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Optimizing the e-Supply Chain: The Final Frontier?
by Ian S. Hayes
Of the myriad opportunities offered by the Internet, perhaps the one
providing the most immediate benefit, and showing the greatest long-term
promise, is supply chain optimization. The Internet's ability to remove
inefficiencies, break down communication barriers, reach disparate
audiences and foster collaboration is perfectly suited to managing and
optimizing the diverse and distributed players in supply chains of all
sizes.
Cutting edge e-supply chain examples abound. Dell Computer Corporation
has achieved recognition and financial success for masterfully
streamlining its supply chain and business processes while providing
customers with personalized product options. Ford Motor Company,
Daimler/Chrysler and General Motors have teamed to develop Covisint, an
online marketplace for purchasing automotive parts and direct materials
from their vast group of first tier suppliers. The PaperExchange, an
Internet-based trade exchange, allows suppliers and buyers to offer and
bid on paper products and pulp. Ford recently announced an initiative to
share legacy-created product design drawings with its suppliers using an
XML translation tool. Even industries that have traditionally been
unaffected by supply chain issues, particularly services industries such
as IT consulting, now find a host of online marketplaces and aggregators
seeking to match buyers and sellers of services.
Little wonder that so many companies are excited by e-supply chain
opportunities. Analyst predictions bear this excitement out. Boston
Consulting Group forecasts that electronic, Internet-based business
transactions will amount to $2.8 trillion by 2003, while Gartner Group
predicts they will reach over $7 trillion. By 2002, Gartner Group expects
7,500 to 10,000 business-to-business (B2B) marketplaces will emerge. Giga
Information Group and IDC estimate that these B2B marketplaces will offer
savings of $180 billion to $480 billion in transaction costs and expenses
come 2003. For the software, hardware and services vendors that would like
a piece of the action, Jupiter Research believes that technology spending
to operate B2B marketplaces will increase from about $2 billion in 2000 to
$81 billion in 2005.
Truly integrated and optimized supply and demand chains offer
significant benefits to their participants. To understand, imagine what
would happen if your company knew in advance exactly when your top clients
were going to make their purchases, what they intended to buy and where
they needed the items delivered. Armed with these accurate forecasts, you
could notify your suppliers of your precise needs, exactly when needed.
Instead of buying raw materials at inopportune moments, you could plan
your purchases to take advantage of favorable pricing. To lower overhead,
you could manufacture and warehouse products in the most ideal location.
With more insight into buying patterns, you could better predict customer
needs, developing even more suitable products and services in
collaboration with your suppliers. Finally, to expand your market, you
could offer all of these products and services online, through one or more
e-marketplaces. What company wouldn't want these benefits?
The Internet is elevating supply chain optimization to new levels, but
the concept of supply chain management (SCM) is not new. Every company, no
matter its industry, is part of one or more supply chains both as a
supplier and buyer of goods. Supply chain investments, ranging from direct
materials used to manufacture products to indirect materials such as PCs
and office equipment, can be huge. Any efficiency that can be introduced
into the supply chain has the potential to result in enormous cost
savings. For manufactured goods, every dollar squeezed from the "cost
of goods sold" is a dollar added to profits. Every reduction in
carried inventory frees capital for other uses. Relying on techniques such
as "just-in-time" inventory management and logistics planning,
and applying automation where needed, many companies have started the
process of integrating and optimizing their supply chains. Auto
manufacturers now rely on automated systems to forecast and order parts
mere minutes before they are needed on the assembly line, and retailers
like Wal-Mart have squashed their competitors by developing sophisticated
logistics, inventory management and distribution systems, all tightly
coordinated with suppliers.
