make your supply chain an asset

MAnAging growth in enterpriSeS: e-CoMMerCe Make Your Supply Chain an Asset Drive growth and ef ciency from top line to bottom line. INVENTORY IS MONEY, AND A COMPANY with tons of goods gathering dust in a warehouse squanders its working capital and starves its bottom line. With a sturdy grasp of supply-chain management (SCM) and a growing array of high-tech solutions, skilled operating managers can make sure goods move very efficiently from component vendors to customers. Radio-frequency identification (RFID) is one of the newest game changers. Working much like a bar code that can be scanned for information about a gallon of milk or a cashmere sweater, an RFID chip goes a step further, transmitting real- Web-based technology gives supply-chain management powerful new tools. time data via radio signals to RFID readers. This technology is already helping some of the largest retailers in the U.S. track product deliveries and manage inventory. tomers and also to the transportation-management system of the manufacturer’s distributor. Web services enable manufacturers to PHOTOGRAPH BY RUBBERBALL PHOTOGRAPHY/VEER While bar codes only identify a product, RFID tags contain a wealth of additional information, including where a product was manufactured, when it expires and where it is in the distribution manage the flow of data across multiple systems without requiring proprietary connections with every counterpart. process. For example, if a truck carrying widgets enters a warehouse with an RFID sensor network, the container’s location can Thanks to better technology in the hands of skilled managers, SCM is smoother today than ever. But wrinkles remain. Software programs and the hardware that reads them need to become more be transmitted automatically to Widget Co. before the truck comes to a full stop. affordable. Technological advances also pose new hurdles. Radio signal interference can make it difficult, for instance, to read RFID Real-time access to data about products, parts and materials in the supply chain will have vast applications in SCM systems. Consider a large manufacturer with a warehouse-management system chips embedded in metallic or foil packaging. Relatively minor drawbacks do little to dampen experts’ enthusi- that must connect to the order-management system of several cus- asm for this technology. “I see RFID as a huge development in supply chain logistics,” says Gary M. Gaukler, director of the RFID and Supply Chain Systems Laboratory at Texas A&M University. He notes that conventional identification technology relies on human intervention. “Someone has to interrupt the process of receiving or shipping goods to scan in a bar code. With RFID you can automatically and transpar- ently receive, store and ship goods without worrying about halting the process or about human error. That’s a giant leap forward.” Giant leaps arrive in many forms these days, none more familiar than the Internet. Not surprisingly, it can streamline supply-chain management. Through sound Web-based strategies, companies may find even more ways to build revenue and profit all along the revenue stream. The best growth strategies include the use of com- munication networks to manage the vast interaction of materials, information and finances as inventory moves from supplier to manufacturer to consumer. SCM mobilizes all the moving parts, coordinating and inte- grating communication within and among companies to reduce uncertainty and boost efficiency. “Ultimately, better coordination of the supply chain improves value for customers and revenue for participants,” says Haim Mendelson, professor of electronic busi- ness and commerce and co-director of the strategic uses of information technology program at Stanford University’s Graduate Participants in the supply chain must decide what information is valuable and then share it on a timely basis. School of Business. processes, your relationships with suppliers and customers and how you can most effectively interact with them,” says Gaukler. He PHOTOGRAPH BY MIKE POWELL/TAXI/GETTY IMAGES Real-time Exchange As networks grow more refined, says Mendelson, real-time exchange of sales data may enable companies to better meet customer needs. notes that while all companies in a particular SCM process should benefit, the biggest gains typically go to the company orchestrating the effort. “If you design the supply chain, you’re probably going to have the most control and reap the most benefit,” Gaukler says. If a manufacturer knows a product is a hit with customers—or, conversely, is selling poorly—the company can anticipate demand and adjust production schedules accordingly. For example, an apparel company might be able to use information about styles that The more companies involved in the supply chain, the more complex the SCM’s architecture. A plastics manufacturer, for example, might have connections with several kinds of customers— are selling well to predict fashion trends and rush similar products into production. industrial-product and consumer-goods manufacturers, as well as product packagers, among others—and coordinating the priorities Begin your SCM process by defining your company’s position in the supply chain. “You need to map your business and logistics of each may be challenging. Typically, there are three SCM elements you need to take into account. If you design the supply chain, you’re probably going to reap the most bene t. Increasingly, these more advanced information systems are based on open data models that share information between the company and its key suppliers, manufacturers and customers. This flow of data helps streamline the supply chain, but it requires system flexibility to link with other systems, and it can raise security risks. “Companies tend to allow an open flow of information only after they’ve developed a basis of trust with each other,” says Mendelson. “But to realize the true value of SCM, you need these links. It’s the immediate, open sharing of information that enables participants to respond quickly to changes in demand or other variables affecting the market.” To minimize inherent risks of a shared, networked environment, supply-chain managers must address issues of data security and protection of intellectual property. At a minimum, they should utilize firewalls and institute detailed protocols for information access, both during the partnership and after the collaboration ends. An integrated process can guide the urgent ow of data. The Future of SCM As SCM continues to evolve, new technologies are paving the way toward even greater efficiencies. For example, many companies are Information flow. Participants in the supply chain must deter- mine which information is valuable—sales data at the retail level, inventory quantities, transportation logistics—and then find ways turning to Web-based SCM applications that smoothly link their proprietary systems up and down supply-chains. “Web services give to share that information on a timely basis. That will enable everyone to respond more quickly and efficiently to fluctuations in you standards you can use to connect relatively quickly to multiple supply chains,” says Mendelson. “This is becoming a standard way PHOTOGRAPH BY AMI GREEN/THE IMAGE BANK/GETTY IMAGES demand or to other important changes. Decision-making responsibilities. Each company in the chain also needs a well-defined role in the decision-making, explains Mendelson: “Each decision—such as when to place an order, the quantity of the product that’s needed and where and how it will be shipped—needs to be assigned to a company in the supply chain.” Information technology. Different software applications help gather data and automate each aspect of the supply chain, streamlining the placement orders, distribution and billing. More sophisticated systems incorporate technology that helps anticipate possible adverse events—like equipment failure or a canceled order—and allow companies to keep the supply chain moving. to collaborate.” the Bottom Line: Supply-Chain Management for Competitive enterprises • Coordinate and accelerate internal information flow • Integrate real-time communication with customers and vendors • Boost value for customers and revenue for all participants • Leverage technology, including radio-frequency identification (RFID)
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