Tuesday, February 28, 2012

The Internet-Enabled Supply Chain: From Your First Click -->To Your Doorstep

I was looking for technology-related articles on supply-chain and I came upon this whitepaper on how technology, particularly the internet, is bringing supply chain towards new horizons.  The article "The Internet-Enabled Supply Chain: From the “First Click” to the “Last Mile” goes on to touch on different topics on technology and supply chain, but the primary focus was on the criticality that a business look at internet with newer eyes -- that the internet fuels the ever-increasing demand of customer needs with its potential to reach a bigger market, thus making ever more critical the need for synchronization.  

With anyone having access to the internet becoming a potential customer for a company that goes online, who are bound to emerge as the winners?  and with what tools and guiding principles?

The below shows how synchronization across your supply chain increases one's capabilities as well as benefits that go with it.  (See Figure 1) At the heart of the matter is reaching your customers in the way   that's most convenient for them while being most cost-effective for you. 

Edesign, or the concept of designing principles with having product innovations done on the web, is an emerging concept among companies with the rise of the internet's influence. (see Figure 2)  Hewlett Packard, for example, is an early example of a company that began using eDesign principles. In the design and production of laser printers, they abandoned the traditional design approach of dedicated teams focused on launch dates, features and functionality. Internal and external design teams collaborated to develop a supply chain friendly product, with modular parts and differentiating components that could be assembled at regional distribution centers rather than multiple dedicated production facilities.1

We see in the figure below the results of a study on online retailer on gaps in supply chain infrastructure that led to disappointment of customers and poor performance.  Not suprisingly, the timing of the delivery comprised much of the causes for disappointment.  Also a cause for concern would be the availability of stock and the exactness of the delivery date as promised.  It is surprising that only 25% of online retailers actually met delivery commitment and another 25% out of 480 product orders in a week could not be completed online.  This illustrates how failure to satisfy customers can be traced to a lack of a smooth collaboration somewhere along one's supply chain.

The big question now is what are the steps to be done to achieve the ideal 100% customer satisfaction from their first click to their last.  Enhacing user online experience is just the start of it.  His first click must trigger a supply chain movement that will go all the way until it all ends at his doorstep with the delivered product.  So my guess is companies should start thinking of revolutionizing one's supply chain from web and back.

Excerpts from the article: 

How is the supply chain changing amidst the evolution of the information age – or, rather, the revolution in the new economy? The Web offers the supply chain enormous potential and entirely new methods for streamlined coordination between business partners, including third- and fourth-party providers. Companies that want to succeed in the new economy need to enhance communications with their partners and providers. The coming years will see an explosion in e-commerce – with a concomitant need for solutions to satisfy ever more demanding customers.

Supply chains in practically every industry are at the beginning of a startling reinvention triggered by the rise of the Internet. The revolution extends beyond performance improvements and efficiencies gained from automation and communication to include entirely new opportunitiesto create value. This new value is derived from synchronized supply chains that can reach out to a bigger market, perform mass customization to tailor product and services to meet the individual customers' needs and develop new products and services that adapt to the competitive and environmental needs. The Internet changes the way in which supply chains are managed, planned and controlled. The information, decisions and processes that form supply chain management are moving to the Web, breaking old paradigms of inter-company boundaries.This common ground will be where entire supply chains truly can be synchronized. New upstart specialist providers of both virtual and physical activities will carve out their own unique roles in the new infrastructure. In this churning environment, supply chain capabilities will be crucial. But gaining those vital competitive capabilities will not be through the typical supply chain initiatives of today. 

Put simply, the Internet enhances supply chain performance and supply chain is crucial to e-commerce. As the supply chain evolves in the information age, the Web’s capability to support tight coordination between business partners means that all the information, transactions, and decisions that are the essence of synchronized supply chains will flow through the Web. Using the Internet to connect the systems of supply chain partners will become the medium through which the essential processes of managing and synchronizing supply chains are carried out. As it does so, it will change the nature of supply chain businesses completely. A company that misses this distinction is in grave danger. It may find itself celebrating the squeezing of supplier margins at auction or the reduction in inbound inventory by sharing forecasts while its competitor builds a tightly linked alliance that shuts it out of the channel to the market completely. Why is this radical change so  certain? It is not that the technology is “cool,” nor even that there are efficiencies to be gained. At the heart of the matter are customers’ ever increasing demands. Customers – whether they are business customers or individual consumers – are looking beyond cost as the sole arbiter of value. They are demanding innovation and personalization of not only the products but of the associated service and delivery.The increased variety and velocity of business increases the complexity of the supply chain issues exponentially and yet at the same time requires even greater flexibility. The competitive power in this environment will lie with a network of business partners who each bring the specific capabilities to bear. But the supply chain activities of these partners must be tightly synchronized with the demands of the market place.That level of coordination requires not only the ability to communicate but also the capability to manage the complexity and immediacy of synchronization.

 Full Article: 
1 -  http://community.mis.temple.edu/mis3537sec001f10/files/2009/09/R08-The-Internet-Enabled-Supply-Chain-from-the-first-click-to-the-last-mile.pdf

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