The Internet and Supply Chain Management
Great claims have been made about the Internet ability to revolutionize supply chains, but how much value is it creating? And how can business benefit?
The Boston Consulting Group recently surveyed 250 supply chain executives and general managers at major US corporations, more than half of whom reported that they see the Internet as a way to "greatly improve" supply chain performance.
On average, they expect to cut unit costs by 3 percent per year while enhancing revenues by 5 percent. They expect to achieve similar improvements annually over several years.
A number of companies are already realising such gains. Most however, have seen only limited benefits and in many cases, companies are making only simple supply chain enhancements that can be quickly replicated by competitors.
There is a better way. BCG has identified pioneering companies that are using the Internet to rebuild their supply chains and create durable competitive advantage. Many of these companies have achieved inventory turns that are two to three times the survey average.
They expect to realize more than twice as much value from their initiatives as the average company and five times the value expected by the laggards. They are doing it with five strategies:
Actively Collaborating with Supply Chain Partners The Internet creates opportunities for collaboration among supply chain partners. Through net-based sharing of end-customer demand data, for example, all partners can reduce forecasting errors, thus driving down inventories and improving manufacturing utilization. Similarly, through net-based collaboration on product design, production, and delivery schedules, they can trim costs and speed products to market.
While many companies now share some data over the Internet, leading-edge companies work aggressively with partners to share relevant information and align supply chain processes.
For example, a manufacturer of basic materials and its major distributor worked closely to revamp their shared supply chain. The two companies were performing the same downstream product modifications, operating salesforces in the same regions, and performing redundant administrative activities. Having combined these functions and redesigned processes to harness the power of the net, they are on their way to realising nearly Dollars 100 m in joint benefits.
Extending the Company's Reach up and down the Supply Chain Leading-edge companies use the Internet to reach out to their suppliers' suppliers and their customers' customers. When Adaptec, a Californian manufacturer of high-tech components, needed a new plant, it created a virtual factory from a global set of manufacturers, suppliers, and suppliers to suppliers. Adaptec now uses the Internet to plan and synchronize—in real time—all these companies' manufacturing activities. The company not only avoided a $1.2 billion capital investment, but also cut manufacturing cycle times from 105 days to 55—while boosting customer satisfaction.
Changing the Supply Chain Flow Path Companies can use the net to leapfrog layers of the supply chain or to engage new participants. For example, FedEx and Kinko's, the US-based visual communications services and document copying company, joined forces to create a new document-delivery flow path that bypasses FedEx's own air-transport fleet of 2001.
Growing Revenue—Not Just Cutting Costs Leading-edge companies look to their supply chains for revenue-enhancing opportunities, using the Internet to shorten order-to-delivery times, improve reliability, broaden product choice, expedite product development, and reach new customer segments. For instance, a manufacturer of industrial valves had been selling most of its output to customers in the paper, chemical, and petroleum businesses. By implementing a web-based customer interface, the company has been able to enter an entirely new market of commercial distributors and building contractors, adding 5 percent to revenues in the first year alone.
Transforming Capabilities into New Businesses With their business processes online, companies can more easily offer selected processes to companies in other industries. Banta, a US-based printing and document management company, uses its global web-based track-and-trace technology to provide inventory and distribution management to the electronics industry through a stand-alone enterprise. Banta's new customers are reducing expenses, increasing service predictability, and improving responsiveness.
Even the best strategies can go awry in implementation. To increase chances of creating real value from supply chain initiatives, the following guidelines should be observed.
Focus Your Implementation Efforts Pour energy into your most important projects and postpone or cancel the rest. The most effective companies pursue only those projects that will yield either quick wins or sustainable long-term advantage.
Break Implementation Efforts into Manageable Pieces For companies in the survey, distinct supply chain investments of less than Dollars 50 m produced triple the returns (in percentage terms) earned by projects funded by more than Dollars 150 m. Moreover, returns from most of the small projects exceeded their original targets, whereas returns from the large projects consistently fell short of their targets. It is fine to think big; but divide each big plan into controllable steps with well defined outcomes and clear benefits.
Invest in Business Processes at Least as Much as in IT The executives surveyed said that the greatest barrier to supply chain integration was that business processes were not ready in time to support integration; inadequate information technology was a much less important barrier.
Nevertheless, most of those executives were spending only 50 cents on business process improvements for every dollar they spent on new IT. Our data showed, however, that companies whose non-IT investments were at least equal to their IT investments earned significantly higher returns.
Keep the IT as Simple as Possible Simple IT solutions can sometimes achieve notable supply chain benefits. Adaptec, cited above, used low-cost off-the-shelf software to link its suppliers' engineers with its own, implementing the entire project in just 12 weeks. The project succeeded in enhancing communication and epitomizing the utilization of manufacturing plants.
