OR/MS Today - April 1998

April 1998

Cyberspace:
Internet-Enabled Supply Chains

By ManMohan Sodhi

A recent movie, "Wag the Dog," is a comment on modern democracy wherein we can have "spin-masters" making policies to manipulate the People's opinion rather than the People's opinion determining policy. Besides being struck by the eerie similarity to the current political situation, I began thinking about how the Internet is wagging the supply chain dog. Unlike the movie, this reverse wagging is good as the Internet is making people realize the value of sharing information, which is a key part of supply chain planning and execution. I describe some applications and initiatives below:

Company-to-company E-Commerce.Forrester Research estimates that revenues from business-to-business Internet commerce will represent an estimated $66 billion in related revenues in the year 2000. Many companies are on this bandwagon, and General Electric Information Services (http://www.geis.com) recently announced a new global e-commerce service called TradeCard, which claims to be "the standard way to trade in the $5 trillion annual world trade market" linking financiers, importers, exporters and freight forwarders via GEIS' secure electronic network. In addition to its proprietary EDI-based value-added network (VAN) services, GEIS provides a variety of Internet-based capabilities like ECXpert for electronic commerce messaging and SellerXpert to help companies establish online selling presence for their corporate clients.

Marketing and consumer intelligence. Many computer company web sites like Dell (http://www.dell.com) and Hewlett-Packard (http://www.hp.com), allow you to price a computer or workstation with customized options. In addition to providing you information at low cost, these companies are gathering useful and timely information on what interests possible buyers in this industry with short product lifecycles.

If you are interested in collecting such information through your web site, there are quite a few companies that can help you, but some companies like MarketFirst have gone even further and targeted marketing and sales business processes like promotional campaigns, lead generation and qualification, web site responses, surveys, and sales support. MarketFirst will provide software to help automate web site response and lead qualification. Not surprisingly, the initial application components are targeted to the fast-paced, high-tech hardware and software companies.

E-procurement. Many large companies (to my personal knowledge an auto company and an airline) have web-based bidding systems as part of their procurement strategies to lower costs. But Ariba Technologies Inc. (http://www.ariba.com) has gone one step further. Ariba describes itself as the first buyer-centric electronic commerce solution addressing the "traditional, fragmented methods of purchasing operating resources (industrial supplies, office supplies, capital equipment, services, and other non-production supplies)" with an enterprise-wide solution that can "capture economies of scale and leverage supplier relationships."

While most corporations purchase goods and services through paper-based processes, automation and consolidation can lower costs significantly. Ariba cites a study demonstrating a 6 percent average savings in operating resource costs realized in less than one year. The company's fully Java-based solution enables easy deployment on the web on diverse platforms.

In-transit inventory visibility. In-transit inventory visibility systems are based on the notion of a "glass pipeline" that lets you "see" and monitor your inventory in the supply chain. One company that provides such monitoring software is i2, UK (formerly M-Star). Their product tracks shipments and orders at the SKU level and supports any level of aggregation from lanes down to containers. i2, UK provides a browser and "daemons" that allow Internet users to securely access and insert transactions as well as an Application Program Interface (API) to support "standard e-commerce and EDI tools." Note that package shipment companies like FedEx and UPS allow shippers to track their shipments over the web.

Drop-shipping. The December 1996 issue of Wired Magazine (http://www.wired.com) had an article about Federal Express (http://www.fedex.com), that included the company's "drop-shipping" efforts. For direct-marketers of computer parts and peripherals like Insight Direct, the way to offer product variety while avoiding excess obsolete inventory is by shipping products directly from the manufacturer to the buyer. This is made possible by FedEx's data network, which connects Insight's customers, suppliers, and its own order processing, labeling, and package tracking systems.

At the time the Wired article was written, Insight was taking these connections to the web as a test pilot for FedEx's BusinessLink software, a web-based e-commerce software package designed to integrate every component "from order placement to billing and invoicing to inventory management to final delivery," thereby underscoring the notion of connecting everyone in the supply chain through the open architecture of the Internet. Currently, Federal Express offers logistics solutions including FedEx Express Distribution Centers and FedEx Express Distribution Depots.

Epilogue

According to the Chicago Tribune, the protesters at the recent spin-masters' Ohio State town hall meeting coordinated their actions through the Internet. Does this mean that the Internet can benefit democratic debate as well as supply chains?

Dr. ManMohan S. Sodhi is president of the Logistics Section of INFORMS and Experienced Consultant in supply chain planning with Andersen Consulting in Chicago. He is the founder of the OR news group, sci.op-research, and helped design and create INFORMS Online. He welcomes your comments at MohanSodhi@AOL.com.

Table of Contents

OR/MS Today Home Page

Lionheart Publishing, Inc.
506 Roswell Street, Suite 220, Marietta, GA 30060, USA
Phone: 770-431-0867 | Fax: 770-432-6969
E-mail: lpi@lionhrtpub.com
URL: http://www.lionhrtpub.com