"Mom and Pop" business may be mostly a thing of the past, but you may be surprised to know that the products (e.g., cars) and services (e.g., package express) we enjoy today are the likely result of an extended enterprise, a network of independent companies, often located in different countries and time zones, seeking mutual business advantage in order to:

• Design, manufacture and deliver "right-quality" and "right price" products and/or services to customers faster than the competition.
  
  
• Win customers in the presence of competition.

Such enterprises consist of suppliers, manufacturers, wholesalers, retailers, distribution and logistics companies, communications and information systems companies, and, of course, customers. Each company within an enterprise specializes in what it does best; the members of the enterprise cover the competencies that are critical to the goal of the enterprise. No single company can have world-class competencies in all areas. However, a well-designed enterprise can, thus providing formidable competitive advantage.

Due to the amount of sharing required for effective extended enterprise, the role of data becomes key. The right data at the right time, in the right form, i.e., information, adds significant value to effective decision-making for improved economic competitiveness. Access to such data is increasingly available by Internet and web-based technologies.

Research has shown that effective extended enterprises are those that are well managed and well designed, where:

• Management involves using analysis and experience to run the enterprise, as currently designed.
  
  
• Design involves making a series of strategic make-or-buy decisions — choosing what work to outsource to suppliers, choosing which suppliers to use, and negotiating the contract — in order to ensure critical competencies are best represented in the enterprise.

Drivers of Change — Homeland Security

A number of ISyE faculty and students are currently involved in research concerning extended enterprise. A central focus of this research is understanding how forces outside the enterprise, i.e. drivers of change, affect how the enterprise is managed and designed. Such drivers of change include:

• Availability of investment/venture capital
  
  
• Pressures to reduce cost (and the challenge of accurately measuring cost)
  
  
• Pressures to improve/expand/contract the set of services and products offered
  
  
• Advances in key technologies
  
  
• Changes in international trade policies and governmental regulations
  
  
• Labor relations and other human resource issues
  
  
• New business practices and work systems (e.g., lean thinking, quality engineering, concurrent design, Six Sigma, shared risk, build-to-order).

Security concerns are now rapidly emerging as a key driver of change. For example, in automotive manufacturing, lean manufacturing and logistics required significant adjustment (headlines read "Will Just-in-Time becomes Just-in-Case?") as the difficulty of moving auto parts increased due to more lengthy security inspections across the Ambassador Bridge between Canada and Detroit immediately after September 11, 2001. The design of automotive supply chains now takes into account the potential difficulty of moving auto parts across international borders during major disruptions. The end result is a growing tendency to locate suppliers in the same country as the assembly plant.

A Key Freight Logistics Challenge

And of course, the freight transportation system can be the delivery system for terrorism, as was the case for the air passenger system on September 11. A key challenge is how to ensure that the national freight transportation system is secure and economically competitive. To address this challenge, a group of ISyE faculty (Alan Erera and Chip White) and their students are examining several critical issues in freight transportation security and efficiency. One of these involves containers at transshipment seaports. U.S. Customs is now working with the world's 20 largest non-U.S. seaports to essentially "push back" the U.S. border and perform security inspections for containers that are U.S.-bound and require inspection at these ports. In light of this new U.S. Customs policy, and the concern that security inspections can reduce seaport efficiency, the ISyE team is addressing such questions as:

• How should containers, some of which require security inspections, be moved from in-bound ships to out-bound ships so as to minimize (a) out-bound ship departure delay and (b) the additional handling costs incurred due to security inspections? An answer to this question has clear operational value.
  
  
• What is the upper bound on the percentage of containers undergoing security inspections so that departure delay does not significantly alter a port's competitiveness position? The answer to this question is of value to the port manager and to U.S. Customs from a port management perspective. There is no benefit to either party for a cooperative port to become less competitive and lose market share.
  
  
• What is the relative value of knowing which containers are to be inspected (a) before in-bound ships dock, (b) while the in-bound ships are being unloaded, and (c) later in the process of unloading the in-bound ships and loading the out-bound ships? The answers to these questions might have implications from a policy perspective, specifically regarding when information should be required from in-bound ships.

The ISyE team is currently working on these questions with researchers at the National University of Singapore through the support of The Logistics Institute (TLI) in ISyE and the Asia-Pacific branch of TLI, TLI-AP. It is also linking up with the Rotterdam port and, closer to home, the port of Savannah, the fifth largest container port in the U.S. and growing. Additionally, the team is involved with an industry consortium investigating answers to the above questions at many of the major container seaports worldwide.

The methodological approach the team is taking uses a mixed integer program (MIP) to model how containers should be moved from the in-bound ships to the out-bound ships, assuming that the containers to be inspected are known before the in-bound ships dock. The team then uses this MIP sequentially for the case where such information becomes available while the containers are being unloaded or even later in the transshipment process. A comparison of the solutions of these problems will provide a quantitative measure of the value of when this information becomes known and will represent a step toward achieving our national goal of a secure and efficient freight transportation system.