In many ways, modern day e-SCM efforts are an outgrowth of the
enterprise resource planning (ERP) initiatives undertaken by many large
companies over the past two decades. With the advent of ERP systems, it
became much easier for companies to access production, scheduling and
operational data -- precisely the information needed to tighten the supply
chain. Companies of all sizes now have automated and rigorous procurement
functions to reduce the overhead of purchasing and tracking indirect
materials like paper, office supplies and furnishings. Advanced planning
and scheduling systems are common across a range of companies and
industries. These enterprise-level systems not only assist companies in
integrating their supply chains, they also enable them to deconstruct
their businesses, outsourcing inefficient or commodity functions to the
most efficient suppliers. Suppliers now regularly take responsibility for
managing their customers' inventory and stock rooms through vendor managed
inventory programs, and third party service providers perform a range of
logistics functions.
Why e-SCM?
For e-SCM efforts to make sense, two overriding things must be present.
First, all parties must have sufficient incentives to participate and make
the investments needed to help the effort succeed. To thrive, most e-SCM
efforts need a critical mass of participants. If prospective players
perceive the effort as simply a means of driving down their prices, they
have little incentive to join, dooming the project from the start. Second,
supporting technology, hardware, software and processes must be available
to ensure that the efforts actually can be implemented. Today, the
abundance of supply chain software, hardware platforms and delivery
options, from the Internet to ASPs to virtual private networks, has
removed many of the technological barriers to implementing e-SCM programs.
e-SCM efforts can range from simple (an electronic catalog posted on an
e-marketplace) to complex (a platform to enable product design and
development between an entire supply chain). The benefits offered by each
of these e-SCM projects will vary. For example, a supplier posting an
electronic catalog on an industry-wide e-marketplace is not expecting to
foster greater product development collaboration with its customers. In
total, however, the benefits of e-SCM are plentiful. Depending on the
position that a company occupies in the supply chain, these benefits can
be broken down by the buyer's, supplier's and facilitator's perspective.
Buyer Benefits. In general, there are three classes of benefits
that a buyer can derive from e-SCM efforts.
- First, a buyer may be able to purchase both direct and indirect
materials at a lower cost, primarily due to price transparency and
competition. Buyers that purchase goods through an active
e-marketplace populated by many suppliers hope to take advantage of
competition and dynamic pricing opportunities to secure the lowest
possible price for goods and services. Although larger buyers such as
Wal-Mart and Ford already enjoy sufficient leverage to command price
breaks and discounts, medium and smaller-sized buyers gain access to
more favorable pricing when suppliers are bidding for their business
via e-marketplaces and trading exchanges.
- Second, a buyer is likely to achieve greater efficiency when
purchasing goods and services, ultimately lowering the overall cost of
conducting commerce. By automating the procurement function,
offloading purchasing activities to end users, and integrating
purchasing data with legacy accounting systems, companies can lower
their transaction costs and overhead. For medium and smaller-sized
companies, B2B marketplaces offer opportunities for price discovery
that would be inefficient or prohibitively expensive to conduct
through human effort alone.
- Third, a buyer may be able to forge stronger ties with its
suppliers, collaborating with them more closely in the design and
development of goods and services, and in forecasting, scheduling and
planning production activities. ERP systems have enabled many
companies to share a subset of this information already. The
collaborative software, middleware XML translators and more powerful
customer relationship management (CRM) functionality available today
promise to align buyers more closely with all participants in their
supply chain.
Supplier Benefits. Supplier benefits generally fall into two
classes, depending on the type of e-SCM program in which they participate.
For e-SCM programs that concentrate on collaboration -- sharing product
data, product designs, etc. -- suppliers have the potential to strengthen
their forecasting ability, meet and exceed customer demands by offering
the right combination of products and services at the right time, align
their production schedules and manufacturing capacity with buying patterns
to improve inventory management and more. For e-SCM programs that
concentrate on commerce opportunities, the supplier's greatest benefit
comes from participating in large, active online marketplaces. These
marketplaces, if frequented by a critical mass of buyers, extend the
supplier's market reach and potentially increase its overall sales.
