Optimizing Intelligence

[From iSource Business, August 2001] In the wake of the dot-com shakeout, a more sober business climate has cast a spotlight on those technologies that can truly help companies lower their costs and raise revenues. As a result, the supply chain once relegated to the dusty corners of the back office is now taking center stage as the formidable, competitive weapon for reducing expenses and driving profitable growth. Companies' aspirations for their supply chain haven't changed, but their ability to realize those aspirations has. New technologies are turning supply chain hot topics, such as connectivity and real-time event management, into obtainable goals.

Technologies such as Extensible Markup Language (XML) and Java, for example, have become key to solving two of the most pressing supply chain challenges: connecting multiple trading partners' technology systems into an efficient and real-time flow of funds, goods and information; and creating a flexible supply chain that can easily be adapted to new partners, new business processes and changing business conditions. In addition, another technology, known as Intelligent Agents, is beginning to enable the supply chain itself to optimize specific business goals, such as saving money or saving time or a combination of both.

In combination, these technologies enable companies to take the three most important steps to squeeze the highest possible competitive value from their supply chains: integration, event management and intelligence. In the right order, they create a sequential journey to success.

Uniting Forces

Supply chain integration is a cure for the disconnection and blindness that have plagued supply chain operations. When supply chain partners integrate their systems via the right technologies, they can then see the entire supply chain rather than just one or two links. A window is opened into the entire flow of goods, funds and information as it moves through the chain, giving all partners what they need to communicate and interact more efficiently. Integration can significantly trim the costs associated with constantly having to fax, make telephone calls and manually enter data, and it will, in turn, keep the supply chain moving, transferring those savings directly to a company's bottom line.

Once integration is achieved, companies must tackle event management. When you can see the individual events or transactions flowing through the supply chain, you can then pinpoint and manage them individually in real-time. Suppose, for example, a manufacturer sees that a shipment of components, being routed by normal supply chain protocol, will reach its destination two days too late for assembly. It can then isolate that individual item from the supply chain and increase its shipping priority. This ability to intervene immediately, in real-time, to manage specific events is the key to competing more effectively and efficiently in a time-compressed market.

Business Intelligence: It's Not a Contradiction In Terms

Intelligence is just the logical extension of event management. Once you can manage individual events, you can implement intelligent processes that streamline that management. At a basic level, adding intelligence to the supply chain is a matter of executing if-then business rules: if this happens, then do this. But technologies now being developed will increase this intelligence to the point that supply chains will operate to achieve certain goals, rather than just execute rules. The supply chain can be calibrated to maximize speed over cost, for example, or vice versa.

The potential bottom-line efficiencies gained through integration, event management and intelligence are plentiful and exciting for any supply chain professional. But the ramifications of being able to see the supply chain, manage it on a micro level and optimize it in real-time are felt throughout an organization, not just by the director of operations. Consider the effect on customer service: Whether you're a B2C or B2B company, creating a system where customers more frequently get what they need on time and without a glitch obviously reduces the number and length of customer service touches needed per transaction helping eliminate operational inefficiencies and costs.

The effects don't stop at operating expenses, either. High customer satisfaction leads to lower customer attrition and, potentially, greater revenue and a greater number of units sold per customer. Through a combination of bottom-line efficiencies and top-line growth, an integrated, real-time supply chain can improve competitive value at numerous levels of an organization.

Fortunately or ironically, depending on your viewpoint the availability of the technologies that can make a real-time supply chain possible has coincided with a business climate that makes them more needed than ever. Lowering expenses, driving profitable growth and retaining current customers are the mantras of the day. Turn to your supply chain to help you implement them.

Vincent Gulisano is the president, chief operating officer and co-founder of Electron Economy.

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