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Real-time e-supply chain management: diffusion of new technologies and business practices
Transportation Research Part E 39 (2003) 79–82 www.elsevier.com/locate/tre
Editorial
Real-time e-supply chain management: diffusion of new technologies and business practices
The past decade has seen a number of developments that in combination enable the real-time e-supply chain concept to become a reality. Recent technological breakthroughs, including connectivity and bandwidth enhancements, facilitate real-time Internet connections among all partners in an extended enterprise. Along with these developments is the improved ability for functional areas within a single organization and for supply chain partners to share information through rapidly developing middleware, which allows organizations to keep legacy supply chain software systems but to share common data across applications. The last several years have witnessed the first releases of portal servers that act as traffic cop servers to route incoming communications and message packets from across the Internet into either secure or non-secure communications streams. The portal servers control and customize user-views based on user roles and security classifications. They enable users to sign on only once to get access to a whole world of information and services. There has also been the rapid maturing of the e-business application server with a high degree of personalization being provided to users via a hardware/software solution. In combination, these developments provide an opportunity for an organization to create a real-time netcentric supply chain. All the various logistics functions are coordinated and linked together in real-time across the organization. Thus, when customer orders are placed, the information gets shared across the organization and to extended enterprise partners in real-time. The customer-initiated order results in an immediate search of inventories, manufacturing schedules and vendor component inventories and schedules to arrive at an available to promise notification to the customer. This entire searching process is automatic, based on pre-established business rules. It enables a response to a customer within seconds. Orders, once placed, are fed to a manufacturing group, shared with suppliers, and tracked throughout the process all the way to delivery. The netcentric real-time supply chain results in fewer mistakes in orders, reduced lead times, shortened cycle times, reduced inventories, and better resource utilization across the supply chain. However, this vision of the netcentric real-time supply chain has not been widely adopted throughout American industry. In this special issue, we seek to present a perspective on what has been accomplished to date as well as a vision of a future in which the concept has been implemented. The articles can be divided along a series of four themes. First, two articles report on the 1366-5545/03/$ - see front matter Ó 2003 Elsevier Science Ltd. All rights reserved. PII: S1366-5545(02)00040-6
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Editorial / Transportation Research Part E 39 (2003) 79–82
results of surveys designed to measure the current extent of new supply chain technology adoption and to explain the observed patterns. Topics covered in the first theme include firm strategy with respect to integrating logistics functions, e-commerce, and enterprise resource planning as well as a statistical model to explain the pace of supply chain technology adoption. Second, two articles report on building blocks on the road to a full implementation of the concept of a netcentric supply chain. Topics covered in the second theme include changes that organizations face in designing distribution networks in flux as a consequence of adopting new technologies and implementing e-business strategies as well as benefits to organizations that take advantage of synergies emerging from a more integrated approach to individual logistics functions. Third, one article focuses on the key question of customer service as organizations adopt new technology and radically transform their supply chains. Topics covered in this article concern the importance to the customer of operational performance, relational considerations, and the interaction of these two factors. Indeed, companies must never lose sight of the importance of the customer in the transition to a new vision of the supply chain. In fact, the customer must be a key beneficiary of the changes that are implemented. Fourth, one article provides a case study of a pilot implementation of the concept of an integrated, netcentric real-time e-supply chain. Topics covered include a demonstration of how the integrated concept facilitates workflow automation, collaborative planning and forecasting, and event management. Rutner, Gibson, and Williams report results from a survey of Logistics Information Systems professionals on the impact of electronic commerce and enterprise resource planning on logistics integration. They found that there continues to be growth in the adoption of electronic commerce systems that support logistics integration. Companies that have successfully implemented the integrated logistics concept are significantly more likely to have also implemented some form of electronic commerce than those who have not. Furthermore, logistics integration and enterprise resource planning implementation go hand-in-hand, according to survey results, with success in one area fostering success in the other. ERP systems provide a mechanism for collecting, managing and sharing organizational data across business functions, including the data needed to support the integration of logistics operations. Patterson, Grimm, and Corsi present a theoretical model providing insights into the key factors leading to adoption of supply chain technologies that would enable the implementation of the netcentric e-supply chain vision. At this stage, the model has been extensively pre-tested with industry leaders. The modelÕs first construct is firm size. Larger firms are more likely to have adopted supply chain technologies than are smaller firms, according to the modelÕs hypothesis. A decentralized organizational structure is also believed to lead to greater adoption of the building block technologies of the e-supply chain. Firms allowing decision makers throughout the organization may engage in more environmental scanning, which leads to a greater awareness and appreciation of potential innovations, according to the theory of the model. Another important driver of supply chain technology adoption is the integration of a firmÕs supply chain strategy with its overall corporate strategy, according to one of the modelÕs hypotheses. Organizations that understand the competitive benefits of supply chain operations incorporate supply chain strategy into the organizationÕs overall strategy. Supply chain partner pressure is another important predictor of supply chain technology adoption, according to the modelÕs tenants. A typical
