SUPPLIER LOGISTICS MANAGEMENT The Next Strategic Layer of Competitive Advantage
Supply chain executives are in the hot seat given the flat economy and a slowdown in revenue growth. They are challenged by senior executives to find new and innovative ways to reduce cost, while still meeting customer needs. However, in today's customer-centric environment, meeting customer's expectations is not a competitive advantage, but a fundamental necessity of existence. Delivering products on time, at a higher level of service, is now a standard expectation, leaving limited room to leverage performance as a sustainable competitive advantage.
To reduce costs and gain a competitive advantage, supply chain executives need to focus on supplier management inefficiencies in their supply chain. Ignoring upstream supply chain activities can be costly. For instance, it has been estimated that the food and beverage industry loses $7 to $12 Billion per year through incorrect data flows between suppliers and retailers (1). Additionally, when European consumer goods and food retailers lost more than $17 billion in inventory last year, they could only explain about 41% of these losses (2). Results like this point to the strategic advantage supply chain executives can obtain by focusing on improving their fragmented and complex supplier logistics networks. Through improved supplier logistics management, supply chain executives can provide senior management the silver bullet they are looking for to minimize operational inefficiencies, reduce costs and gain a sustainable competitive advantage.
This is Part One of three-part note. This part covers how Technology Enables Supplier Logistics Management:
- The Internet
- Net-Native Applications
Parts Two and Three will cover the Seven Fundamental Issues Targeted by Supplier Logistics Management.
|(1)||Kraft In Sync with Shaw's Supermarkets' Consumer Goods Technology, Ralph Bernstein, June 2001|
|(2)||Unexplainable Losses', Traffic World, John Parker, June 4, 2001|
Through improved supplier logistics management, supply chain executives can provide senior management with the silver bullet they are seeking.
Until the availability of the Internet, supply chain executives did not have the opportunity to successfully implement supplier logistics solutions. Electronic Data Interchange (EDI) provided the primary means for companies to integrate with large suppliers. This option turned out to be cost prohibitive and stifled its rapid adoption across small to medium size suppliers.
To complicate matters, EDI did not provide real-time information transfer and, because the process was heavily dependent on batch driven algorithms, mission critical information would often arrive too late for companies to make time-sensitive decisions.
The Internet provides companies and their suppliers with an affordable platform to share and access data in a real-time environment. Using languages like XML, the Internet lets companies extend their communication footprint across their entire supplier base in a flexible and inexpensive manner. Common communication platforms like EDI and Fax, do not allow companies to communicate real-time with their suppliers. Companies can now be alerted immediately when supply chain disruptions occur and take the necessary corrective action to rectify the problem without impeding the movement of goods.
Net-Native applications are built and designed for the Internet and this architecture is fundamental for companies to manage supplier relationships.
When identifying supplier logistics solutions, companies must look for platforms that are Net-Native. Unlike Web-enabled client-server applications, Net-Native applications are built and designed for the Internet. This type of architecture is fundamental for companies to manage their supplier relationships. Net-Native applications provide significant benefits:
- Centralized information platform for multiple parties to access -- Supply chain information exists, however it is often decentralized. In today's environment companies are required to search carrier websites to track shipments and request pickups. Net-Native applications provide a single data source from which companies can manage their supply chain. The centralized information platform also extends itself to be a hub where companies can manage and monitor their partner activity.
- Built with the intention to scale to multiple companies -- Net-Native applications are built with a multi-tenant data model. Multi-tenancy allows entire communities to operate within a single instance. Existing web-based, client-server applications were developed with the concept of one customer per application install. These applications must be re-designed to allow for multi-tenant data model in order to accommodate the many entities in a company's supply chain.
- Inexpensive and easy to deploy -- Net-native applications are less disruptive and require minimal involvement from in-house IT personnel for deployment. Because Net-Native companies provide these resources, as well as the hardware and software necessary to run the application, they remove a company's dependency on scarce and costly UNIX and database administrators. According to Forrester Research, the cost to implement traditional applications is approximately $1,090,000, while the typical Net-Native application implementation cost is just $240,000.
Since Net-Native applications were designed for the Internet, a significant emphasis has been placed on the user experience. User-Interfaces are straightforward and most training can be conducted on-line without the assistance of costly implementation consulting.
These factors result in rapid application deployment, mitigation of risk and quick return on investment for companies.
- Long-term planning not needed for upgrades -- All companies on Net-Native Applications access the same code base. Custom coding is limited and upgrades to existing applications occur overnight and without company resources.
Companies receive product enhancements immediately, leaving time for Net-Native application vendors to focus on building new features rather than focus on supporting multiple installations of the code base. According to Stacie McCullough-Kilgore of Forrester Research, "Sixty percent of client/server development resources on rapidly adding new features rather than supporting prior releases and other platforms so clients get access to new features in one-third of the time it normally takes to upgrade the client/server counterpart."
This concludes Part One of a three-part article.
About the Author
Mr. Buelow is a Product Manager at Elogex Inc. and has several years ofindustry experience in supply chain software and strategy. Buelow was previously a Senior Consultant in the Supply Chain Strategy Group at iXL and prior to that was a Senior Consultant and Business Analyst at Optum Inc. He has helped developed the Internet strategies for such Fortune
500 companies as GE Polymerland and Danaher and successfully implemented transportation management software at Federal Express Logistics, Skyway Logistics, Ticona, Monsanto, and Solutia.