Because this extensive market reach is achieved at a fraction of the cost
associated with other sales channels -- mass mailings, telemarketing, on
site sales calls -- it is a more cost-effective way to market and sell
goods and services. Suppliers can also take advantage of B2B marketplaces
to gauge the demand for their goods and services and, using dynamic
pricing features such as auctions and bids, the price that the market is
willing to bear for these items. Although the price transparency fostered
by online marketplaces may deter suppliers from participating at first,
once a sufficient number of buyers and competitors are using the model,
every supplier must eventually join. Marketplaces can be helpful with
inventory management activities, allowing suppliers to auction off excess
inventory to a large group of potential bidders.
Facilitator Benefits. A facilitator of e-SCM efforts is a party
that provides some component or service integral to the effort. A software
or hardware vendor is a facilitator, as is an ASP providing application
functionality and/or Internet connectivity. In the case of a B2B
marketplace, the facilitator is the market maker that establishes,
administrates and operates the electronic marketplace, perhaps including
services such as financial settlement, fulfillment, logistics etc. In
general, the benefits to a facilitator are strictly monetary -- the
software or hardware vendor receives license fees and the ASP normally
receives monthly rental or usage fees. The market maker typically receives
a percentage of each transaction; the PaperExchange marketplace charges 3%
of each transaction completed by its members. If the market maker also
happens to be a large purchaser, and participates in the marketplace as a
buyer, then it will also enjoy all of the benefits that accrue to a buyer.
Preparing For e-SCM
The benefits of e-SCM are so plentiful, and the potential synergies so
compelling, that companies, vendors, service providers and investors have
been dazzled by its promise. Pick up any publication, surf the Web or
attend a conference and you'll find dozens of stories about existing and
planned electronic supply chain endeavors. Ford is attempting to foster
greater collaboration with its suppliers by simplifying and automating the
process of sharing product design data. Tier 1 auto suppliers are
developing their own design, collaboration and commerce exchanges to
interact with their smaller suppliers. The dairy industry is launching a
B2B exchange to auction perishable dairy products.
Businesses worldwide recognize the imperative of automating and
tightening their supply chains through electronic mediums. They don't
really have much of a choice. One by one, their competitors are doing it.
Large buyers are using their leverage to demand better supply chain
management. Just as one company puts pressure on its supply chain to
increase efficiency and reduce costs, it is also pressured by its trading
partners to make its own operations more efficient and its prices more
competitive.
Without the Internet, e-SCM efforts would be on the slow track rather
than the fast track. The Internet is the ideal platform for launching e-SCM
because it shares many of the same characteristics of a supply chain. Both
consist of a web of participants, communicating and sharing data and
information in a standard way. The Internet simply makes this
communication and data sharing more cost-effective through the use of
standard protocols, a choice of relatively inexpensive connections and
high adoption rates. An array of software products, translation middleware
and XML are removing some of the last barriers to widespread exchange of
data.
There are some fairly painless ways to get immediate benefits out of e-SCM.
Participating in an e-marketplace as a buyer or seller is one method.
Implementing an automated procurement system is another. To extract even
stronger benefits out of e-SCM requires more complex and integrated
solutions. These solutions take greater effort and investment, and depend
on industry dynamics, competitors' activities and customer demands. Before
embarking on an e-SCM project, consider these issues:
- Leverage
. Your company's size, relative to others in the
supply chain, will determine who has the leverage to dictate terms. A
small business customer does not have the clout to tell Staples how to
construct its Web storefront; Staples makes that decision. Tier 1 auto
suppliers, while individually large, do not have the leverage to refuse
participating in the big 3 automakers' marketplace. Be aware of your
position in the grand supply chain scheme.
- The Tower of Babel
. Communicating and sharing data between
scores of supply chain partners is utter chaos. Most meaningful e-SCM
solutions require a fair amount of integration between supplier systems
including front-end sell-side, CRM, ERP and advanced planning and
scheduling applications. Except in rare cases, these systems run on
different platforms, use different technologies, store and manipulate
data in different ways and have ill-defined or non-existent interfaces.