Editorial / Transportation Research Part E 39 (2003) 79–82
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comment from a pre-test of the model expands upon this predictor: ‘‘Most customers demand this supply chain technology or they will go someplace else.’’ The final construct hypothesized to drive adoption is environmental uncertainty. Organizations facing greater uncertainty employ supply chain technology to improve information management and exchange in order to be able to better respond to changing conditions. The drivers toward adoption of new supply chain technology are very powerful, indeed. In the words of one respondent to the pre-test of the model: ‘‘With almost daily technology advancement globally in every facet of the business, organizations need to synchronize by adopting and implementing new electronic commerce and supply chain technology in order to protect market share.’’ Chopra discusses challenges faced by firms as they attempt to realign their physical supply chains to adapt to new technologies, including greater use of e-commerce, that displace the more traditional supply chain structure of manufacturers, warehouses, distributors, and retail outlets. Indeed, the netcentric e-supply chain creates the opportunity for manufacturers to ship directly to customers and remove distributors/retailers from the chain. Chopra discusses alternative physical configurations for supply chains in the new environment and presents the advantages and disadvantages of each structure in terms of customer service and total costs, each broken down into sub-components. Mason, Ribera, Farris, and Kirk examine the synergies that firms can achieve as they implement and integrate new supply chain technologies. Specifically, the authors show the advantage firms realize from integrating two functional aspects of an overall logistics strategy––i.e., warehousing and transportation management. The authors advance the premise that warehousing and transportation management systems are key factors in integrating the physical flow of goods along the extended supply chain. Their research reveals much potential for improvements resulting from an integrated WMS/TMS system. Their experiments suggest that potentially dramatic improvements in lead time reduction (both in average and variability) can be gained when full knowledge of the location of all assets and their status are known in real-time through global inventory visibility––an outcome of a fully integrated WMS/TMS system. The Zhao and Stank paper brings a sense of reality back to the discussion of new supply chain technologies and their impact on business practices. Indeed, their paper focuses on the importance of understanding the key drivers of customer satisfaction. Business decisions about their investments in supply chain technologies must carefully weigh the impact of the new processes on customer satisfaction. To that end, the authors show that both operational and relational capabilities for logistics services are key drivers of customer satisfaction, based on their detailed assessment of the food service delivery industry segment. The authors find that operational and relational capabilities for logistics services do not complement and enhance each otherÕs impact on performance. There seems to be a strategic fit, which requires either a high–low or a low–high combination of the two capabilities in order to achieve superior performance. Firms should allocate their resources between the two types of capabilities according to their own strength, due to the existence of resource tradeoffs between operational and relational capabilities for logistics services. A strategy of pursuing excellence in both capabilities for a broad market offering as advocated by previous studies is often not attainable, unless capacity constraint can be alleviated. The Boyson, Corsi, and Verbraeck paper address a pilot implementation of a netcentric e-supply chain concept in the context of a supply chain for the F101 engine. The prototype demonstrates how a portal allows users to see a have access to the information and decision
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Editorial / Transportation Research Part E 39 (2003) 79–82
support tools required by their specific roles within the supply chain. The portal provides a single, unified database interconnected in real-time via a middleware messaging layer that allows data to be exchanged based on a series of user-specified business rules. The simplified portal interface is used in the prototype to demonstrate workflow automation, collaborative planning and forecasting across the extended enterprise, and real-time event management. This special issue has shown some of the promise of a netcentric real-time e-supply chain concept. The path toward greater diffusion of the concept will be time-consuming and very expensive. Yet, the advantages of the new supply chain technologies and business practices are compelling. It will be very interesting to observe the process as it unfolds. The articles in this issue show the promise of the new approach as well as pointing out the difficulties and hurdles to overcome in reaching it. We are hopeful that readers will be in a better position to understand the technologies and the change process as a result of reflecting on the insights of the various articles contained in this issue of the journal. Thomas M. Corsi Sandor Boyson Supply Chain Management Center Robert H. Smith School of Business University of Maryland, College Park MD 20742, USA E-mail addresses: [email protected], [email protected]
