supply chain generates value as it moves through the different stages from the content provider to the consumer. Secondly, In contrast to the traditional supply chain, the digital supply chain represents a highly efficient processing environment, minimum use of physical media and increased visibility into storing and sharing content. Thirdly there is high emphasis on security and traceability. Data encryption ensures that piracy is reduced in a pure digital supply chain. Unlike in a traditional supply chain, digital content does not need to go through freight or warehouses. Digital object identifiers and metadata allow for content to be tracked easily. The ability to encrypt the content and therefore reduce risk of piracy.Stocking: Unlike the traditional supply chain where suppliers planned, stocked and delivered physical goods, within the digital supply chain, one copy of the content is received in inventory sold a million times over without restocking.

The digital supply chain allows for collaboration between the supplier and the consumer. This not only reduces costs of design but also allows for accelerated product time to market. True on-demand product availability: The vendor needs to invest little in stocking digital inventory. As soon as a consumer places his order, the vendor can retrieve a copy of the file and sell to his consumer.

When there are several players in the digital content market, top players are distinguished by their superior customer service. For example: The download of a particular music video is easy through iTunes when a customer already has an iTunes account. If he or she believes that the music video quality downloaded through iTunes is better than that of Hulu.com he/she will stick to iTunes. Customer services also include quality of the content, ease of transaction, speed of download, speed of activations and ease of refunds

Another important advantage of the digital the capability of co-creation in terms of size, numbers, format etc. In a digital supply chain, collaboration is not simply between a supplier and buyer, but involves the end consumer from the idea generation stage.

Film studios, broadcasters, global media enterprises and advertising agencies use processes like work order management, library management, resource scheduling, element tracking, digital ordering and distribution. Their digital supply chain provider usually handles asset management, metadata tracking, billing and notifications and strong media industry relationships.Some of these media and entertainment enterprises use the digital supply chain very profitably. Take the case of Walt Disney. While Walt Disney continues to employ traditional supply chain practices such as the demand-driven replenishment system for its DVD business, it has succeeded in implementing pure content distribution via the digital supply chain (The AMR Research Supply Chain Top 25 for 2009). Warner Bros. on the other hand uses the Media Asset Retrieval System (MARS) that acts as a single end-end source to store, access, allow downloads and manage content

While it took approximately three years to sell one billion songs, Apple sales from $4B to $5B took only five months with sales of the iPod and iPhone. This was triggered by Apple’s investment in a digital supply chain for its iTunes software. The digital supply chain increased agility through higher cash flows, decreased turn-around times with digital content and reduced time to market through a recognized digital store front. Today iTunes is in the top league as a retail store for music and it’s digital supply chain moves more than music. Apple’s supply chain heavily concentrates on technology and can move videos, television, games, and publications. This means that Apple’s supply chain not only distributes to retailers (for hardware like iPhone, iPod) but also to broadband providers and even to direct consumers (C.J. Wehlage 2008).

The manner in which digital infrastructure resources such as processing power, storage and network are utilized is highly variable driven by great fluctuations in demand. For example in the case of content processing, periods of limited utilization are interspersed with phases of high activity. While content processing may sit idle for several hours with the system is waiting for orders to come in, when a big order arrives, a large pool of processing resources would be required. Such fluctuations pose a huge financial challenge to the digital supply chain. Since the system needs to be scaled for peak loads, resource constraints directly translate into large capital expenditures and business risk for the media enterprise. Variability in market demand based on the entrance and exit of digital content providers might result in under or over allocation of infrastructure resources of content processers.

Media, entertainment and other industries on the content value chain are in the midst of a transition from the physical, broadcast world to a fully-connected digital world. To compete effectively in this time of transformation, every enterprise has to accelerate the move to a digital supply chain. And in order to keep pace, market players within the digital supply chain need to innovate while distributing rich digital media In the future, enterprises will be judged by their capacity to distribute digital content securely. From newsletters, distance learning content to distribution of financial information, rich media content will permeate every aspect of the modern enterprise. Content generators, digital retailers and consumers will be connected through efficient digital supply chains that will allow rapid transferring of content from the origin to the destination (IBM 2001). In the following years, the cost of storage will drop significantly, making it possible to store significant amounts of digitized content. New devices, such as digital video recorders embedded in TV set top boxes have already hit the market, giving customers instant access to content.

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Digital Supply Chain - Presentation Transcript

The Digital Supply Chain
A presentation by Siddharth Chandrasekar
Once upon a time…
But now…
Trends in digital media
Online access to digital content is common in
Media & E-learning Software
Entertainment
Music, Movies, Games, Books, Photo Stock …
What is a digital supply chain?
Consumer
Content
Capability
Broadly involves the process of transferring digital content (music/video) from the content provider to the end consumer online and in a suitable format
The digital supply chain process
C
O
N
S
U
M
E
R
Content Provider
Digital Retailer
Physical Retailer
Content Processor
Similarities and Differences
Metadata
Encryption
Advantages – Time to Market & On-demand product availability
Advantages – Customer Service
Advantages – Co-Creation
Media & Entertainment Industry
Wireless,
Cable, Broadband
Physical media on demand
The Case of Apple
Problems: Infrastructure Resources
Variability in Market Demand puts pressure on infrastructure resources
Conclusion & what’s in store for the future?
Questions