Supply Chains: The Next Generation

It's crystal ball time. Here's a look at what the analysts, practitioners and solution providers are predicting for the supply chain in the years ahead, as well as their advice for building your own next-generation supply chain.


All this connectivity is having one other consequence: time compression. This magazine has covered the drive to reduce cycle times through the adoption of automated tools that accelerate order processing (It's About Time, November 2000), but the talk these days is about collapsing forecast horizons to the extent that supply chain planning becomes supply chain execution. Analysts from U.S. Bancorp Piper Jaffray, led by Jon Ekoniak and Tim Klein, write in their weekly e-mail newsletter, The B2B Analyst, that the Internet's ability to increase the flow of real-time information can be seen in the creation of collaborative planning solutions that can take on a more executional feel because they are driving the realization of faster, more immediate and dynamic plans that can be reoptimized daily versus monthly.


Finally, while it seems almost hackneyed to say so, it's worth noting that connectivity is also allowing for a greater degree of automation in the supply chain than was possible before the rise of the Web. e-Tools have the potential to free supply chain practitioners from tactical or manual tasks so they can focs on more strategic functions, such as building closer relationships with suppliers. Says AMR's Ferrari: In B2B, you're doing business around the clock. Because of that, the notion is that you need to let the application try to manage the day-to-day activity, and the focus needs to be on when something goes bump in the night, when supply and demand don't match, when an order doesn't get fullfilled or when an exception gets drawn in the supply chain.


Supply Chain Community


The bottom line for this orthodox vision of the supply chain's future is, in a word, community. The supply chain, so this vision goes, will become a forum for continuous real-time interaction between companies and their suppliers and customers. Don Willis, CEO of IPNet, a company that provides e-business connectivity software, puts it like this: By the end of this decade we're going to look at the supply chain as an organism in itself, as an entity unto itself, where information will flow freely between these different components of the supply chain. The parts of the entity that are dedicated to a particular project will vary, depending on which combination of trading partners can provide the optimal solution for the end user. Relationships will become paramount, both within and outside the enterprise. Relationships are going to be more and more key than they've ever been before, says Flum, of The Budd Co., noting that all the e-tools in the world won't do any good without cohesive buy-in from a company's internal divisions and suppliers.


This shift from supply chain and purchasing as isolated functions within the enterprise to the supply chain as a community that extends beyond the four walls of any one company will also necessitate a change in how the chain is managed, according to Bill Michels, CEO of ADR North America, a supply chain consulting firm based in Ann Arbor, Mich. Supply chain management now spans numerous functions across the enterprise as companies become aware of the impact on shareholder value that the supply chain can bring. We're really moving to business managers, Michels says, and he points to a generational shift within purchasing and supply chain departments, for example, as bright young MBAs capable of operating on a business level, not a functional level, move into key positions.


Barriers to Change


Clearly none of this is going to happen overnight. Barriers abound, not the least of which being uncertain economic times. An economic slowdown can affect efforts to build a next-generation supply chain in at least two ways. First, supply chain practitioners that just now are contemplating such projects are likely to find little enthusiasm among upper management for grandiose, expensive information technology (IT) projects. MaterialNet's Pecoraro points out that the steep learning curves involved in moving to new technologies and new processes often equate to disruptions in business-as-usual, which can mean less revenue and lower profits. That's not what board members want to hear in the current economic climate because, as Pecoraro says, Wall Street won't accept quarter-over-quarter setbacks.


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