Editorial
Real-time e-supply chain management: diffusion of new technologies and business practices
The past decade has seen a number of developments that in combination enable the real-time e-supply chain concept to become a reality. Recent technological breakthroughs, including connectivity and bandwidth enhancements, facilitate real-time Internet connections among all partners in an extended enterprise. Along with these developments is the improved ability for functional areas within a single organization and for supply chain partners to share information through rapidly developing middleware, which allows organizations to keep legacy supply chain software systems but to share common data across applications. The last several years have witnessed the first releases of portal servers that act as traffic cop servers to route incoming communications and message packets from across the Internet into either secure or non-secure communications streams. The portal servers control and customize user-views based on user roles and security classifications. They enable users to sign on only once to get access to a whole world of information and services. There has also been the rapid maturing of the e-business application server with a high degree of personalization being provided to users via a hardware/software solution. In combination, these developments provide an opportunity for an organization to create a real-time netcentric supply chain. All the various logistics functions are coordinated and linked together in real-time across the organization. Thus, when customer orders are placed, the information gets shared across the organization and to extended enterprise partners in real-time. The customer-initiated order results in an immediate search of inventories, manufacturing schedules and vendor component inventories and schedules to arrive at an available to promise notification to the customer. This entire searching process is automatic, based on pre-established business rules. It enables a response to a customer within seconds. Orders, once placed, are fed to a manufacturing group, shared with suppliers, and tracked throughout the process all the way to delivery. The netcentric real-time supply chain results in fewer mistakes in orders, reduced lead times, shortened cycle times, reduced inventories, and better resource utilization across the supply chain. However, this vision of the netcentric real-time supply chain has not been widely adopted throughout American industry. In this special issue, we seek to present a perspective on what has been accomplished to date as well as a vision of a future in which the concept has been implemented. The articles can be divided along a series of four themes. First, two articles report on the 1366-5545/03/$ - see front matter Ó 2003 Elsevier Science Ltd. All rights reserved. PII: S1366-5545(02)00040-6
80
Editorial / Transportation Research Part E 39 (2003) 79–82
results of surveys designed to measure the current extent of new supply chain technology adoption and to explain the observed patterns. Topics covered in the first theme include firm strategy with respect to integrating logistics functions, e-commerce, and enterprise resource planning as well as a statistical model to explain the pace of supply chain technology adoption. Second, two articles report on building blocks on the road to a full implementation of the concept of a netcentric supply chain. Topics covered in the second theme include changes that organizations face in designing distribution networks in flux as a consequence of adopting new technologies and implementing e-business strategies as well as benefits to organizations that take advantage of synergies emerging from a more integrated approach to individual logistics functions. Third, one article focuses on the key question of customer service as organizations adopt new technology and radically transform their supply chains. Topics covered in this article concern the importance to the customer of operational performance, relational considerations, and the interaction of these two factors. Indeed, companies must never lose sight of the importance of the customer in the transition to a new vision of the supply chain. In fact, the customer must be a key beneficiary of the changes that are implemented. Fourth, one article provides a case study of a pilot implementation of the concept of an integrated, netcentric real-time e-supply chain. Topics covered include a demonstration of how the integrated concept facilitates workflow automation, collaborative planning and forecasting, and event management. Rutner, Gibson, and Williams report results from a survey of Logistics Information Systems professionals on the impact of electronic commerce and enterprise resource planning on logistics integration. They found that there continues to be growth in the adoption of electronic commerce systems that support logistics integration. Companies that have successfully implemented the integrated logistics concept are significantly more likely to have also implemented some form of electronic commerce than those who have not. Furthermore, logistics integration and enterprise resource planning implementation go hand-in-hand, according to survey results, with success in one area fostering success in the other. ERP systems provide a mechanism for collecting, managing and sharing organizational data across business functions, including the data needed to support the integration of logistics operations. Patterson, Grimm, and Corsi present a theoretical model providing insights into the key factors leading to adoption of supply chain technologies that would enable the implementation of the netcentric e-supply chain vision. At this stage, the model has been extensively pre-tested with industry leaders. The modelÕs first construct is firm size. Larger firms are more likely to have adopted supply chain technologies than are smaller firms, according to the modelÕs hypothesis. A decentralized organizational structure is also believed to lead to greater adoption of the building block technologies of the e-supply chain. Firms allowing decision makers throughout the organization may engage in more environmental scanning, which leads to a greater awareness and appreciation of potential innovations, according to the theory of the model. Another important driver of supply chain technology adoption is the integration of a firmÕs supply chain strategy with its overall corporate strategy, according to one of the modelÕs hypotheses. Organizations that understand the competitive benefits of supply chain operations incorporate supply chain strategy into the organizationÕs overall strategy. Supply chain partner pressure is another important predictor of supply chain technology adoption, according to the modelÕs tenants. A typical