Somehow, a modicum of standardization and definition has to be imposed
on this Tower of Babel to enable accurate and timely data sharing. Many
point-to-point ERP and electronic data interchange (EDI) implementations
permit this type of sharing, but are not widespread enough to integrate
an entire supply chain.

- Collaboration and coordination
. The more complicated the e-SCM
solution, the more collaboration and coordination required among the
participants. Leverage may determine who gets to run the show, but an
uncooperative participant can wreak havoc on the project. Suppliers that
are involved in multiple e-SCM initiatives, perhaps across several
industries, will resist adopting conflicting, redundant or grossly
expensive SCM approaches. Designing, implementing and testing a complex
e-SCM solution between scores of players will stress any organization's
program management abilities. Commitment and perseverance are essential
to putting a large-scale e-SCM effort in place.
Categories of e-SCM Solutions
There are virtually hundreds of e-SCM solutions from which to choose,
ranging from simple to complex and requiring different levels of
investment, participation and integration. Electing to participate in an
e-marketplace is a relatively straightforward decision. Creating a custom
extranet to give suppliers access to your production data and sales
forecasts is another matter.
e-SCM solutions range from "close" to "open." As
illustrated, close e-SCM solutions are custom, private implementations,
driven by one or more powerful buyers or suppliers. These point solutions
are built to specification between several or many supply chain
participants and may be quite complex, requiring a high degree of system
integration. Close e-SCM solutions include early ERP and EDI
implementations, but also encompass more functionally rich offerings. The
primary purpose of these solutions is to foster rich information exchange,
although they can also support commercial transactions and a range of
specialized services. Although these close e-SCM solutions may be built
using "out of the box" components, they also may offer a range
of customized functionality not present in the public, commodity exchanges
such as sharing of forecasting, sales, production, planning and scheduling
data.

Open e-SCM solutions focus on commerce between suppliers and buyers,
and may also include ancillary services such as payment processing,
fulfillment and logistics. These open solutions are available to and used
by the public and typically revolve around a vertical industry such as
healthcare or retail, a product or set of products such as electronic
components, or a service such as travel. These solutions, which include
e-marketplaces and trade exchanges, operate much like a financial or
commodities exchange. Dynamic bids and sales are generally supported.
Buyers may advertise RFPs or RFQs, or may invite sales proposals for
commodity goods. Sellers may solicit bids for products or services. Price
negotiations, sales and financial settlement are all conducted online.
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Private SCM |
Vertical Marketplace |
Global Marketplace |
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One-to-many |
Many-to-many |
Many-to-many |
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Private |
Public |
Public |
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Collaboration and/or Commerce |
Industry, product or service based |
Commodity products/services |
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Rich info. exchange |
Fosters liquidity, dynamic pricing |
Fosters liquidity, dynamic pricing |
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Relationship building |
Little info. exchange |
Little info. exchange |
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High integration |
Low integration |
Low integration |
There are a number of specific e-SCM solutions that fall within these
two classes.
- Basic Supply Chain Execution Components
Although many e-SCM systems focus on enabling communications and
collaboration with external entities, there are a host of internal,
back-office systems that help companies execute various supply
chain-related functions apart from their suppliers and partners. These
systems include custom-developed and packaged software systems that
aid product design, order processing, inventory management, logistics
(transportation, warehouse management, fulfillment), forecasting,
planning and scheduling. In addition, companies rely on strategic
planning tools to help them optimize their sourcing and other aspects
of their supply relationships. Decision support tools are also used to
access and manipulate the data produced by these systems. Software
vendors such as i2 Technologies, SynQuest, McHugh, Logility and Optum
provide supply chain execution solutions. Several IT consulting firms,
such as Keane and Cap Gemini Ernst & Young, have dedicated supply
chain practices to help companies implement supply chain execution
components.
