“e-Business has leveled the playing field – every corporation, customer, and the institution now has an equal opportunity in the Internet economy. The new differentiator is an intelligence-driven e-business strategy. Those who capitalize on this opportunity will emerge as tomorrow’s market leaders”, according to Bernard Liautaud of Business Objects.
The biggest benefits of the Internet for enterprises are in supply chain management (SCM), enabling them to cut costs by better managing inventories, described by Dell’s Dick Hunter as “a substitute for information: you buy them, because you are not sure of the reliability of your supplier or the demand of your customer.” In the perfect world, inventory will only exist in transit.
What is a supply chain, and why is it important to look at managing it? An extract from a paper by Ram Ganeshan and Terry P. Harrison provides the perspective:
A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers.
Traditionally, marketing, distribution, planning, manufacturing, and the purchasing organizations along the supply chain operated independently. These organizations have their own objectives and these are often conflicting. Marketing’s objective of high customer service and maximum sales dollars conflict with manufacturing and distribution goals. Many manufacturing operations are designed to maximize throughput and lower costs with little consideration for the impact on inventory levels and distribution capabilities. Purchasing contracts are often negotiated with very little information beyond historical buying patterns.
The result of these factors is that there is not a single, integrated plan for the organization — there were as many plans as businesses. Clearly, there is a need for a mechanism through which these different functions can be integrated together. Supply chain management is a strategy through which such an integration can be achieved.
The Internet is now enabling companies to connect their operations with their suppliers and customers, creating supply networks.