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2INNOVATION New http://anderson.ascet.com Dr. David L. Anderson Accenture Models – The Opportunities Dr. Hau Lee Stanford University and Challenges

Recent developments in supply chain offer the cific changes companies are making to their potential not just to cut costs but also to generate new revenues business models as they move along that continuum. Forgiving some overlap, we and higher profits. The remaining challenge is to link these novel believe they can be categorized into four approaches together to garner the competitive rewards of a areas: design for supply chain by supply synchronized supply chain. chains; e-marketplaces; collaborative manu- facturing; and integrated fulfillment. We will finish with some thoughts on bringing these A casual reader browsing the three editions offs” or “outsourced” are only painting part four developments together to synchronize of ASCET might be tempted to conclude that of the picture. In Figure 1, we show a useful the supply chain. little has changed. Isn’t success basically a approach to capturing all aspects of a busi- matter of excelling at design, manufactur- ness model. Design for Supply Chain ing, , and logistics and then Clearly, business models must change, by Supply Chains synchronizing all these supply chain activi- particularly in today’s rapidly evolving busi- Creating collaborative cross- ties together? ness climate. Companies find themselves company processes to design However, closer review demonstrates with a difficult choice, accepting the status products that meet the market’s how rapidly has quo, and risking competitive stagnation or need – and can be quickly and matured. Our original lead article concerned redefining their business model, a journey efficiently produced. key concepts such as supplier relationship fraught with potential disaster. Despite the The following are to consider: management, supply chain compression, inherent difficulties, many leading compa- • Customer-Driven Design collaborative design, and planning. By the nies are making radical changes to their core • Collaborative Design second edition, the explosion of e-commerce logic of value creation. • Leveraging R&D Assets methods such as e-design, e-mediaries, As they do so, we consider them to be As rates accelerate and product Web-based planning, and e-fulfillment was advancing on the continuum shown in life cycles shorten, face rising giving life to these ideas. Figure 2, which serves as a road map to the and development (R&D) costs and We have always warned that these change journey. Maximizing the value of a decreasing time in which to recoup them. changes go beyond iterative process any supply chain involves first integrating Since 1993, for example, the R&D expendi- improvements and herald entirely new supply chain operations within the company ture of the top 20 pharmaceutical companies ways of conducting business. This year, itself, for instance, making sales and logis- has more than doubled, and it is forecast to we are at a point of evolution that allows tics operate together with the customer in double again by the year 2005. So companies us to examine the new business models that mind. The second step requires collabora- are increasingly sensitive to three key met- are emerging. tion with vendors and customers, for exam- rics: speed-to-market; speed-to-volume; and First, let’s be clear about what we mean ple, on shared forecasts. The final level is time-to-profit. by a “business model.” Succinctly put, a synchronization of the supply chain into one Shifting design from a departmental and business model is an ’s core logical enterprise, operating it as a fully- sequential process to a cross-company and logic for creating value in a sustainable way. linked and optimized capability from suppli- concurrent one has been discussed for sev- For profit-making enterprises, that means ers to customers. eral years. But using traditional product data how it makes money over the long haul – not This article will take a closer look at spe- management systems and exchanging engi- just the most recent quarter. That means more than an approach to Dr. David L. Anderson is a managing partner in the Accenture Supply Chain Management practice and a pricing, more than a , and leading expert on new supply chain business models. more than an organizational form. So busi- Dr. Hau Lee is the Kleiner Perkins, Mayfield, Sequoia Capital Professor of Management Science and ness models described as “free through the Engineering, and Professor of Operations, Information, and Technology at the Graduate School of Business at Internet,” “competing on quality,” “spin- Stanford University. Special thanks to Stuart Roach for his research assistance in producing this paper.

