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.


Nor are companies that have already embarked on supply chain re-engineering projects immune to the impact of a flagging economy. Kevin Williams, manager for account development at American Express Corporate Services, warns that as the economy lags, the funding that has been provided for e-supply chain initiatives could start to decrease. The risk is that a company that was partway through an implementation will drop it, stall it, postpone it or drag it out, he says. As a result, people's enthusiasm for the project might flag when they don't get the results that they expected. Cost can be an issue even when a company is fully funding its own supply chain initiatives. What about the company's suppliers? For example, Cindy Cronin, vice president of strategy at Ability, a provider of supply chain solutions to mid-market distributors, notes that midsize companies, with lower IT budgets, are likely to be reluctant to adopt a new technology until it is proven. Moreover, while small- and medium-sized enterprises are feeling pressure to move toward new supply chain technologies, Cronin explains, Their back-office systems may not be compatible to the outside world right now. As a result, these companies might not be able to provide information regarding current inventory levels or available production capacity on the real-time basis that supply chains are going to demand in the future.


The Risks of Sharing


The issue of who will foot the bill for moving a supply chain into the future can be further complicated by other issues. Drisko, from Logistics.com, cites an example from the transportation industry: Trucking companies generally know where their trucks are in transit, thanks to such technologies as wireless communications and global positioning devices, but the truckers have been reluctant to share that information with shippers. In part, this is a question of staffing: although the truckers have the relevant data, at this point someone would have to re-key the information into a system to make it available to the shippers, or they would have to invest in software to automatically post that information. That's a choice between ongoing staffing costs or a one-time IT investment. But what would be the return on that investment? The carriers know that merely showing the location of a particular shipment at any given moment does not accurately reflect the likelihood that the shipment will get to its destination on time. Carriers can expedite shipments to make sure they are on time, after all. But if a shipper or consignee were to pull up location information that appeared to show the shipment running behind, the carrier could wind up losing business. From the carrier's perspective, it does not make sense to invest in more advanced technologies to make the location information available to the outside world - all the shipper needs to know is that the package will get there on time. Shippers and consignees want more information to help them manage their supply chains, and, moreover, they want that information for free. Technology could help here, Drisko says, were it inexpensive enough that the carriers could afford it. But right now, the case has yet to be made to the carriers that offering this type of detailed, real-time information will net them a return.


The extent to which a company may want to share internal information affects the whole issue of visibility, too. Beyond just issues of security, an enterprise may consider its demand or inventory information to be proprietary. IBM's Seybold cites an example of gaming in the supply chain to illustrate how such information can be used: Last year, during a computer chip shortage in the high-tech industry, some companies were doing a good deal of forward buying as a way to keep competitors from having sufficient supply. When you are pursuing strategies of this nature, it calls into question the degree of visibility that you want to provide into your own supply chain, Seybold says.


Timeline for the Future


Barriers notwithstanding, a sense of the inevitability of change in the supply chain pervades conversations with analysts, practitioners and solution providers alike. Chris Flum sums up the mood when he says, 'e' [as in e-business] is going to go away in a couple years and it will just be business.' New processes and technologies that seem revolutionary today will become a mundane part of the landscape in the years ahead.


How many years ahead is open to question, however, and the pace of change will undoubtedly vary depending on the size of a given organization, its industry and internal culture, as well as such external factors as the economy. Lora Cecere, research director for enterprise and supply chain management with Stamford, Conn.-based technology consultancy Gartner, already sees a wide divergence among the companies with which she is talking. Cecere, who spent 16 years as a supply chain professional buying and implementing systems and four years working in software prior to joining Gartner in 2000, says the early 'A' [adopter] companies on the technological edge, are currently talking to her about supplier relationship management (SRM) applications that combine collaborative planning, forecasting and replenishment (CPFR) with supplier scorecards and technologies to enable buying, selling and negotiating within trading communities.

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