The supply chain's driving the new economy

By William C. Copacino -- Logistics Management, 11/1/2000

Over the past seven years, the U.S. economy has achieved unprecedented success. Clearly thoughtful fiscal and monetary policies have been important contributing factors. But the huge productivity gains achieved through supply chain and information technology advances have also been an important force-both in driving U.S. competitiveness and in allowing our economy to expand at historic rates without inflation.

A number of supply chain developments have contributed to these profound productivity gains, including the following:

• The emergence of the extended supply chain. The integration of the supply chains of channel partners has reduced transaction costs, improved delivery service, allowed greater capacity utilization, and improved asset productivity. It has also allowed a reduction in leadtimes, provided greater demand signal and pipeline inventory visibility, and enabled companies to develop better forecasts of demand-substantially improving inventory performance.

This revolution in operating models has had profound effects on the companies that have built these powerful channel integration capabilities. From pioneers like Wal-Mart and Dell to a much broader group of players today, channel integrators are driving tremendous productivity gains and creating a competitive gap with those companies that have not embraced these operating models.

• The introduction of new tools. This channel integration revolution has been made possible by the availability of an ever-expanding set of software and analytical tools. From the well-known supply chain planning and collaborative tools, to e-procurement tools, to auctioning software, to software that allows real time inventory and event monitoring, real-time extraction and monitoring of key data from legacy systems, and work flow management and exception processing ... these new applications are allowing companies to manage in ways we only dreamed of a few years ago.

• The emergence of a culture of collaboration. We have turned the corner where most companies today realize that they cannot afford the time, cost, and risk to develop leading-edge supply chain and information technology capabilities and are much more willing to outsource these business functions. Furthermore, many companies have improved their collaborative skills and ability to partner, and we will see increased outsourcing in all supply chain functions in the years ahead.

It's an exciting time for supply chain practitioners, who find themselves front and center in this economic revolution. It challenges each individual to grow continuously and learn new skills, and it promises to allow us to participate in the opportunity of the century.

Editor's note: Last month's Strategy column contained an incorrect spelling of one Internet business. The correct spelling is Kozmo.com.

William C. Copacino is the managing partner of Andersen Consulting's Global Supply Chain Practice. 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.