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neering data with suppliers has proved diffi- ers – collaborate in the product development TechEx.com offers an online forum designed cult, slow, and geographically limited. and design process. Typically this means around three types of qualified participants, Flawed coordination between teams, sys- that one member of the supply chain checks namely licensing professionals from tems and data incompatibility, and complex with others on the feasibility of a design – its research institutions, venture capitalists, approval processes are common. Too often potential manufacturability and serviceabil- and corporate licensing professionals capa- the result is late product introductions, dis- ity, the availability of components, and any ble of bringing early stage inventions to mar- traction of high-value staff, quality prob- possible revisions or improvements. ket. The latter two groups establish a confi- lems, or supply chain complications. Unfortunately, previous technology solu- dential profile describing the licensing However rapid advances in the design tions have struggled to affordably and con- opportunities that interest them. Then tools are driving companies forward in three sistently support such integrated teams. But research institutions, owning the technology distinct directions. the universal, low-cost, real-time linkage of for out-license, describe their technologies the Internet, combined with relevant process to the extent that they consider non-confi- Customer-Driven Design changes, can now help to avoid many of the dential. TechEx then employs research and In this , customers become far more disconnects, time delays, and hand-off licensing professionals to match opportuni- integral to the design process, making issues that occur. ties with the relevant parties. designs more relevant to the needs of the For instance Adaptec, a semiconductor Yet2.com, by contrast, has enlisted corpo- marketplace. manufacturer, uses Extricity software to con- rations and government agencies from a For instance, Fiat involved a group of key nect with its manufacturing partner TSMC in wide array of fields. Companies joining customers in the conceptual design of the Taiwan, its assembly partner ASAT in Hong yet2.com commit to offering their technol- next generation Fiat Punto. Through a Kong, and Seiko in Japan. During product ogy for license or sale exclusively on Web-based survey, 3,000 customers development, chip designers send chip yet2.com’s website. Potential buyers can effectively co-designed a car on-screen by design data and diagrams to the partners for quickly search the site for intellectual prop- selecting from various styles and features. both simulated and real-world testing. The erty and patents relevant to their own organ- The software tracked the steps that results highlight potential improvements ization. Licensing such solutions gives customers took when evaluating and that are relayed to Adaptec. Since the immediate access for significantly lower selecting options. Over 30,000 pages of such process can be quickly iterated in real time, than an R&D program of their data gave insight into how customers the time-to-product-introduction is drasti- own. To date, Yet2.com has signed up a vari- prioritized various criteria and directly cally reduced. ety of major including Boeing, influenced styling and concept designs. All the major public e-markets, such as Siemens AG, and Toyota that represent over Another idea is tightly linking design deci- Covisint, e2Open, Converge, and Exostar 10% of global R&D exspenditures. sions to the actual sales behavior of real cus- recognize “collaborative design” capabilities tomers. Zara, a $2 billion Spanish retailer of as a crucial part of their future offerings. E-Marketplaces women’s fashion, analyses data right from Exostar is an aerospace & defense e-market- Using Web-based marketplaces as a the shop floor on a daily basis. Collaborative place spearheaded by BAE Systems, Boeing, fast-track mechanism to a tightly sessions between the store manager, central Lockheed Martin, and Raytheon. It provides, synchronized supply base. planners, and suppliers then guide design as an example, features such as demand The following are strategies to consider: decisions. Allied with a less than 15-day planning, real-time design collaboration, • Industry Vertical Marketplaces manufacturing cycle and twice-a-week store product life cycle management, easy identi- • Private Exchanges replenishment, results have been impres- fication of qualified sources, order tracking, • Horizontal Aggregators sive. Zara is experiencing 25+% same-store and product pricing. The e-marketplace concept started as a new sales increase and 34+% yearly increase in way to procure product, particularly non- profits in an otherwise weak retail sector. Leveraging R&D Assets items. The scope of services has Another strategy aims to extract more value since widened dramatically to change the Collaborative Design from R&D . When developers of way companies manage and interact with Even a product that is wildly popular in the a technology or intellectual property do not their supply base. Their true value is now as marketplace will be less financially success- have a use for their developments, other a mechanism to greater collaboration and ful if its design is not supply chain companies may still find it invaluable. synchronization between organizations.

“friendly.” Minimizing design complexities Rather than relying upon secre- more on the web The early evolution was led that cause supply chain inefficiencies is tive independent negotiations, by dot-com start-ups. These An Exostar case study therefore another strategy. corporations are now commer- illustrates how the trading exchanges, however, were typ- This, of course, is not a new concept. The cializing through exchange is revolutionizing ically based upon charging key is to have multiple partners – manufac- development portals. A&D. Read it online at transaction fees, a business turers, suppliers, and manufactur- In the biomedical industry, http://plyer.ascet.com model that can succeed but

