Supply Chain e-Volution - Staying One Step Ahead

The Article was written by:
Robert P Smith
Managing Director, Global Supply Chain Consulting.

Published August 2000

Robert Smith is Managing Director of GSC Consulting, a specialised management consultancy focusing on supply chain physical processes and information technology solutions. His career has been spent working in a variety of industries, including consumer packaged goods and pharmaceuticals, helping clients optimise their supply chains. He has more than 12 years experience in supply chain distribution operations, systems integration and implementation consulting. Mr Smith holds an MSC in Computer Integrated Manufacture from Cranfield Institute of Technology and a BSc in Engineering Product Design from the South Bank University.

With the emergence of enabling technologies, such as the Internet, many historical IT infrastructure boundaries have been broken down and no longer provide a constraint to our innovative minds within the Supply Chain World. New technologies, such as wireless application protocol (WAP) and other mobile communication devices are opening up many unforeseen possibilities to improve Sales revenues within our businesses. These technological advances in the e-commerce arena, coupled with web-enabled Supply Chain Management tools are transforming our Supply Chains to new levels of productivity and performance.

It is difficult to imagine the future world of Supply Chain with many technologies developing in parallel and a different rates, but it is certain that it will have a significant impact on our business processes and therefore on our Supply Chains. The following sections evaluate some of the issues and technologies that I believe will have an impact on supply chain over the forthcoming year.

e-Business - The Future Is Here - Collaboration
As e-Business develops, it will change most of our business process - with customers, suppliers and third parties. The goal will be to maximise revenues through new channels, reduce costs, increase order transactions speed and simplify or eliminate non value adding processes - ultimately enhancing profitability. Collaboration between customers, suppliers and logistics providers will be paramount to the success of many e-business solutions within supply chain.

Collaborative commerce is generally known as "c-Commerce". Some of the first examples of c-Commerce, were customers and suppliers sharing forecasting and sales information electronically to facilitate just-in-time (JIT) deliveries and inventory management across the supply chain. But the scope of today's collaboration is much wider, encompassing procurement, development from design to manufacture, strategic planning and fulfillment. In a nutshell, c-Commerce is about making intelligent business decisions via the Internet with your collaborative partners.

To enable effective c-commerce, the collaborative partnerships must share much more information than they imagine. Not only inventory and logistics information, but also sales and procurement information. This opens up a completely different ball game. These business relationships that are likely to fit are existing ones, where such levels of trust are already in existence. An example of this level of partnership would be in the automotive industry where opposing dealers exchange sales and stock information with manufacturers for everyone's benefit including the customer.

c-Commerce solutions will be developed initially through existing business partnerships, but then through companies that are enabled to dynamically exchange data via the Internet. Many consultants are already talking about automated "reverse auction site" capability, where a customer could make an offer to buy a product and the collaboration system locates the supplier, confirms a selling price and delivery dates. These wider reaching supply chain issues will effect our supply chains as more integration of systems and data exchanges are required.

The Impact Of m-Commerce On Supply Chain - New Channel To Market
At the end of this year mobile phone networks are due to be upgraded to a new radio frequency service known as general packet radio service (GPRS). This will increase the mobile internet speed to around 128K which is comparable to many ISDN connections today. These devices will effectively be permanently on-line because GPRS uses "packet" technology, which means that the user only pays for the data that is transmitted. New pricing structures will be offered by the air time companies that will make using this technology more affordable. This advance in communication technology will encourage the development of business to business (B2B) and business to commerce (B2C) wireless internet applications. It is predicted that the impact of mobile commerce (m-Commerce) on the supply chain will be similar to the impact that we have seen over the past five years with the emergence of the World Wide Web and internet trading. As consumers become more confident with the technology, transactions through this new channel to market will increase. Companies that develop wireless internet applications to exploit this new channel to market must look deeper inside their own businesses and plan further improvements to their supply chain to cope with the additional volume and velocity required for customer orders.

Some companies have more complex order fulfilment operations with the introduction of outsourced third party logistics. Changes to these integrated systems to allow the exchange of real-time inventory data and processes to achieve enhanced customer service levels will be a challenge. There is no doubt that as the m-Commerce channel evolves, our supply chains will need to evolve to become even more agile and provide a new level of performance to exceed the expectations of our customers.

