eSupplyChain.com
By William C Copacino -- Logistics Management, 2/1/1999
The world is rapidly moving into a new economic realm: "the eEconomy," a change that is as profound as the movement from an agrarian to an industrial economy more than a century ago.
Electronic commerce already is moving beyond the initial "incubation" phase to the rapid-growth phase. One has only to look at the phenomenal appreciation of Internet stocks and the tremendous market capitalization of "eEconomy" companies such as Microsoft, Yahoo, Cisco, Amazon.com, eBay, and eTrade to understand the profound shift that is occurring. These companies are becoming the new creators of economic value.
The "eEconomy" poses tremendous opportunities and challenges for supply chain management. It also offers industrial and consumer-products companies the opportunity to create substantial economic value for their shareholders--with supply chain management at the heart of that value creation. Some areas of supply chain management that will be profoundly affected include:
* Process efficiency. Electronic commerce can enhance the efficiency and effectiveness of key supply chain processes like supplier management and order management, fulfillment, and replenishment. Costs in these areas can be slashed. For example, I estimate that an Internet-based order-entry process can reduce costs by up to 30 times the costs of a call center, dropping order-entry costs from 6 percent for call center ordering to a fraction of 1 percent for an Internet-based order-entry process.
* Channel restructuring. The "eEconomy" allows for an increase in disintermediation of channel intermediaries. This results in a corresponding drastic reduction of channel inventories, handling costs, and transition costs, and provides an opportunity for companies to recapture channel intermediaries' margins. One need only compare the economics of a Dell Computer to those of traditional PC manufacturers to understand what a powerful value-creation opportunity channel restructuring offers.
* Channel integration. The "eEconomy" allows companies to integrate with suppliers and customers in a way that can lower transaction costs, enhance demand visibility, improve forecast accuracy, and reduce capacity requirements, manufacturing costs, and supply costs. The "eEconomy," moreover, allows the creation of entirely new approaches to sourcing and procurement strategies.
It is vital that logistics and operations managers take action to respond to this rapidly growing economic trend. As they develop "eSupplyChains," they will transform the way logistics, manufacturing, and procurement are conducted and create tremendous shareholder value for their companies.
William C. Copacino is managing partner of Andersen Consulting's Strategic Services Practice for the Americas. A frequent speaker before business and professional groups, Mr. Copacino has a number of publications to his credit, including the book Supply Chain Management: The Basics and Beyond (The St. Lucie Press, 1997). He is based in Andersen Consulting's Boston office, 100 William St., Wellesley, MA 02181. Phone (617) 454-4480.
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