The Internet is enabling companies to connect their operations with those of their suppliers and customers. As a result, the traditional, linear supply chain is being transformed. Armed with information technology and the Internet, the move is, in the words of Penelope Ody of the Financial Times, “towards supply networks, parallel chains, enhanced concurrent activities and supply models, cutting inventory and lead-times throughout the pipeline still further. The new supply chain model demands seamless integration of software systems and visibility throughout the network to all trading partners.”
Roy Shapiro of Harvard Business School elaborates on the supply network:
If you look at business-to-business exchanges as one form of new business-to-business models on the Internet, the whole notion is to open up a vast quantity of information that is available in real time to all players in a particular supply chain-or more accurately, supply network. So everyone can see the whole picture simultaneously-what people need, what’s available, what’s in inventory, what capabilities each player brings to the table, and so forth.
An example of efficient supply chain management comes from Dell. Customers can order exactly the computer they want (think of this as mass customization). Dell holds less than a week’s inventory. It collects its money from retail customers when they order and from corporate customers within 30 days of shipping, while paying its suppliers after 45 days, thus operating in “negative cashflow”. Dell has about 200 suppliers, with 30 companies accounting for nearly 80% of its total purchasing. When a customer places an order on Dell, its suppliers can see it and thus make the appropriate parts, turning Dell into a “sort of portal through which orders arrive for redistribution among suppliers”.
E-business is all about competing through speed — satisfying changing customer needs quickly, accurately, profitably and in a customized manner. The ideal supply chain is one that conforms to the sell-one/make-one model, somewhat in the Dell mould.