Technology is changing the enterprise. The combination of cheaper and faster computers, devices, broadband and wireless networks, software being offered as a service, and the ubiquitous presence of the Internet worldwide is bring enterprises closer. The last two decades have seen the rise of technologies like Enterprise Resource Planning (ERP) to bring together information about what has happening within the enterprise, Supply Chain Management (SCM) to better integrate and manage the value chain, and Customer Relationship Management (CRM) to connect on a one-to-one basis with customers.
So far, adoption of many of these technologies have been limited to the top few thousand companies in the world because of the investments needed in the purchase, customization and integration of these technologies within the enterprise. The coming years will see the penetration of technology into the next level of enterprises, opening up markets which hitherto have been untapped.
Says Walter W. Buckley III, of Internet Capital Group, “Most distribution channels over the last 50 years have become fragmented and fractured. This significantly inhibits communication flow, and that, in turn, creates tremendous inefficiencies at all stages along that supply chain. The Internet allows real time communications along the entire supply chain. When coupled with business applications, this begins to squeeze out inefficiencies and increase productivity.”
Enterprises have to manage not just the flow of goods, but, more importantly, the flow of information. Take for example the semiconductor business. The design of a new chip may be done in Silicon Valley and Bangalore, the fabrication in Taiwan, the integration into the motherboard or device in China, with distribution happening in different countries across the world.
Tight co-ordination between all the enterprises in the supply chain has become critical because in the semiconductor business (as in any other) being saddled with unfilled customer demand or with inventory can mean disaster.
Writes John Ince in Upside:
The goal is the transformation of linear, serial supply chains into parallel, collaborative communities, dramatically reducing cycle times, improving customer relationships, and increasing productivity.
Potential savings accrue from better planning and execution — both upstream and downstream — involving design, forecasting, procurement, production and fulfillment, logistics, order management, change orders, and channel management. Companies reap savings from process efficiencies, better inventory management, and unencumbered working capital.
The real action comes from shearing away the huge inefficiencies that exist because of the incompatibilities between inter-company and intra-company applications. The savings inherent in this process will likely overshadow the relatively meager savings in pricing and commodity e-procurement that were once hailed as the shining promise of b-to-b independent marketplaces.
Increasingly, manufacturers and suppliers are becoming one enterprise. The reduction in information-flow latency also permits faster product-to-market strategies. Collaborative-supply chain communities are witnessing the breakdown of boundaries between businesses.