ERP Vendors vs APS Tool Providers - Competition In Advanced Planning & Scheduling
By implementing a supply chain management (SCM) system, businesses can often gain better control of their sales forecasting and replenishment processes, thus enabling an improvement in service levels to their customers while giving them the control to minimise inventory holding. This one off cash saving can justify the purchase of an appropriate system, but which one would you choose?

The advanced planning and scheduling (APS) functionality within many Enterprise Resource Planning (ERP) systems is not as mature as some of the specialised applications providers, such as i2 Technologies, Manugistics and Mercia Software. The competition between ERP vendors and APS tool providers is becoming more and more intense as their products offer similar functional and technical abilities. Many ERP vendors are now attempting to bridge this gap by developing functionality that will compete directly with the APS tool providers. Their new modules have been better equipped, but still lack features and functionality of the established products offered by the APS tool providers. Also, to stay ahead in this game, the APS tool providers are combating this assault by adding new web-enabled functionality that will facilitate the growth of e-procurement within supply chain.

Clearly, both ERP vendors and APS tool providers are directly competing for similar business sectors. In my opinion, there is no one right or wrong solution. The best-fit solution for a Client is the one that facilitates the achievement of their company goals and corporate business plan. There will be a market for all products offered by software providers, but getting the best-fit for your future business and implementing the system successfully still remains to be the challenge to us all.

Global Trading Networks - One World, One Vision
The concept of Global Trading Networks (GTN) in Supply Chain is now becoming more widespread. When electronic data interchange (EDI) was introduced, this was the first big step towards externally linked business systems but these were purely transactional. Companies would often send order information to a supplier and receive despatch information in return. Since then and primarily due to the emergence of the World Wide Web, the opportunities for integration are becoming more cost effective and hence available to the small and medium enterprises (SME's). Collaboration across a broad range of supply chain processes makes the whole value chain more competitive. We are now at the point where global integration opportunities are becoming reality, but the future model will be based around dynamic collaboration, not static collaboration. Businesses will join together to produce customised products and services, then break apart and reform to cater for changing market requirements.

The most efficient business to business relationships will be the ones that have seamless integration between partners and the business processes. Within a few years, the on-line exchange will become the accepted standard for collaborative supply chain management.

Supply Chain Synchronisation - Measuring The Pulse
As enterprise systems evolve into Global Trading Networks, the need for intelligent real-time collaborative business decisions will increase. To facilitate these decisions, information systems must hold up to-the-minute data on the current business situation across the GTN. Many systems today are configured to work with one organisation and may not operate efficiently as part of a GTN community. Integrated ERP systems operate with batch processes moving data between modules or company functions. The synchronisation of these processes within the GTN will be critical to a business being able to make last minute decisions. The frequency of batch processing will need to increase which will be a challenge for database administrators and technical architecture teams. The analogy would be with the organs of the human body - the pulse between business's needs to be synchronised.

By synchronising the GTN pulse, the optimal business process will be achieved which will allow real-time supply chain decisions within the collaborative community. Real-time decisions could be:

• Direct merging of in-transit orders from different sources of supply to give one customer delivery, on time and in-full (OTIF)
• Real-time transportation schedules using global positioning system (GPS) mapping technology
• Real-time purchasing plans with available-to-promise dates (ATP)
• Real-time manufacturing schedules

Synchronising the GTN pulse will provide may benefits to a collaborative community and to their customers. As the Global Trading Network becomes the industry standard way of doing B2B business, simple connectivity and pulse synchronisation will become critical factors to the success of these collaborative business ventures.

A New Level Of Performance - Staying One Step Ahead
Over the next 12 months we will see many industries encompassing a broader vision of supply chain and establishing an e-Business culture that will require a new level of performance from the Supply Chain. This next level of performance in supply chain will be created through continual development of global trading communities, integrated IT & business process, business pulse synchronisation and intelligent business decisions. Is your company ready to evolve into an e-Supply Chain business?