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only by achieving scale – not an easy task. ices, as is the case of Zoho, a marketplace for vate exchanges, and horizontal aggregators. Suppliers are often concerned that the hospitality industry. Supply chain plan- exchanges might not best serve their inter- ning and coordination are other key features Industry Vertical Marketplaces ests, and buyers resist paying any additional provided by some of the big public Some industries are seeing one major verti- fees to a third party. exchanges like Covisint, e2open, Converge, cal e-marketplace emerge, as with - These concerns, combined with the start- and TheSupply (a semiconductor market- Ranger in oil. In others, such as food and ups’ high valuations, led the industry place). And, of course, the collaborative retail, there is competition between groups incumbents to form consortium-based pub- design services noted earlier are another of large multinationals to be the dominant e- lic markets. So we saw Covisint formed in way for e-marketplaces to add value. marketplace. the automotive industry, Trade-Ranger for With this in mind, both industry consor- An example of a major industry vertical is oil, Omnexus for chemicals, and e2Open and tiums and the surviving start-ups are recog- Quadrem, founded by a consortium of lead- Converge in the high-tech sector. nizing their own and each other’s capability ing players in the mining, minerals, and met- This discouraged dot-com investment and gaps and are actively seeking suitable part- als industry. Together they represent more extended the start-ups’ time-to-market. The nerships. Each of the leading traditional than 60% of the industry's total market cap adjustment of early 2000 fur- chemical companies, for instance, has taken and more than 25% of its total buying ther stretched the start-ups’ limited funding, a 10% equity share in ChemConnect, with power. The industry's need to work in and spectacular failures hit those with the 5% shares being offered to other players. remote areas means Quadrem must serve weakest fundamental business propositions. Looking to the future, there will be note- constituents in over 100 countries and in Most e-marketplaces now see that being a worthy successes and significant failures as numerous languages. Preliminary estimates transaction hub alone is not sufficient and the reality of managing complex relation- show that between 3.5% and 9% of a com- are therefore expanding their offerings. This ships and transactions takes hold. pany's total spend might be saved through might include value-added services such as Ultimately, we expect to see a combination of Quadrem, through trading and auction serv- inventory management and financial serv- three different plays: industry verticals, pri- ices for all products, not just MRO and off- production items.

What are the company’s revenue streams? Private Exchanges Some very successful companies have formed their own private exchanges – , for instance, has built Valuechain.dell.com, while Cisco has created its famous eHub. Operating Revenue Operating Revenue This brings aggregation capabilities to their What are the How does the company company’s value propositions? manage its finances distinctively? customers and suppliers and strengthens the • What does it sell to whom? • How does it attract financial whole . • Why do customers choose ? One reason for shunning the public this company over others? • How does it maximize the exchanges is skepticism that industry con- • How does the company value of its financial assets? sortia can hold together and build e-market- communicate distinctively with customers? places in realistic timescales. These leading • How does it price distinctively? companies are also the most advanced at connecting with their customers and suppli- How does the company make a profit? ers through the Internet and see no reason to level the playing field. • What role does it play in the value stream? Building a private exchange is also easier • How is its costs structure distinctive? in some respects. First, it is much easier to • What distinctive resources, assets, and integrate a group of suppliers over which capabilities does it leverage? you have tremendous control. So while • What distinctive relationships does it enjoy? Covisint, after one year in operation, has • How does it structure and lead its only 20 suppliers signed up, Cisco has thou- organization to achieve world-class sands of suppliers on their eHub. It is also performance? easier to build into the exchange, since the host can initiate it directly. So Dell has used i2 Technologies to Source: “Cautionary Tales” by Jane C. Linder and Susan Cantrell – Outlook 2001 Number 1 help coordinate the demand planning of Figure 1 – Evaluation of revenue streams their suppliers. Cisco uses Manugistics to