ERP systems standardize companies' internal applications and give
them access to data generated across the enterprise, from accounting
to operations to sales and marketing. This standardization enables
companies to share data with suppliers and partners using similar
paradigms. EDI implementations are generally custom interfaces built
to exchange data between two parties' dissimilar systems. The type of
data exchanged is generally product/inventory information, reflecting
some sort of contractual agreement between the parties, however, many
ERP vendors are adding specific supply chain functionality that allows
for broader exchange of information and collaboration.
ERP solutions are expensive, typically costing millions of dollars
to implement. They are advantageous, however, because they integrate
all of the back-end systems that typically prevent companies from
instigating meaningful SCM programs. Because of this integration, ERP
systems provide companies with access to abundant data. While this
feature makes ERP systems very powerful, it also makes integration
with outside entities more complicated. Suppliers may not have the
same type of ERP system, or any ERP system at all, so developing an
interface is a complex proposal. As a result, companies usually devise
point solutions, linking up their most important suppliers one-by-one.
Historically, these interfaces have been implemented using EDI.
Software vendors offering ERP/e-SCM solutions include: SAP, Baan,
Peoplesoft, J.D. Edwards, Oracle and Great Plains Software. Consulting
help also abounds, especially from firms such as Accenture,
PriceWaterhouseCoopers and KPMG to implement ERP packaged solutions
and to design custom solutions.
- Custom interfaces with trading partners
In addition to ERP/EDI solutions, some companies have devised
customized interfaces with their trading partners, vendors and
customers to share information and strengthen relationships. These
custom interfaces may rely on extranets or virtual private networks
that allow one-to-many interactions with third parties. These custom
interfaces may involve data exchange -- sharing information to enable
better materials planning, inventory management, etc. -- or may
facilitate some form of commerce between the parties. Because these e-SCM
solutions are implemented on a custom basis, they often rely on
outside consulting assistance and may also incorporate some of the SCM
vendor offerings listed throughout this section.
Although not thought of as a classic example of e-SCM, Web
storefronts give companies another channel for selling to their
customers. Depending on the sophistication of the storefront and the
underlying technology and functionality (CRM, ERP, etc.), businesses
may be able to accumulate significant information about their demand
chains, that in turn can improve forecasting, scheduling and planning
abilities. Although a storefront is advantageous for the seller,
allowing it to reach a potentially huge audience, it is not as
beneficial for buyers. These storefronts facilitate one-on-one
transactions rather than aggregate buyers and sellers. A buyer that
wishes to purchase goods or services through Web storefronts still
must conduct extensive research and price discovery manually. Without
dynamic pricing capabilities, buyers are not ensured of receiving the
most favorable pricing terms possible.
There are hundreds of software vendors (Ariba, Commerce One,
BroadVision,) that provide components of a web storefront from
catalog/content management, to credit card processing, to fulfillment,
etc. Many of these solutions are also offered on a hosted, ASP basis
by companies such as PurchasePro, USInternetworking and Interliant.
Almost every Internet and IT consulting firm can perform the
interactive design work and the technology/infrastructure components
required by a Web storefront.
Standalone corporate procurement systems, typically implemented
over an intranet, are used to distribute the purchasing function to
end users. Information about supplies and electronic catalogs from
pre-approved vendors are posted on the intranet. These vendors usually
have some minimal agreement with the company about price discounts,
volume purchases, etc. Procurement systems also allow authorizations,
rules and approvals to be specified and applied automatically as end
users perform their purchasing activities. Purchases conducted over
the procurement system are fed into back-office accounting and legacy
systems, which helps to reduce overhead and potential data entry
errors. Companies generally use procurement systems to lower
transaction costs rather than obtain the lowest price possible for
supplies. Because procurement systems work with a set of pre-approved
vendors and do not support dynamic selling or bidding, they are not
designed to force prices down. The cost of implementing a procurement
system and maintaining electronic catalogs puts it outside of the
reach of small and medium-sized companies, however, ASP offerings may
be more cost-effective.
Software vendors offering procurement systems include Ariba,
Commerce One, i2 Technologies and Trilogy. ASPs offering procurement
software include PurchasePro, Clarus and USInternetworking.
