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3.3. Supply Chain Hubs 

The task of reducing supply chain costs is expected to become even more difficult due to increasing mass cus­tomization of products, a rise in outsourcing (leading to more discrete players in a supply chain), and the glo­balization of markets.

The concept of hubs using Internet technologies en­ables enterprises to establish secure, scalable, and dy­namic collaborative commerce networks with their business partners at a low cost holds a great deal of promise. These networks allow enterprises to carry out collaborative activities ranging from product design to order execution with chosen partners.

The Internet hub, which becomes the centerpiece of the supply chain, around which the different players can gather and through which they can collaborate and con­duct business, is rapidly gaining momentum. Simplis-tically these hubs foster better communication between the members of a supply chain, and this is in itself enor­mously valuable.

The distinct entities in the network such as suppli­ers, manufacturers, and retailers will be able to cooper­ate and act as a single entity focused on delivering enhanced customer value while reducing costs through­out the entire chain. Customer choices are simulta­neously visible to all supply chain partners, who work to deliver their components and services when required needed, to the channel captain company, another sup­plier, or sometimes directly to the customer. The hub's role is to coordinate all of this activity, continually alert­ing the members as to any changes so that the entire supply chain can react as one.

The net result is "one number" across the supply net­works. The direct fiscal benefits include lower inventory levels, higher inventory returns, improved cash flow, and reduced capital investment. Reduced planning lead times lead to increased responsiveness. Enterprises can increase their profitability and their market share at the same time. The indirect benefits include tighter relationships with customers leading to higher customer satisfaction.

Leading-edge companies perceive collaborative abili­ties as a significant competitive advantage that will help them retain existing customers and acquire new ones. In this regard we move beyond the simple concept of e-commerce to do talk of collaborative-commerce. In these supply chain scenarios several employees in different enterprises work on a common business goal linking different activities. To achieve this goal enterprises share information and define responsibilities for specific ac­tivities. Such a collaborative scenario can span several [T systems and exchange business documents between these systems using Internet technology.

This level of collaboration presupposes that the in­dividual members of the supply chain have already mas­tered fulfillment excellence and have ERP and APS systems in place. Without this ability to execute these new opportunities will be squandered.

Companies in a supply chain that cooperate to build electronic business hubs, allowing them to closely inte­grate their business processes with customers, suppli­ers, and business partners, should also consider including marketplaces into their business system land­scape. The additional utility of a marketplace will allow participants to expand their business opportunities to

3. larger (electronic) community by providing additional
commercial functionality on both the buy and sell sides
of the supply chain.

4. CONCLUSION

By eliminating the physical and systems borders between supply chain partners, the Internet enables new busi­ness models and new types of value creation among en­terprises. Greater internal collaboration, concurrent, real-time planning, information sharing, and value-added service are all key factors in speeding up supply chain processes.

Ultimate efficiency, however, is achieved through collaboration. Collaboration removes the divisive bar­riers that formerly separated the distinct links in the chain: procurement companies, production compa­nies, and so on. Though the supply chain partners still consist of distinct entities, they cooperate at an unprecedented level because they realize the mutual benefits—low inventory levels, high inventory returns, an improved cash flow, and a drastic reduction of the dreaded bullwhip effect.

The increased transparency of what the individual participant contributes to shared value creation benefits the entire chain. While this also unavoidably raises the level of competition, it results in better solutions, creat­ing more value both for the enterprises involved as well as ultimately for the end consumer.

The Internet is here to stay and it will impact your supply chain.

Are you ready?

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

Lean Manufacturing Articles and click on Series 12


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