levels in warehouses and the whereabouts of trucks), and suppliers’ capability to provide product as well good forecasting models.
Practically, collaborative supply chain management can only occur when issues of data quality, technological capability and integration between organizations, and the technical competencies of the people contributing to the supply chain, are aligned. The company i2 – see Byte Idea this chapter, is currently a leading player in providing software to electronically manage supply and demand forecasting and potentially, collaborative supply chain management.
Supply Chain Electronic Information Management
As discussed throughout this chapter, successfully managing a supply chain requires accurate information to fl ow smoothly and in a timely fashion through a variety of business functions and organizations (Lummus and Vokurka, 1999). For example, in manufacturing, information provides the routings and instructions necessary to assemble products: no information often means no parts, no assemblies and no products moving through the manufacturing area.
From there, if the information is not accurate in the warehouses or is not fl owing smoothly, then the lists needed to deliver parts to the manufacturing operations won’t be printed and the labels and routings needed to move in-process products won’t be created when they need to be. Finally if the mission-critical documentation needed to distribute products to customers doesn’t happen and the trucks aren’t loaded and dispatched, then the business’s own supply chain has created a business disaster.
This situation is amplifi ed with the current globalization trend because it means that modern, successful businesses are looking to employ global resources to maximize their potential opportunities in the global community. Whilst it is recognized that a supply chain that makes decisions based on global information will clearly dominate one with disjointed and disparate decisions made by separate and independent entities in the supply chain, such coordination is diffi cult to achieve.
The technologies of the eLandscape have all contributed to providing physical pathways for coordinated global supply chains – the next hurdle is how to share and manage information (which includes inventory data, sales data, order status data (for tracking and tracing orders), sales forecast data, production delivery schedule data, performance metrics and capacity data) in a collaborative environment. The major challenges (Lee and Whang 1998) to information sharing across the supply chain are:
• Aligning the incentives of the different partners (i.e. minimizing the potential for exploitation by chain partners)
• Confi dentiality of information shared
• Cross organizational information systems are expensive and risky
• Timeliness and accuracy of shared information.
To truly be collaborative, these issues need to be addressed early in the planning procedure.
The First4Farming agribusiness ‘hub’ is a good example of how this can be achieved – see Byte Idea this chapter.
The Agile Supply Chain
The increasing volatility or rate of change in the business environment is creating the need for businesses to be highly agile in responding to change, ie they can respond in shorter timeframes to changes in volume requirements and variety change.
Martin (1999) put forward the idea of an agile supply chain which is a supply chain that is capable of reading and responding to real demand, using a ‘pull’ philosophy for supply chain management rather than ‘push’ whilst at the same time being able to recreate itself rapidly to meet the challenge of shorter product lifecycles and development times. There are four main distinguishing characteristics of an agile supply chain:
1. Market sensitivity. In contrast to a lean supply chain which aims to minimize inventory, the agile supply chain aims to improve market sensitivity with inventory minimization happening as a by-product. The agile supply chain model is demand driven (vs. forecast driven).
2. Virtual. The agile supply chain is information driven vs. inventory driven and the use of information technology to share the data between buyers and suppliers creates essentially a virtual supply chain.
3. Process integration. Shared information between supply partners can only be fully leveraged through process integration, collaborative buyer-supplier teams, and transparency of information, joint product development and common systems.
4. Network based. The agile supply chain is a confederation of partners linked together as a network. Trust is critical and agile supply chains tend to be tightly focused private exchanges.
The drivers of the agile supply chain approach are a combination of the need to address an increasing customer demand for variety in less predictable environments with shorter life cycles, the need and greater ability to forecast demand, the need to cut out supply chain ineffi ciencies, to get closer to the customer, an increasingly knowledgeable and thus powerful customer base, and a need to create value for all participants. The theory is that providing partners access to business-critical data will produce better informed ‘real-time’ performance, ordering and production decisions.
The Agile Supply Chain Versus the ‘Traditional’ B2B Marketplaces
The similarities between the agile supply chain and B2B marketplace models (European Union Commission, 2003) are that they involve the same players in the supply chain, i.e.
suppliers, buyers and customers; and both focus on using technology to create a virtual meeting place for players. However, there are a number of differences. These include:
• That the B2B marketplace needs a critical and large mass of players, while the agile supply chain concept is essentially associated with private exchanges that link only key partners and suppliers.
• The relationship structure in the B2B model is adversarial while in the agile supply chain model, the hallmarks are trust and collaboration.
• The B2B marketplace presents more of a cultural barrier due to unfamiliarity and discomfort in dealing with a large number of faceless partners. Migrating a brick-and- mortar private exchange to a virtual one presents less of a culture shock.
• There is diffi culty in assessing the quality of players in the B2B marketplace vis-à-vis the hand-picked players in the private exchange.
• The up-front cost and complexity may prove a drawback in both models, but more so for the B2B marketplace model. The loose B2B arrangement is less amenable to positive net benefi t projections and hence is less attractive.
Essentially whichever model survives over time – the reality is that survival itself will only happen if there are cost savings and additional value that can be obtained by adopting the model. Fundamentally, if the cost savings or benefi ts aren’t there then the markets don’t exist.
In order to succeed, a new technology or business model must be demonstrably better than the technology it replaces. The telephone is still a very quick way to place an order.