- E-Marketplaces, trading exchanges, etc.
E-marketplaces, also known as trading exchanges, trading hubs,
trading communities, etc., support many-to-many relationships between
buyers and sellers. Members of these communities conduct commerce,
offering and purchasing commodities, products and services.
Marketplaces may be private or public and may be formed around a
product or service, the needs of a large supplier or buyer, or a
particular industry. They may include electronic catalogs of
suppliers' wares, or simply a posting board where offers, bids and
requests are broadcast, similar to a financial exchange. Most
marketplaces have dynamic pricing features that allow suppliers and
buyers to conduct auctions, offers/counteroffers and other types of
price negotiations online. In addition, ancillary services such as
financial settlement, fulfillment, logistics, transportation, etc. are
increasingly being offered through the marketplace.
Marketplaces are established, administered and managed by a large
buyer, seller or neutral third party called a market maker. The market
maker recoups its costs by either taking a percentage of each
transaction and/or by participating as a seller or buyer in the market
and enjoying the associated benefits. These marketplaces require a
critical mass of buyers and suppliers for the model to work.
ASPs offering marketplace services include PurchasePro and
VerticalNet. Software vendors include CommerceOne, Ariba, i2
Technologies and Manugistics. There are many consulting firms
including Keane, Intelligent Information Systems and Sapient, that
work with e-marketplace participants to integrate their back-office
systems with the marketplace transactional data.
Many companies are looking for ways to enrich their communication
and relationships with the important players in their supply and
demand chains. These initiatives are based more on collaboration than
they are on commerce, and are meant to optimize supply chain
operations, particularly in the product design, planning and
forecasting areas. Ford's effort to improve the sharing of product
design information with its suppliers is one example. Kmart's trial of
CPRF (collaborative planning, forecasting, and replenishment) with its
suppliers is another example. Software collaboration vendors include
Syncra, Manugistics, i2 Technologies, Logility and webPLAN.
e-SCM Enabling Technologies
Whether joining a marketplace, establishing a private extranet with
trading partners or collaborating on product design with a supplier, it is
clear that e-SCM solutions demand a high degree of systems integration.
Some solutions may require that supply chain participants integrate their
systems and data with other participants; other solutions may require that
a participant's back-end systems be able to handle new sources of data.
Because e-SCM solutions are so widespread, affecting the systems and data
of many organizations, some type of standard is required that will enable
participants to interact in a common manner, and to understand the data
and information underlying those interactions.
Using the Internet as a platform for e-SCM solutions establishes
standards for connectivity and communication. But standards must also be
defined for the data that will be exchanged via e-SCM solutions. XML
(Extensible Mark-up Language) is emerging as the de facto standard for
data exchange over the Internet, creating common data definitions and
formats. Many software vendors, such as XML Solutions, Hostbridge
Technology and PFN offer translation tools that allow companies to
translate their internal data into XML so that it can be widely shared and
understood by others in the supply chain. Several IT consulting firms,
such as Intelligent Information Systems, also specialize in data
translation tasks.
In addition to XML, there are a host of middleware products to assist
companies in communicating with their supply chain participants. These
solutions include messaging and communication products, integration
services, database and server products offered by companies such as
Oracle, Progress Software, BEA Systems, Neon Systems, Unify and Vitria.
e-SCM Implementation Considerations
Implementing an e-SCM solution can be simple -- such as joining an
e-marketplace -- or complex -- such as implementing an ERP package and
establishing a proprietary, collaborative platform to share production
data. Not surprisingly, the most beneficial e-SCM solutions are usually
more difficult to implement, and may require a significant investment
depending on the state of a company's existing infrastructure and systems.
Massive integration with multiple suppliers' systems, the installation of
brand new software systems, hardware upgrades and consulting assistance
are often necessary.
