劉大成：數字化時代全球供應鏈體系變革（English Version）

Professor Wong, Thank you for your introduction.

There are 4 main points in my speech. At first, the global supply chain has leapt from scale economy to network economy, and then to scope economy. That is, it has leapt from pursuing zero marginal cost to pursuing zero absolute cost. Secondly, digital technology and its products help the supply chain upgrade comprehensively from the four aspects of perception, transmission, decision-making and implementation. Thirdly, the trend of anti-globalization is obvious. Flexible supply chain, short supply chain and regional supply chain have triggered a comprehensive change in China's supply chain. Fourthly, the supply capacity is far greater than the demand capacity. The global supply chain has turned to the "consumer-focused" mode. The supply chain 4.0 supported by digitalization has arrived.

1. From information era to network era, then to digital era

The video in the slide is the first AI virtual student in the Computer Science Department of Tsinghua University in 2021. Her name is Hua Zhi-bing. In the next four years, she will study and grow in Tsinghua University as a real student until graduation. If only on the Internet, you will not be able to recognize her true or false. This may be the digital age.

In the digital era, every enterprise and entrepreneur actively embracing digitalization is looking for opportunities to leap from the original scale economy, network economy to scope economy. Taking manufacturing enterprises as an example, Elon Musk, the Iron man who looks up to the Mars, is one of the best. Elon Musk takes the migration of earthlings to Mars as his goal and has built a huge business structure with zero absolute cost.

In 2004, Elon Musk acquired Tesla company established in 2003. In order to make the absolute cost of energy driven by pure electric vehicles approach zero, Elon Musk purchased SolarCity in 2006, making free solar energy the main power energy for future vehicles, and will change Tesla car roof into a solar energy collection device. In order to deploy car charging piles globally at the lowest cost, and open Tesla pure electric vehicle technology to the world in 2014, numerous pure electric enterprises have entered this market, volunteered to help Elon Musk expand the coverage of charging piles, and also cultivated future solar energy users.

Tesla adopts video technology as the path to realize automatic driving technology instead of quantum wave technology and laser radar. Because the latter two technological paths still adopt scale economy, and strive to take the marginal cost tending to zero as the goal of market competition. Tesla, on the other hand, will adopt the path of scope economy to realize that the absolute cost tends to zero, because video in unmanned driving is just like the timing function in smart mobilephones. Under the cost sharing of multiple functions, the timing cost can be ignored.

After Apple launched the smart phone with timing function, Nokia, the head enterprise of the function phone with call as the core, had to leave the market. However, Steve Jobs' biggest exploration in the scope economy is not the iPhone or Macintosh computer, but the system of iPod + iTunes. A song can be sold for 99 cents in the software plus hardware plus content system constructed by Steve Jobs. Song creators, record companies and Apple platform obtain 33 cents each. Now Apple Music platform has 400 millions subscribers and 60 millions paying users. Apple has launched App + iStore on this basis. Every user will pay a high Apple tax, the absolute cost of which tends to be zero.

The first two examples are based on production enterprises, and the typical cases of commerce and circulation should belong to Amazon. Jeff Bezos builds a supply chain system with scope economy and zero absolute cost in the mode of "flywheel effect". The flywheel effect brings suppliers and users from the upstream and downstream of the supply chain to the Amazon platform. For users, Amazon promises to deliver within 48 hours for “Amazon Prime” members and 1 hour for “Amazon Prime” members living in many metropolises. By the end of 2020, there are more than 200 million “Amazon Prime” members with an annual fee of $119. Amazon Web System helps the Amazon platform understand the needs of “Amazon Prime” members better than themselves, so as to reduce inventory cost. For suppliers on the Amazon platform, the flow of more than 200 million Prime members has expanded the supplier's market, and supply chain integration has made suppliers bear the additional inventory costs of Amazon platform. This ensures that Amazon is not only the world's largest e-commerce company, but also the strongest logistics service provider.

