2. DRIVERS BEHIND INTERNET ADOPTION
2.1. Shortcomings with ERP and APS
During the 1990s, two types of business software application gained ascendancy in many companies around the world—enterprise resource planning (ERP) systems and advanced planning and scheduling (APS) systems. ERP was focused on integrating the various disciplines and departments within a typical manufacturing company so that a high degree of internal business process automation could be achieved. APS, on the other hand, was focused on the optimized planning of inventories and capacities utilizing tools such as linear programming and heuristics. The successful application of both of these types of systems typically required painful and far-reaching changes to the organization in the areas of business practice, structure, and culture. The difficulties of getting these soft issues right is reflected in the many tales of woe one hears about failed ERP and APS implementations. However, companies with strong leadership and
project management found that these implementations brought significant benefits in their wake.
Significant benefits—BUT not necessarily sustainable or differentiating benefits, for there is a shortcoming to ERP and APS in the way they are typically adopted. They are generally applied within the context of a single company or even a single plant within a company. In other words, we focused on local efficiencies and optimization. We were focused on closing local loops while the overall system (the supply chain) remained an open loop. As Eli Goldratt made abundantly clear in his book The Goal, we should be focusing on the throughput of the entire system (and herein lies one of the reasons for companies to turn to the Internet for competitive advantage). Many companies that are experiencing the reality of globalization are now realizing the significance of this holistic view of a supply chain. It is very difficult to be globally competitive on your own. You have to work with
sales agents, shippers, brokers, forwarding and clearing companies, third-party logistics providers, and so on. A lack of coordination among these players manifests as excess inventories, high-cost emergency shipments, disgruntled customers, lost sales, and so on. The Internet gives us the means to synchronize the activities of all members of a supply chain, closing the loop for the entire system. This does not mean that the need for internally oriented systems will go away. Indeed, many would argue that the lessons learned and capabilities gained through the implementation of these systems are a vital precursor to true supply chain management. We have to learn how to talk to and cooperate with our colleagues inside the company before we can hope to successfully move into a world of collaborative planning and replenishment.
"The ability to exploit linkages—to get people talking across their functional boundaries; to share information between offices, branches, divisions; and to make the strength of a part the strength of the whole—is the key to competitiveness." (Tony Manning, strategy consultant.) There is no doubt that getting this ability in place internally will serve any organization well when in moves onto the Internet.
2.2. The Network Effect
Marketers seeking to explain the rapid adoption of a product or service sometimes refer to the idea of the "network effect." This can best explained by looking at the ascendancy of the VHS video format over the (arguably superior) Betamax standard. Once a critical mass or market share is reached by a product/service (particularly one that delivers information), it rapidly feeds on itself as the universe to which it is connected realizes the benefits of that standardization and connectivity. If my colleagues all have a VHS machine, it makes sense for me to do likewise as I can then share and swap tapes with them. If we all adopt a standard such as the Internet we can all communicate with each other electronically. This is how Lotus 1-2-3 gained a global lead in spreadsheets and why Microsoft later overtook it. Nowhere is the network effect more visible than with the Internet. It is no exaggeration to say that literally every student entering the workplace today will have had exposure to the Internet and World Wide Web and they will expect these facilities from their
employers. As consumers and customers these technologies are shaping what we expect when we deal with suppliers. The Internet is, therefore, because of the network effect, rapidly becoming the de facto standard upon which we will architect supply chains.
To Be Continued