Depending on a company's need, it can select a custom, package or ASP
solution. Custom development is an expensive option, but it is the only
alternative for highly unique requirements or for situations where the SCM
software itself will provide a competitive advantage. A growing number of
package solutions are available to handle a wide range of SCM
requirements. Packages decrease time-to-market for gaining SCM
capabilities, allow multiple companies to share the same functionality and
reduce the cost of maintenance. These solutions are appropriate for
companies with the resources and desire to operate their own software, but
no need for unique SCM functionality. By combining software, hardware and
support into a single monthly fee, ASPs often offer the fastest and least
capital-intensive means of gaining an SCM solution. ASP solutions exchange
unique functionality for ease of implementation and operation. As such,
many medium and small-sized companies may find an ASP solution is the most
cost-effective option, particularly for e-SCM solutions such as
procurement systems and e-marketplaces.
Integration issues take front stage in almost any e-SCM implementation.
First, in-house supply chain systems must be integrated to optimize
internal supply chain operations. Second, these systems must be integrated
with those of outside parties such as trading partners and/or customers to
share important data. Finally, internal processes must be upgraded to
reflect the changes introduced by the e-SCM systems. True integration
requires in-depth understanding of the data produced by different systems.
To provide the most meaningful data to a supplier, it may not be enough to
just provide access to inventory information. It is often necessary to
draw information together from diverse sources, which were never designed
to work together, to give an accurate view of the data. In addition, a
company must determine the appropriate integration approach for its
systems. Is it best to upgrade systems so they work in concert? Should a
central data repository be used? Should new applications be written to
access and manipulate this data? Should an end-to-end integrated software
package be preferred over best-in-class, point solutions? Most
organizations are advised to seek outside consulting assistance to help
determine which options are feasible and make the most sense given a
company's particular situation.
A number of other, important issues will affect an e-SCM
implementation. Whenever data is shared with third parties, issues of
security and privacy become paramount. Companies closely guard their
customer, sales and forecasting data, and want to ensure that the e-SCM
applications producing and exchanging this data can prevent unauthorized
access.
Companies must also have appropriate management structures in place to
oversee the e-SCM implementation. Any program that involves multiple
parties, spanning organizational boundaries, is bound to have coordination
problems. Representatives from all affected organizations must
participate, and they must have the clout to reconcile differing
schedules, agendas and technologies and resolve any impasses. Testing an
e-SCM solution across multiple organizations is no small feat, a fact
observed by many Year 2000 programs. As with everything, the party with
the most leverage will greatly influence the direction and implementation
of the e-SCM program.
Looking to the Future
e-SCM solutions today are still in their infancy. Nevertheless, they
are delivering impressive ROIs, a fact that bodes extremely well for the
future of e-SCM.
What e-SCM areas promise to be hot in the future? E-marketplaces will
continue to evolve until the best economic model surfaces. Because it is
crucial for these marketplaces to attain a critical mass of suppliers and
buyers to survive financially, there will have to be sufficient incentives
for companies to join. Marketplaces that revolve around large buyers
and/or suppliers with a great deal of leverage are likely to be the most
successful. Integrating internal procurement systems into marketplaces,
and services such as financial settlement, logistics and fulfillment, will
give many companies the impetus to conduct more of their commerce through
marketplaces. Medium and small-sized companies will find it economical to
join these marketplaces, since the market maker absorbs all of the set-up
costs, however, their lack of leverage will not bring them the big gains
enjoyed by the larger players.
Perhaps the most exciting future direction for e-SCM lies in the
collaboration area. Several fortuitous events are converging. First,
companies have developed a mindset and culture that is open to optimizing
the supply chain by working with partners and customers. Second, an
increasing number of platforms, packages and technologies have appeared to
allow meaningful collaboration from sharing product design data, to
developing joint forecasts and customer reward programs.
The time is ripe for e-SCM, and the future promises even greater
returns and rewards to its practitioners. Whether your company is at the
vanguard, designing and implementing cutting edge e-SCM solutions, or
being pulled into e-SCM initiatives by its partners, embrace e-SCM because
it is here to stay.
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