Digitalization not only redefines the demand structure and supply structure, but also redefines the production logic. If we only look at productivity, in the farming era of more than 3000 years before the industrial revolution, the global total factor productivity has not been improved. Agricultural production depends on 95% of human beings' continuous work, and only less than 5% of the aristocrat class can enjoy products. The two industrial revolutions liberated the power constraints of human beings, and capital played a greater role. In 1913, Ford works produced black T-shaped cars. At that time, the daily wage of each employee was $5. After eight months, the worker at Ford works could buy the cars produced by his own enterprise, and then the income could be turned into capital and invested into his own enterprise, forming a capital surplus other than labor surplus. In this way, 95% of the population is engaged in production and 95% of the population can enjoy products.

The digital age has liberated the shackles of human thinking. There is no cost for data replication, but the scenario of data replication is realized with benefits. We will see that only 5% of the population is required to engage in production, and 95% of the population may enjoy the product.

In China, there is a very famous live-streaming performer “Camgirl” named Weiya. In 2020, Weiya sold RMB 36.8 billion yuan in the live webcast room, and the dehydration sales were 20.2 billion yuan. The so-called dehydration sales refers to take off the return and exchange of all goods at the end of the year. Her sales alone have exceeded those of many large supermarket chains. A more exaggerated story is that she sold the launch rights of five rockets in a few seconds on April 1, 2020, at a price of 40 million yuan each. This is probably the digital age that is difficult for people to understand in traditional thinking.

Of course, from the information age to the network age, and then to the digital age, it is a process from scale economy to network economy, and then to scope economy. The informatization started 50 years ago has realized the digital interconnection between people and equipment. We can put the traditional physical world into the digital world in the computer, reduce the threshold of scale economy, and make the marginal cost tend to zero more easily.

In the network era, the digital interconnection between people has been built through the Internet, turning the physical isolation that was difficult to connect in the past into a close logical connection, making it easier to realize the network economy.

In the digital era, the digital interconnection of equipment and equipment has been completed. For example, the cyber physical system described in industry 4.0, in which the equipment and workpieces are given digital, the supply chain system can achieve the maximum output with the least input, and the enterprise pursues zero absolute cost.

2. How do digital technologies and its products change the supply chain?

The core of digital technology and its products change supply chain includes four elements: data, algorithm, computing power and knowledge.

From data to big data, it breaks the original statistical sample extraction process. There are enough big data to find the optimal solution by discarding the original complex algorithm. The improvement of computing power also directly threatens the effectiveness of the original traditional algorithm. The d-wave 2x quantum computer developed by Google in 2021 will directly increase the computing speed to 100 million times that of traditional computers, which may completely crack the most advanced cryptographic algorithm in the past, let alone defeat the world's smartest chess player. The change of data, computing power and algorithm will inevitably bring about the change of knowledge.

Digital technology has also completely subverted all four stages of the supply chain system, namely perception, transmission, decision-making and execution. With the support of black technologies such as big data, cloud computing, artificial intelligence, the Internet of Things, robots, edge computing and blockchain, the perception part of the supply chain system has changed from the traditional passive perception mode to the active perception mode, and human beings can more intelligently perceive the environment and environmental changes. The transmission part has also changed from traditional point-to-point information transmission to network to network transmission, and the cost, efficiency and scope of transmission have been improved step by step. The decision-making part has changed from the traditional decision-making based on information island and human instinct to the decision-making supported by more knowledge with the help of artificial intelligence. Execution has also changed from the traditional expansion of pure power to an autonomous unmanned operation unit. Digitalization has changed the whole supply chain system.

3. The changes in the global supply chain system brought about by "anti-globalization".

There are four main factors that cause "anti-globalization". The first is digitalization, the second is the environmental problem caused by global warming, and the third is the national conflict caused by geopolitics. In particular, the Russian Ukrainian war has caused the fragmentation of the world. The fourth is the COVID-19, which has ravaged the world for more than two years.

