Survival of the e-fittest

By Francis J. Quinn -- Logistics Management, 3/1/2000

Who knew that the phenomenon known as e-commerce would come on so hard and so fast? And who could have predicted that the people responsible for moving product to market would be right in the middle of the action?

But that's the reality. The impact of e-commerce is being felt across the supply chain and at every point within. And anyone working in logistics or supply chain management who doesn't understand that reality is jeopardizing his or her professional future.

Upstream in the channel, one of the most dramatic manifestations is the rapid emergence of electronic procurement, or e-procurement. Companies are researching suppliers on the Web and then placing their orders for a range of products (and now services, too) with no human intervention. New dot-coms let prospective buyers post their requests for proposals on the Web and then await the responses of qualified suppliers. Auctions for commercial products and services are becoming more and more common, mirroring what has already happened in the business-to-consumer segment.

One of the most significant developments in the e-procurement arena is the emergence of the new online trading communities. The trading hubs set up by GM and Ford, in particular, have captured the greatest attention because of the magnitude of the potential trades involved. Through their Web-enabled communities, the automakers will ultimately buy millions of dollars of products online from thousands of suppliers.

How big is electronic procurement expected to get? A recent study by consultants A.T. Kearney suggests that within two years as much as one-fourth of all external expenditures among U.S. companies will be made via the Internet. The volume now is only about 2 percent.

Moving down the supply chain, the Internet's impact has been no less remarkable. Logistics managers now find themselves scrambling to develop physical order-fulfillment systems that deliver on the electronic promise of the Internet--not an easy task, as anyone who has stepped up to this challenge will attest.

Logistics managers also are being asked to become experts in managing the physical movement of goods using the Internet. The technology is there to help them do that. Web-centric applications let you check on inventory status across the supply chain, schedule shipment and delivery, and then confirm delivery with the customers. The hard part is evaluating and comparing the solutions now available. At this point in the Internet age, proven track records are few and far between.

Managers responsible for warehouses and distribution centers, for their part, face their own e-commerce challenges. How do we configure our warehouse to respond to online orders most effectively? What type of warehouse management system (WMS) is needed to manage the e-enhanced operation? What's the best way to train our people in the use of the new technology?

If they haven't done so already, supply chain and logistics professionals can fully expect to encounter the kinds of challenges enumerated above--and soon. Instead of trying to fight the inevitable, the best course of action is to learn as much as you can about electronic commerce as fast as you can. The world of e-commerce is here to stay. And as in all new worlds, the mandate is to adapt or ultimately perish.

Francis J. Quinn is editor of Supply Chain Management Review, published by Cahners Business Information. For subscription information, call (888) 343-5567.