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coordinate production plans at multiple tiers turing operations and focusing operationally the supply chain remains basi- of suppliers, to generate alerts should any on other strengths such as , cus- cally the same. potential shortages or production problems tomer relationship management, or R&D. Consequently old problems persist – be detected, and to find the optimal ways to Many interconnected specialized firms are communication is still essentially one-way. resolve such issues. In this way, the private stepping up to carry out operations Data such as forecast information and exchanges potentially offer far greater value once completed by larger vertically product content changes flow from the OEM than merely supporting transactions more integrated corporations. to the EMS provider with little or no efficiently. The reason is, once again, these three advanced future visibility, driving the EMS measures: time-to-market; time-to-volume; provider to a reactionary role. The OEM in Horizontal Aggregators and time-to-profit. In this particular case, the turn operates and makes decisions with Horizontal aggregation is likely where solution is downstream of the design little knowledge from the EMS provider on anti-competitive regulations affects vertical process. material or capacity availability. integration or geographical isolation puts The electronics industry provides a dra- In certain fundamental processes such as constraints on achieving critical mass. matic example of these trends and demon- planning, forecasting, or new product Perhaps the most obvious opportunity for strates the evolution that other industries introduction, old problems can even be horizontal e-marketplaces is fulfillment, but may also experience. Traditionally, OEMs amplified. For example, a supplier might organizations will also look for opportuni- used electronics manufacturing service assess the accuracy of the OEMs forecasted ties in areas such as education, training, and (EMS) providers for capacity overflow and information and apply their own “fudge fac- . retained the manufacturing of printed circuit tor.” This can exaggerate demand fluctua- In the fulfillment arena, freight e-market- assemblies and final product assembly as tions required by the EMS provider to main- places have developed the most rapidly with core competencies. But OEMs now look to tain higher levels of inventory. over 150 such marketplaces operating glob- product innovation, customer and channel Additionally, a whole new process is ally. Most focus on a particular transport management, marketing, and sales required to transfer product information, mode, while some take an industry or geo- for competitive differentiation. With the such as bills of material and drawings, graphic tack. ELogistics.com, for instance, increasing complexity and cost of capital across company boundaries. The conversion operates an online road freight procurement equipment, many are divesting themselves of data formats and validation is often man- exchange that matches shippers’ road freight of capital-intensive manufacturing opera- ual, introducing errors and time delays that requirements with carriers or truck owners. tions – thereby effectively converting fixed affect time-to-market performance. CorProcure is an Australian-based costs to variable costs. This allows rapid In response, OEM and EMS providers horizontal exchange announced in July 2000 scale-up when markets are good but buffers often resort to additional resources and lay- by some of Australia’s largest companies them against economic downturns and ers of management at the company inter- including Amcor, Coca-Cola Amatil, Coles seasonality. EMS providers, in turn, can faces. But this additional cost can quickly Myer, Foster’s, Goodman Fielder, Qantas, build similar products for competing OEMs outweigh financial benefits achieved and Telstra. It is estimated that $8 billion in the same facility, thus spreading their risk through the exchange of assets. (AUD) of transactions will go through across a portfolio of customers. the exchange over the next two years. As a result, the EMS industry is recording Collaborative Integration The diverse range of products and services an exceptional compound annual growth Clearly, two-way collaboration is needed but covered by the exchange includes rate in excess of 35%. The current top five it must be supported by joint decision-mak- advertising, computer services, energy, EMS providers – Solectron, SCI Systems, ing. For example, an OEM might replace a , facilities management, Celestica, Flextronics, and Jabil Circuit – are component in the Bill of Material with an and legal services. growing, typically through acquisition, at a alternative item because of availability collective rate of over 50% per year. issues. Here, the partners must work Collaborative Manufacturing But each partner relationship is not together to determine the best timing of the Redistributing production assets created equal. In the electronics industry, change, taking into account demand for the and forming tight collaborative three levels of integration – transactional, product and the acceptable depletion of the to achieve greater collaborative, and networked – can be obsolete inventory. manufacturing flexibility. distinguished. The challenge is that the supply chain is The following are strategies to consider: so dynamic that manual processes simply • Transactional Integration Transactional Integration cannot keep pace and fully-tested and stan- • Collaborative Integration The majority of outsourcing relationships dardized software products are not yet built- • Networked Integration today are transactional in nature, meaning out for all processes. The leading companies Original equipment manufacturers (OEMs) assets are transferred but little else changes. cannot afford to wait for the solutions to be are increasingly outsourcing core manufac- Direct financial benefits are achieved but fully built-out and standardized and so are