The above figure on the left shows the changes of assets at all levels in the United States according to the statistics of Bank of America Merrill Lynch. Wealth is gathering more and more, which is a powerful role of digital technology in optimizing resource allocation. With the support of the business form of transnational corporations and digital technology, the innovative technology and capital of developed countries are more and more closely combined with the labor and primary resources of developing countries, forming a solid industrial chain ecology, which also leads to the lack of jobs in labor-intensive industries in developed countries and the relative decline in the unemployment and living standards of the most bottom workers in developed countries, These bottom-level workers who have the most votes begin to hate globalization, which also drives these countries whose policies are dominated by votes to turn to "anti-globalization".

Global warming has intensified the natural disasters on the earth. The different pursuits of developed and developing countries for environmental protection, especially carbon dioxide emission policies, have changed the global energy output structure and consumption structure, and also led to the trend of "anti-globalization".

Geopolitics has a huge impact. In January 2012, the United States proposed the concept of flexible supply chain at the Davos conference in Switzerland, which is only a goal. Now, the Russian Ukrainian war has created a new gap in the world, and energy, food, finance and commodities have begun to rebuild a new industrial chain. The quadripartite agreement of the United States, India, Australia and Japan once again proposed flexible supply chain; The India-Pacific Agreement established between the United States and Southeast Asian countries also has specific pertinence. There is also the Five Eyes Alliance (FVEY) and the meeting of defense ministers of 40 countries. Since 1991, global integration has been gradually moving towards the opposite direction, and global cooperation such as the United Nations and WTO is giving way to regional alliances that are starting from scratch.

We should also see the impact of the global COVID-19. Different epidemic prevention policies of various countries have placed different countries in different regions at different times in an open or closed environment. Economic fluctuations occur one after another. Countries are scrambling to launch short supply chains and regional supply chains for the basic necessities industry, which has greatly destroyed the original situation of global supply chain integration.

These factors will profoundly change the global integrated supply chain system that has been running successfully for 30 years.

In fact, the global supply chain is a value chain system. In the 2020 world development report, the global value chain distribution in 2015 is given. In the figure, dark blue indicates the innovation activity area, light blue indicates the advanced manufacturing and service industry area, and red indicates many primary product areas. Therefore, countries and regions around the world are divided into consumer countries dominated by developed countries such as the United States, Europe, Japan and South Korea, producer countries dominated by China and Southeast Asian countries, and resource countries dominated by Africa and South America, realizing the global resource cycle.

In the global value chain, it is worth noting that the largest developed country in the world is the United States, while the largest developing country in the world is China. Ray Dalio, President of Bridgewater fund, compared China, the United States and other three developed countries in the long river of history. He is extremely optimistic about China's economic development. If it can be as predicted by Ray Dalio, China may become the country with the highest GDP and the largest consumer market in the world in 3-5 years. Therefore, the global industrial chain and supply chain are bound to change.

If China's economy is the second largest in the world in terms of economic aggregate? In the past 42 years, China's economy has developed very rapidly. As can be seen from the picture on the first line, China initially traded socks for aircraft. It is said that at that time, it traded the export of 100 million pairs of socks for the import of a Boeing aircraft from the United States. Then "made in China" products rose from socks to clothing, and then to household appliances. In 2020, Tesla put its factory in Shanghai, China, and achieved Elon Musk's ambition within a year.

So why does "made in China" have the competitiveness in the global middle and low-end commodity market? Here is an example of a balance bike. In the 1990s, the Dutch invented the balance bike, which sold for more than 50,000 euros and exceeded the BMW 7 series. The market was bleak. Then the inventor bought the patent to the Americans, and the American company lowered the price by more than 10,000 dollars. At this time, a Chinese entrepreneur bought a balance bike and gave it to the son of a famous Chinese official, which became evidence of the official's bribery because of the price of more than 10,000 dollars. However, China's Xiaomi Company controls the price at about $130, while the price on Vova（Also called Pinduoduo in China）, a famous low-cost e-Commerce platform in China, is only about $30. This is "made in China". The core advantages of "made in China" in global market competition are cost advantages, organizational advantages and scale advantages.

