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CSCB Report

Why are CEOs So Excited About SupplyChain Management?

by Carol West

Supply chain management has suddenly caught the attention of business strategists in a big way. What’s all the fuss about? And what does it mean for the logistics professional?

So far, new technology and procedures have helped us run supply chains much more efficiently than in the past. Now, we are being challenged to shift the whole paradigm of linear supply chain management. Strategists are telling CEOs that the key to competitive advantage lies not just inside their own companies, but outside the company walls – in increasingly complex, technology-driven webs of suppliers, carriers, brokers and business partners. The more adventurous are saying that the supply chain, in fact, simply is the business – a virtual business that disregards conventional corporate boundaries.

Why are supply chains where all the action is? Consider how thinking about manufacturing competitiveness has evolved over the years.

In the 1970s, the key to competitiveness was quality – the buzzwords were all about quality management. But when everyone starts producing quality products, quality is no longer a competitive edge.

So the search for a competitive edge turned to manufacturing efficiency. In the 80s and 90s, companies reengineered, got lean and mean, cut costs and excess fat. For the sake of argument, let’s say that most companies have reached that point – and the playing field is level once again. Where do you look now? You look outside the manufacturing plant to the supply chain. And that’s where we are. Supply chains are the competitive battleground of the new millennium.

The key battles are taking place on the Internet. The Internet makes supply chain integration possible and practical, on a scale few could imagine a few years ago.

That’s why the Canadian Society of Customs Brokers moved the CSCB Gateway EDI service from traditional VAN to Internet technology a year ago, in partnership with ViaSafe Inc., an e-business integration service provider. Brokers have long been among the most connected players in the supply chain industry. We know that in the future, Internet-based trade facilitation will set the performance benchmarks for our business.

If there were ever any doubts about this, two recent reports should lay them to rest. Stephens Inc., a U.S. investment bank, estimates that the market for Internet-based cross-border logistics will explode over the next two years, becoming a $1 trillion market by 2005. Their comprehensive report, “e-Global Logistics: the Engine Powering Globalization,” is available for download from their site (www.stephens.com).

U.S.-based PRTM management consultants have released preliminary results of a two-year logistics benchmarking study. They also see the Internet as the great enabler, redefining performance standards for the industry. In the July/August issue of Supply Chain Management Review (www.manufacturing.net/scl/scmr/) they report that companies who “Web-enable” their supply chains are performing better than “best-in-class” – creating a strategic gulf between themselves and non-Web-enabled competitors, delivering measurably superior service levels at competitive prices. And the gulf is widening.

What does all this mean for logistics and supply chain managers?

If your job involves managing cross-border supply chains, the most sensible step, of course, is to ask your customs broker. As you prepare for this transition, here are some recommendations.

If you are not Web-enabled yet, figure out how you can move your function onto the Internet. But be wary of Internet-based solutions that tie you too tightly to a single community of subscribers, or require your partners to adopt proprietary software. The Internet – and e-business integration – is about universal access, universal connectivity. You need the flexibility to connect to any partner in the supply chain quickly and easily.

Be wary, too, of pinning your e-business strategy to generic Web-based market exchanges or auction services. Analysts have doubts about the viability of this type of service, and expect to see many closing down.

However, you need to look closely at industry-specific Web-based consortiums forming among big players in some sectors, like chemicals, automotive parts and healthcare. ElastomarSolutions.com, for example, is a consortium formed by global chemical companies to connect with buyers and suppliers. If your supply chain involves players like DuPont, Dow or Bayer, chances are you will have to play through their Web portal, on their terms.

Whatever your role, it enables you to enrich the supply chain and your role in new ways. Look at the kind of information that flows through your function and how that information is used by your partners to make decisions, upstream and downstream. Find ways to add value to the flow, enabling those decisions to be made more effectively.

Ultimately, that is what Internet-based SCM is about: adding value. It is not just about cutting costs, or shrinking time. It is about creating new kinds of value every step of the way, in the new battleground for competitiveness.

It’s about making our roles, as logistics professionals, more central to the competitive success of our partners than ever before.