What is a digital supply chain? In many ways, it's similar to a traditional supply chain, says Pearlman. Purveyors of digital entertainment still must cope with issues related to order management, inventory control, manufacturing and distribution. The difference lies in a reliance on "virtual inventory" - music, books, movies and games that don't exist in a physical form that requires packaging and transportation. But don't be fooled into thinking that "digital" is another word for "unlimited inventory." Granted, there aren't warehouses filled with the computer files that constitute digital entertainment. But there are still major constraints to supply. It's expensive to keep digital files on line, so some are relegated to off- or near-line storage. "The ability to access that is still challenging," says Pearlman.
In addition to the problem of bandwidth, producers face the issue of product standardization - or lack of it. In the digital world, says Pearlman, "there's no such thing as a standard." Each title on DVD has its own Universal Product Code (UPC); no equivalent exists for movies transmitted over the internet, on airplanes, in hotels, or via cable systems. Each has a different format. "It's a really complex problem in general," he says, "and the lack of standardization makes it even more so."
Pearlman sees an eventual merging of standards as the industry matures. An "800-pound gorilla" like Apple Computer could play the same role on the digital side as Wal-Mart Stores has served for physical consumer goods. Still, there are major issues to be resolved around such elements as image quality and screen size. The emergence of the high-quality Blu-ray format for disks poses yet another challenge for digital content. "The manufacturing process itself remains complex and highly customized, while we work on one end of the problem," he says.
For the time being, key processes related to the digital supply chain remain extremely manual. "It's still pretty new and novel," says Pearlman, "but it is going to find its way."
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