In recent years, due to the introduction of flexible supply chain, short supply chain and regional supply chain, some goods made in China have been transferred to Southeast Asian countries such as Vietnam and the Philippines. However, in the next decade, it is impossible for the global manufacturing market to leave China. This is because Southeast Asian countries lack heavy chemical industry, and heavy chemical products are the most basic materials for most parts. From the perspective of economics, it is impossible for Southeast Asian countries to establish a competitive heavy chemical industry system in the short term.

In the future, the development of made in China will also benefit from industrial clusters catalyzed by local governments. First, industrial clusters can make each independent enterprise very small, which can more flexibly adapt to the production demand of global innovative products; Second, industrial clusters can enable many small enterprises to gather to form scale advantages and increase the market competitive advantage of low prices. Third, industrial clusters with highly resilient supply chains can form scope advantages since scale advantages, just in line with the goal of digital supply chains.

Therefore, China is more willing to strengthen exchanges with Japan, the Republic of Korea and the ten ASEAN countries. China has the largest port group in the world and can strengthen economic cooperation with East and Southeast Asian countries through shipping. China has also started railway connectivity with Southeast Asian countries. In the future, it can also strengthen industrial chain and supply chain cooperation with Southeast Asian countries through railways and highways.

4. From supply chain 1.0 to supply chain 4.0

Finally, I want to talk about digital technology supporting supply chain to supply chain 4.0. Its main features are demand driven, digital technology support and intelligent optimization of resource allocation.

The starting point of the supply chain is the value chain. The United States and other developed countries have taken the supply chain strategy as a national technical guarantee in the global economic competition and cooperation. China also released the national strategy for supply chain innovation and application in 2017. However, with the development of digital technology, the integration of supply chain and industrial chain begins to strengthen, and the simple chain-shaped supply chain is increasingly developing into a network-shaped supply chain system.

This is the 4-tier architecture model of smart supply chain I have built. The bottom layer of the smart supply chain is mainly based on nodes, that is, the optimization of resource allocation within functions, such as cross-docking, milk road, etc., to get the optimization results within one function.

The second layer of smart supply chain forms a chain-shaped supply chain structure, which emphasizes the optimization of resource allocation between functions. The one-hour delivery mode realized by Amazon is to replace remote transportation with warehousing. Of course, this must be supported by digital technologies such as big data, cloud computing and artificial intelligence in AWS, so that the inventory cost will not affect the system revenue.

The third level of smart supply chain is the optimization of resource allocation of upstream and downstream enterprises in the supply chain. China is implementing an ultra-high voltage power transmission and transformation network, which can realize coal mine mouth power generation, to reduce or eliminate the long-distance transportation of coal in the future.

The fourth level of smart supply chain is the optimization of resource allocation between parallel supply chains. On the one hand, it constitutes a demand pull, and on the other hand, it realizes a network-shaped supply chain architecture. The top Internet entrepreneurs described above, such as Elon Musk, Steve Jobs and Jeff Bezos, are among them. They are pursuing such a cost-free and profit-making business operation model.

Entering the digital age, we can see that the production capacity is becoming stronger and stronger, so consumers will become more and more picky and changeable. As for the supply chain, it needs to be fully consumer oriented. In the era of supply chain 1.0, facing the differentiated demand, manufacturers choose to divide the market into smaller segments and adopt mass customization to meet the differentiated demand of consumers. In the era of supply chain 2.0, digital integration of producer resources is used to ensure the minimum resource consumption. In the era of supply chain 3.0, the customer relationship management platform supported by digitalization is used to improve the ability of accurate prediction. In the era of supply chain 4.0, we need to be closer to customers, make the network visible, make manufacturing faster, and make delivery time shorter, to form a stronger market competitiveness.

Thank you for listening.

編輯｜段文秀

審核、責編｜楊帆