[From iSource Business, December 2001] Two hundred years ago, Nathan Mayer Rothschild earned millions through a configured supply chain that consisted of some pigeons and a few good men. Understand the benefits, individual steps and strategies and your company, too, can have a competitive information system.
The Jewish banker Nathan Mayer Rothschild carefully placed intelligence at the Battle of Waterloo and used carrier pigeons to transfer handwritten notes of the battle back to London. With the information literally in-hand, Rothschild amassed his fortune by running goods for the British through Napoleon's blockade and transporting gold to finance Britain's army in Spain. These actions later won him the post as agent of the British treasury.
Although Rothschild's competitive advantage had all but disappeared by the time the first telegraph company opened for business, his story is still worth remembering. His business acumen serves to teach the modern-day businessperson that when you learn to configure processes better, faster or cheaper than the next guy; and you know what information to collect and how to act on that information, the rest is history.
In today's economy, the Rothschilds of this world make the best use of information via a collaborative network of suppliers, buyers, customers and perhaps even competitors. The key to configuring the network is a keen understanding of the benefits and the individual steps and strategies needed to achieve those benefits.
The larger the benefit, the more likely it will accrue over the long term. However, companies should deploy performance metrics for even simple transaction-type events in order to recognize short-term benefits. For example, first-generation digital marketplaces provide process efficiencies and cost savings during the order-requisitioning process; but second-generation digital marketplaces, private exchanges and collaborative supply chain applications will garner more substantial benefits over the long term. Metrics used to measure long-term benefits might include inventory reduction, increased turns and higher customer satisfaction.
Too many companies over-emphasize the technology to the detriment of processes, however. While integrated transactions certainly bring an organization closer to having a more efficient supply chain, value will only come to those companies that use information better than other companies. In Rothschild's case, wealth was generated from his deployment of processes (information gathering), tools (pigeons) and his analytical skills in terms of what he did with the information he gathered (short some contracts). In the same way, successful companies always look at the tools, the processes and the information.
Let's start with the easy part. What are the benefits of deploying the tools? This will depend on the industry in question. Each industry suffers from a different type of pain and therefore requires an industry-specific solution or configuration. Configuration refers to the re-configuration of the traditional supply chain around industry-specific processes and technologies.
For the telecommunications and high-tech industries, the benefits of re-configuration center on planning. With short product and service lifecycles and high levels of creativity required, the biggest bang for the buck may lie in collaborative product/service design. For consumer-packaged-goods companies, which often produce time-sensitive products through numerous and dispersed distribution and manufacturing locations, solutions around distribution planning, such as warehousing, transportation and logistics, may provide the greatest value. For global manufacturing-intensive industries like durables, automotive and high-tech, solutions around production planning offer the largest benefit. The smart enterprise-technology suppliers, service providers and consultants understand the value of delivering industry-specific solutions.
Once the specific solution is identified, organizations need to understand the key challenges of deployment in order to create strategies that will address each one. Success will come to those organizations that create strategies around:
* Clearly defining the business requirements and the new collaborative processes.
* Establishing neutrality in defining the supply chain processes. (Most initiatives generally have a supplier or buyer bias.)
* Deploying robust technology solutions to deliver the deep functional requirements of the new collaborative processes.
* Agreement from all major network members of the new collaborative processes. (Those industries with existing standards will achieve benefits more quickly.)
* Streamlining the complexity and lead time(s) for technical integration to the network members' internal applications and systems.
* Enabling processes and technology within the four walls of each supply chain participant.
* Developing enhancements and solutions to address gaps in current technology offerings.
* Managing change. Participants often need to change many of the fundamentals in the day-to-day operations of their businesses.
The best companies must first lay out their information needs. Then they can identify challenges and bottlenecks, devise solutions, select tools that enable the flow of information, and, finally, synthesize and analyze the data coming back. Although it took Samuel Morse the better part of 35 years to commercialize the telegraph, which displaced Rothschild's pigeons, Rothschild had already amassed his fortune through his use of information, laying his personal foundation for the multi-billion dollar conglomerate that NM Rothschild & Sons is today.
Kevin S. Costello is global managing partner for market solutions at consulting firm Andersen.