By deploying creative, competitively focused Internet strategies, pioneering companies are transforming their supply chains into engines of durable competitive advantage.
Reading aids and expressions:
1、The Boston Consulting Group recently surveyed 250 supply chain executives and general managers at major US corporations, more than half of whom reported that they see the Internet as a way to "greatly improve" supply chain performance.
在此句中
1）The Boston Consulting Group recently surveyed 250 supply chain executives and general managers at major US corporations 是主句，介词短语“at major US corporations”修饰“250 supply chain executives and general managers”
2）more than half of whom reported that they see the Internet as a way to “greatly improve” supply chain performance 是非限制性的定语从句，修饰“250 supply chain executives and general managers”，其中的“that they see the Internet as a way to “greatly improve” supply chain performance”是宾语从句，作“reported”的宾语。
2、Most, however, have seen only limited benefits and in many cases, companies are making only simple supply chain enhancements that can be quickly replicated by competitors.
此句是个并列复合句
1）Most have seen only limited benefits and in many cases, companies are making only simple supply chain enhancements 是个由“and”连接的并列句
2）that can be quickly replicated by competitors 是个限制性定语从句，修饰名词“enhancements”
3、Having combined these functions and redesigned processes to harness the power of the net, they are on their way to realizing nearly Dollars 100 m in joint benefits.
1）Having combined these functions and redesigned processes to harness the power of the net是个完成式的现在分词短语，它所表示的动作发生在主句谓语“are on their way to”之前；这个现在分词短语作原因状语，相当于一个由“as”引出的原因状语从句：as they have combined these functions and redesigned processes to harness the power of the net
2）(be) on one’s/the way to (doing) something: (be) in the course of doing something 正在做（某事）, e.g.
①I'm well on the way to completing the report. 我马上就要写完那份报告了。
②He thinks he is on his way to fame and success.他以为他快要功成名就了。
4、The company not only avoided a $1.3 billion capital investment, but also cut manufacturing cycle from 105 days to 55 – while boosting customer satisfaction.
这句是个并列复合句
1）The company not only avoided a $1.3 billion capital investment, but also cut manufacturing cycle from 105 days to 55是个由“not only …but also”连接的并列句
2）while boosting customer satisfaction 是个省略了主语“it”和助动词“is”的时间状语从句
5、go awry:
（something）does not happen in the way that was planned 出差错，e.g.
1）My carefully laid plans had already gone awry.我精心制定的计划失败了。
2）Anything that goes awry in the office is blamed on Pete.办公室出了任何差错都会怪罪到彼得头上。
6、For companies in the survey, distinct supply chain investments of less than Dollars 50 m produced triple the returns (in percentage terms) earned by projects funded by more than Dollars 150 m.
这句虽长，却是个简单句
1）distinct supply chain investments 是主语
2）produced triple the returns (in percentage terms) 是谓语动词和宾语
3）for companies in the survey是介词短语，作状语；介词短语“of less than Dollars 50 m”作定语，修饰“distinct supply chain investments”；过去分词短语“earned by projects funded by more than Dollars 150 m”修饰名词“returns”，其中的另一个过去分词短语“funded by more than Dollars 150 m”修饰名词“projects”
7. fall short of
be less than what you need, expected, or hoped for, or fail to reach a satisfactory standard 未达到，e.g.
1）The economy fell short of the Treasury's target of 2% growth.经济（增长）未达到财政部所要求的2%的增长目标。
2）His performance in the contest fell far short of what his teachers had expected.他竞赛的成绩远不如他的老师们预料得好。
8、Our data showed, however, that companies whose non-IT investments were at least equal to their IT investments earned significantly higher returns.
此句中
1）Our data showed是主句
2）that companies whose non-IT investments were at least equal to their IT investments earned significantly higher returns 是宾语从句，作“showed”的宾语，其中的“whose non-IT investments were at least equal to their IT investments”是个限制性定语从句，修饰名词“companies”
Questions:
- How many supply chain executives and general managers did the Boston Consulting Group survey? And what was the attitude of the most surveyed towards the Internet?
- How much can businesses gain in terms of cost-cutting and profit-making after the use of the Internet, according to the people surveyed?
- Why have most companies achieved only limited gains, although they also used the Internet?
- How can businesses create durable competitive advantages in the IT era?
- How can businesses take advantage of the information made available by the Internet, especially the information about consumer demands?
- Why did Adaptec want to make a $1.2 billion capital investment and how did Adaptec avoid it?
- What is a virtual factory as mentioned in the passage?
- How did FedEx and Kinko’s cooperate to succeed in providing same-day document-delivery service?
- What are the guidelines that can ensure the creation of real value from supply chain initiatives?
- Why should businesses invest as much in business processes as in IT?
