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THE USE OF ELECTRONIC COMMERCE IN MANAGING THE SUPPLY CHAIN

There are many opportunities to use elements of elec­tronic commerce in supply chain management. Some will improve internal and external communications, a basic tenet of effective supply chain management. Oth­ers will automate tactical tasks, allowing purchasing professionals the opportunity to concentrate on the more strategic elements of their jobs, and some will al­low for greater efficiencies in the entire enterprise. The Internet plays a major role in electronic commerce and provides the framework for enhanced supply chain com­munication through such vehicles as e-mail, file trans­fer protocol (FTP), the World Wide Web, intranets, and extranets.

E-mail is a very popular, effective, and useful elec­tronic commerce tool and has been affectionately called the Internet's "killer application." The effective use of e-mail is not just rapid communications, but a vehicle to send letters, prints, specifications, and other business communications through the supply chain. The uses of e-mail are endless, and it allows users to communicate not only instantly, but cost effectively. Messages and information can be forwarded, duplicated, and other­wise processed at the touch of a key or click of a mouse. The problem with electronic mail is that its use is still not widespread, and there are many companies that do not utilize this technology. However, suppliers and pur­chasers who do utilize it find their communication links improved.

THE IMPACT OF THE INTERN ETON SUPPLY CHAIN MANAGEMENT

Commercial firms have used the Internet primarily to reduce communications, publishing, and other related costs, and to improve their business processes, such as manufacturing, marketing, sales, and customer service and support. Using newsgroups, bulletin boards, list services, e-mail, file-transfers, and the Web, individuals and companies are able to share information with oth­ers, including customers and suppliers.

There is an ever-expanding amount of information available on the Internet that aids in supply chain man­agement applications. From a research perspective, there are a significant amount of working papers, technical reports, and journal articles available online. University libraries are also available online, as are many newspa­pers and thousands of popular trade publications. Gov­ernment sources are also plentiful, as groups such as the Library of Congress, the Census Bureau, the U.S. Patent Office, and the General Accounting Office main­tain excellent Web sites. Online engineering research has enabled engineering departments to significantly reduce cycle time. The National Aeronautics and Space Admin­istration, the Environmental Protection Agency, and the National Institute of Standards and Technology main­tain complex Web sites, enabling engineers and scien­tists to save countless hours in research activities. There are also virtual libraries, servers that connect to librar­ies and engineering departments at universities and col­leges around the world. Commercial services such as Dun and Bradstreet also provide financial information on companies. While some of these services are fee-based, most of the information on the Internet is free.

 

An expansion of Internet-related activities in indus­trial applications are occurring. These industrial users include supply management professionals, as well as engineering, technical, and service personnel. Supplier organizations can put specific information on the Web, such as product specifications and pricing, application information, new product announcements, service in­formation, and training and seminar schedules. They also have the ability to target select audiences. Custom­ers can access this information, and through the use of interactive features of the Internet, pose specific ques­tions to marketing and technical representatives.

 

The potential to the seller is also huge, as they can pinpoint and concentrate on select groups and custom­ers, increase service levels and customer satisfaction to existing customers, and maximize their advertising and marketing expenditures. There are many ways that pur­chasing and supply management professionals can use the Internet to improve the acquisition of materials and services at each stage of the procurement process. These include source selection and qualification, online busi­ness research, and electronic transactions. Other benefits include shorter procurement cycles by means of online catalogs, rapid ordering and payment, enhanced compe­tition through competitive bidding as customers have easier access to a larger market, and reduced development cycles and accelerated time to market through collabora­tive engineering and product implementation.

EVOLUTION AND THE FUTURE

The Internet has evolved to be the primary driver of supplier communication.

Many supply management professionals are already accessing suppliers' Web pages for technical and com­mercial information. In many cases, especially in the MRO areas, purchasers are placing orders online with suppliers. The intranet is also providing a method for

internal requisitioners to process requisitions, order parts and equipment, and access information. The intranet also allows purchasers to maintain an internal Web site that improves intracompany communication. Many companies are reserving space on their intranets for specific supplier information that can be accessed by anyone within the company. Many intranet sites also directly link into supplier Web sites. This allows for al­most instant communication with suppliers, and it is a way to show the internal requisitioners the preferred suppliers. There is also a move toward extranets, the company restricted linking of the Internet and intranet, to improve intercompany communication and com­merce. The use of extranets is a normal progression of strategic supplier relationships, and will be at the fore­front of electronic commerce in the years to come.

How might the evolution of electronic commerce af­fect supply management initiatives in your organization? The trends are clear that organizations will have to adapt to effectively service internal and external customers. Among the changes that are currently happening:

      An increase of virtual supply management where
cross-functional teams convene to manage a project
or problem, and then disband, or move on to other
issues. Rapid electronic communication tools are
mandatory.

      Increased use of groupware to manage the commu­
nication links within the supply chain.

      More online ordering as the security issues of Inter­
net commerce are solved, and as consumers become
more comfortable with the technology.

      Increased dependence on custom Internet solutions
that will eliminate Web surfing and work toward
managing specific tasks.

      The development of more "working" supplier Web
sites and less "commercials."

      Easy transfer of information between all elements of
the supply chain as technology becomes less expen­
sive and less complex.

      Communication will continue to be the largest ele­
ment of successful supply chain management.
Progressive supply management organizations are at

the forefront of the electronic commerce revolution. En­hanced communication, global sourcing, information retrieval, document exchanges, and the sharing of in­formation up and down the supply chain are no longer viewed as futuristic, but mandatory in today's global business environment. The Internet, as well as new tech­nologies still to come, will have a very positive effect on


 

all aspects of supply chain management. Those compa­nies that seek to operate efficiently and effectively in the marketplace will be able to best satisfy their cus­tomers. Just as companies have a strategic plan for sup­ply management, they must review their electronic commerce needs and develop and align a cohesive plan that addresses their own business needs, as well as the needs of their suppliers and customers.

CONCLUSION

 

The main barrier to the effective use of the Internet in supply chain management will be the mindset of the users. The Internet is new to many and there are ques­tions, concerns, and excuses for not utilizing the tech­nology. The Internet is fast becoming the primary sales, distribution, and information channel for industrial goods and services.

 

Economics will begin to drive the use of the Internet and electronic commerce in general. Its use is too cost-effective, and efficient, to be considered an adjunct method of business. As more and more businesses and customers begin to use the elements of electronic com­merce, the current methods of business will ultimately become obsolete. The trend may be towards parallel pro­cesses, but the momentum of the Internet, and electronic commerce in general, will eventually prevail.

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 12


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