The Supply Chain of the 21st Century

There is great value in harnessing the power of supply chain ecosystems to drive growth and efficiency in a business. Applying ecosystem principles helps businesses create and master this "chain of chains" that envelops the multi-enterprise scope of the company's suppliers and customers to function as one synchronized unit.

The supply chain, as it currently exists for most companies, is a linear function of buy, sell, ship and pay. However, technological advances and communication innovations over the last 40 years have increased the complexity, opportunity and benefits associated with effective supply chains.

Even so, few companies have successfully realized the benefits. Most are still striving to integrate functions such as forecasting, purchasing, manufacturing, distribution, sales and marketing across their supply chains, and few have crossed the chasm to create a harmonious "chain of chains" or supply chain ecosystem, that envelops the multi-enterprise scope of the company's suppliers and customers to function as one synchronized unit.

Today's Supply Chain Ecosystem

Supply chains have evolved from merely a linear mechanism to a complex, multi-enterprise ecosystem. To understand the supply chain as an ecosystem, it is important to first understand the elements of any ecosystem. An ecosystem can be defined as "a community of different species interdependent on each other together within their environment, which is a relatively self-contained entity in terms of energy flow, adaptation and interactions" (From http://www.hyperdictionary.com. Note: definition simplified for the purpose of this article).

Within a supply chain ecosystem, a community is any combination of supply chain participants acting as a population. Interdependent species are supply chain ecosystem participants that, through their actions, impact the supply chain in whole or in part. Three categories of action or "energy flows" are present in a supply chain ecosystem: transactions, collaboration and initiatives.

Transactions are the life-blood or the circulatory system of the supply chain ecosystem that gives the ecosystem a reason to exist. Transactions are specific messages that are exchanged between two or more participants in the ecosystem, such as purchase orders, invoices, shipping notices, and payments. Transactions drive the end-state value of revenue generation (either directly, i.e. purchases, or indirectly, i.e. fulfillment) in the ecosystem, hence its role as the life-blood of the ecosystem.

Collaboration is the set of nerves or the nervous system within an ecosystem giving the ecosystem a way to create greater sensitivity and understanding to drive optimization. Collaboration includes sets of data, messages or process execution that drive clarity, increased understanding and knowledge of the conditions and uses of transactions within the ecosystem. At an extreme, collaboration is used to facilitate and manage the process such as made-to-order design, define available-to-promise distribution, or negotiate context-based pricing. At a more basic level, collaboration is used to increase the level of synchronization that exists between the participants of a given supply chain ecosystem to enable efficient transaction processing. The ultimate value of collaboration is increased efficiency in the timing and use of transactions within the ecosystem.

Initiatives are the mind and imagination of the supply chain ecosystem and consist of community or ecosystem-wide activities that drive some level of adaptation to the ecosystem. Common examples include outcomes of industry standards groups that drive changes in the way the ecosystem functions (X.12, RosettaNet, UCCNet), key industry "heavyweights" that require a fundamental change in the way others interact with them (i.e. Wal-Mart and the Department of Defense's radio frequency identification (RFID) initiatives for logistics and order fulfillment, or the evolution of generally accepted practices within an industry like the use of advanced ship notices rather than purchase order acknowledgement to trigger order fulfillment and acceptance).