Editorial / Transportation Research Part E 39 (2003) 79–82
81
comment from a pre-test of the model expands upon this predictor: ‘‘Most customers demand this supply chain technology or they will go someplace else.’’ The final construct hypothesized to drive adoption is environmental uncertainty. Organizations facing greater uncertainty employ supply chain technology to improve information management and exchange in order to be able to better respond to changing conditions. The drivers toward adoption of new supply chain technology are very powerful, indeed. In the words of one respondent to the pre-test of the model: ‘‘With almost daily technology advancement globally in every facet of the business, organizations need to synchronize by adopting and implementing new electronic commerce and supply chain technology in order to protect market share.’’ Chopra discusses challenges faced by firms as they attempt to realign their physical supply chains to adapt to new technologies, including greater use of e-commerce, that displace the more traditional supply chain structure of manufacturers, warehouses, distributors, and retail outlets. Indeed, the netcentric e-supply chain creates the opportunity for manufacturers to ship directly to customers and remove distributors/retailers from the chain. Chopra discusses alternative physical configurations for supply chains in the new environment and presents the advantages and disadvantages of each structure in terms of customer service and total costs, each broken down into sub-components. Mason, Ribera, Farris, and Kirk examine the synergies that firms can achieve as they implement and integrate new supply chain technologies. Specifically, the authors show the advantage firms realize from integrating two functional aspects of an overall logistics strategy––i.e., warehousing and transportation management. The authors advance the premise that warehousing and transportation management systems are key factors in integrating the physical flow of goods along the extended supply chain. Their research reveals much potential for improvements resulting from an integrated WMS/TMS system. Their experiments suggest that potentially dramatic improvements in lead time reduction (both in average and variability) can be gained when full knowledge of the location of all assets and their status are known in real-time through global inventory visibility––an outcome of a fully integrated WMS/TMS system. The Zhao and Stank paper brings a sense of reality back to the discussion of new supply chain technologies and their impact on business practices. Indeed, their paper focuses on the importance of understanding the key drivers of customer satisfaction. Business decisions about their investments in supply chain technologies must carefully weigh the impact of the new processes on customer satisfaction. To that end, the authors show that both operational and relational capabilities for logistics services are key drivers of customer satisfaction, based on their detailed assessment of the food service delivery industry segment. The authors find that operational and relational capabilities for logistics services do not complement and enhance each otherÕs impact on performance. There seems to be a strategic fit, which requires either a high–low or a low–high combination of the two capabilities in order to achieve superior performance. Firms should allocate their resources between the two types of capabilities according to their own strength, due to the existence of resource tradeoffs between operational and relational capabilities for logistics services. A strategy of pursuing excellence in both capabilities for a broad market offering as advocated by previous studies is often not attainable, unless capacity constraint can be alleviated. The Boyson, Corsi, and Verbraeck paper address a pilot implementation of a netcentric e-supply chain concept in the context of a supply chain for the F101 engine. The prototype demonstrates how a portal allows users to see a have access to the information and decision
82
Editorial / Transportation Research Part E 39 (2003) 79–82
support tools required by their specific roles within the supply chain. The portal provides a single, unified database interconnected in real-time via a middleware messaging layer that allows data to be exchanged based on a series of user-specified business rules. The simplified portal interface is used in the prototype to demonstrate workflow automation, collaborative planning and forecasting across the extended enterprise, and real-time event management. This special issue has shown some of the promise of a netcentric real-time e-supply chain concept. The path toward greater diffusion of the concept will be time-consuming and very expensive. Yet, the advantages of the new supply chain technologies and business practices are compelling. It will be very interesting to observe the process as it unfolds. The articles in this issue show the promise of the new approach as well as pointing out the difficulties and hurdles to overcome in reaching it. We are hopeful that readers will be in a better position to understand the technologies and the change process as a result of reflecting on the insights of the various articles contained in this issue of the journal. Thomas M. Corsi Sandor Boyson Supply Chain Management Center Robert H. Smith School of Business University of Maryland, College Park MD 20742, USA E-mail addresses: [email protected], [email protected]