Shrinking the expanding supply chain
By Badri Devalla, Sr. Principal, High-Tech and Discrete Manufacturing
Supply chains are lengthening as everyone knows - we are connecting far removed markets and suppliers, moving far more information (buying a car at a dealer in your zip code vs viewing models and building a personalized car online), and moving a lot more inventory over larger distances (So much so that there’s a Think Local movement gaining root in the left coast of the U.S.)
Suppliers and Consumers mask the “distances” between them through fast movement of inventory (think air, rail, road and even water with massive and fast container ships), structures to exchange information easily (think internet-based tools) and moving money across continents – these three – the movement of information, money and inventory being the classic dimensions of the supply chain – a responsive supply chain is masking the “distance”. The dimension that has changed due to flattening of the world is of course "information" - its creation, exchange and consumption.
When we talk to Manufacturers and Distributors in the supply chain, we hear 2 initiatives – “Supplier Collaboration” looking out to the supply and “Partner Relationship” looking out to markets – the issues we hear are about, “We don’t want to just communicate over EDI or present products on a portal but we want online communities where we can collaborate or have a dialog” – be it swapping greater dimensions of information around demand/supply on the “supplier side” or tell us what your longer term needs are (beyond that one transaction) and we’ll personalize our solution for you on the “partner” side.
Enterprises and players in the supply chain are acting much like individuals in a social network – when we know we are “farther” apart, we want to “talk” more.
The onus therefore for Enterprises is to focus on making money (or reducing costs) in not just moving information but from encouraging a richer dialog.
So the question is, how do you enable a richer dialog? How do you profit from the conversation?
When we talk to Manufacturers and Distributors in the supply chain, we hear 2 initiatives – “Supplier Collaboration” looking out to the supply and “Partner Relationship” looking out to markets – the issues we hear are about, “We don’t want to just communicate over EDI or present products on a portal but we want online communities where we can collaborate or have a dialog” – be it swapping greater dimensions of information around demand/supply on the “supplier side” or tell us what your longer term needs are (beyond that one transaction) and we’ll personalize our solution for you on the “partner” side.
Enterprises and players in the supply chain are acting much like individuals in a social network – when we know we are “farther” apart, we want to “talk” more.
The onus therefore for Enterprises is to focus on making money (or reducing costs) in not just moving information but from encouraging a richer dialog.
So the question is, how do you enable a richer dialog? How do you profit from the conversation?
Comments
Badri, you make an excellent observation about the illusion of a shrinking supply chain when in terms of absolute distance and links, it is growing beyond something ever imagined.
The most obvious suggestion for facilitating a richer dialog across suppliers, enterprise and partners is to use the Web 2.0 technologies - wikis, blogs, mashups etc. But are the enterprises ready for this? More importantly, are the suppliers aligned with the enterprise w.r.t technology?
Thinking beyond technology, an interesting move that comes to my mind is the proposal by Tata Motors to make their 1-lakh car as a CKD kit and have it assembled at road-side mini workshops. Not only will this reduce costs, but will build an invaluable channel for feedback whereby they can continuously refine the product. Such a channel should surely facilitate an enriching dialog.
Posted by: Pratik | May 25, 2007 8:09 PM
This is good conversation since to lower COGS, rationalization of the supply chain function is key and for rationalization, optimization of channels is necessary. The technology used for facilitation is in my opinion a peripheral issue, the key challenge will be "what's in it for me" both from an enterprise perspective as well as from a supplier perspective.
B2B as an opportunity is hovering between a "has been concept" to probably a moderate success (we have seen some success stories). Where I think enterprises and suppliers can partner is extending beyond this transactional relationship to co-ownership relationship. That is what we have been able to drive to moderate success...
Posted by: Anand Kumar | May 26, 2007 4:39 AM
Pratik's comments bring Jason Maynard's comment (Credit Suisse Software Analyst) on a different topic to my mind -
See "Revolution of business software" presented at an SIAA event http://www.siia.net/s4/2007/ppt/Maynard.pdf
About Web 2.0 and related - Maynard talks about Consumer Internet services showing the way
Maynard points out that teenagers can collaborate on the Net better than corporate workers. I think the point is that most corporate workers have access to better collaboration tools/communities in their homes than at work - I believe we will see these "end users" drive Enterprise 2.0 in their respective organizations (more than a CIO top-down mandate to move to Enterprise 2.0). The same end-users will also as consumers provide instant feedback on a product and even participate in product design as we see in the Video Game software world.
I do agree with Anand's point about technology being a peripheral issue - the business value driven by collaboration is key.
Posted by: Badri Devalla | May 29, 2007 3:22 PM
Interesting analysis by Maynard.
However, I think we should distinguish between Web2.0 and SaaS in a meaningful way - web2.0 services catering to the Consumer Internet Services market, whereas SaaS catering to the Business Enterprise Services market. If an enterprise can amalgamate the 2 in its business strategy, then we have a potentially endless source of feedback and information through
partner participation.
And I think Salesforce.com is showing us the way right now...
Posted by: Pratik | May 31, 2007 7:14 PM