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implementing available capabilities and Ariba for product content collaboration are working with supply chain software compa- Networked Integration driving this effect. Where multiple supply nies to improve functionality. Beyond solutions between individual part- chain software tool sets are found, the In the electronics and high-tech sector, ners, there is a great opportunity to replicate development and adoption of the standard EMS providers are experiencing rapid those capabilities across other relationships information structures, such as RosettaNet, growth rates, fuelled by acquisition of OEM and achieve a “.” can drive value. plants. Such growth brings a mix of A key benefit is to allow multiple partners It is still in the early stages and most processes, systems, and cultures that might to participate in planning and execution implementations are starting with only a limit design and manufacturing flexibility. decisions. Probably the most advanced few supply chain partners. As the more One solution is the AgileAnywhere product capabilities exist in supply chain planning ambitious OEMs and EMS providers from Agile Software, recently acquired by software that give OEMs visibility of demonstrate the benefits of operating com- Ariba Inc. With their product, a customer materials not only at their EMS providers but mon systems, solutions, and processes, it concept can be designed, prototyped, and also at the Tier 1 suppliers and component will find wider adoption. ramped to full volume in a consistent man- distributors. They can then optimize the ner for every customer, at any time, any- entire supply chain rather than just a single Integrated Fulfillment where in the world. It uses a standard format relationship. Taking a holistic approach to manag- to integrate customer product information A second benefit occurs as more and more ing the wide variety of Web-based or with the local ERP system. Reduced time-to- partners use the same software tool set. traditional fulfillment channels now volume, lower inventory, improved cus- Having standardized information formats available. tomer service, and increased efficiency of and processes helps eliminate many of the These are the strategies to consider: key personnel are just some of the benefits. inefficiencies of communicating across the •Logistics Postponement In total, these benefits can amount to over supply chain. In the electronics industry, i2 • Exchange $30 million to the bottom line. Technologies for supply chain planning and •Leveraged Shipments

Potential E-Fulfillment Models

How How Model Comments Fulfilled Delivered Type

Current Though tempting, channel conflict issues can arise- Insourced/ Retail DC Integrated specifically, difficulty aligning pick and pack processes 3rd Party for Internet orders with retail store channel consignments Parcel Dedicated Carrier Many merits but high cost is primary barrier to this DC Dedicated approach

3rd Party Provides fast set-up and access to proven technologies and reliable performance. Confidence in third party’s capabilities DC 3rd Party Out-sourced and aligning each company’s e-commerce strategies is key. Parcel DC of Carrier Supplier Can be very cost-effective model when the distributor has Manufacturer Drop-shipped proven capability for one-to-one shipping. Substantial shift of Consumer power away from the e-commerce company to the distributor. X-docked Current Through Retail DC Retail Store Flow-through Works well for items with a substantial service component.

Retail In-sourced/3PL Store Has not generally been successful. technology integration Store Parcel carrier and quality control are big stumbling blocks.

Rapid Designed to handle high premium, time critical delivery rd 3 Party Local Response services. A wide range of products must be stocked near the DC X-dock Spoke customer base, so only viable in densely populated areas.

Offers simplified security and cash management as well as rd 3rd Party 3 Party Convenience the provision of special handling requirements such as Pickup Point DC Store temperature control.

Figure 2 – Eight B2C fulfillment models and some of the issues involved.

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•The Clicks-and-Mortar Model technologies to build this capability. packages to their respective neighborhood. Regardless of the degree to which a Menlo-Logistics, an LSP, uses a “rolling company conducts its operations online, the warehouse” concept. Traditionally when Clicks-and-Mortar Model delivery of products generally remains a shipping products from the West Coast to the When existing physical channels only physical event. Both B2C and B2B East Coast, a truck is loaded with well- extend to retail outlets, it can be very costly are seeing customers demand a defined shipment quantities for each of its to deliver products onto the final customer choice of delivery channel. Matching these destinations, even though it may be several destinations. But if these retail outlets or physical fulfillment methods with the newer days before they are unloaded. During that similar locations are easily accessible then business models is proving to be a time, demand might change – one ware- one approach is to have customers travel the significant issue. house may want more; another may want “last mile” themselves. An integrated fulfillment approach less. The new concept uses satellite commu- For instance, CVS a major pharmaceutical answers this challenge with a “back to nication to inform the driver how much can retail chain, has over 5,000 items that can be basics” focus on the right warehousing, be unloaded at each destination at the time purchased online. But 65% of customers transport, and customer service solutions. of arrival based on the very latest demand elect to pick up their orders at CVS stores, But it also bolsters operational excellence information. and so the last mile problem is consequently with new kinds of networked relationships made much easier. between supply chain partners and sup- Resource Exchange ported by new technologies and services to If products are stocked at many locations, Synchronization meet the new economy opportunities. these locations can be pooled to form a vir- The alignment of the supply chain For example the smaller, more frequent, tual resource. On receiving a customer order, into one logical enterprise and time-sensitive orders typical of consumer- information flows can locate the closest operating it as a fully-linked and direct models place high demands a distri- inventories within the network. Order optimized capability from suppliers bution system. Arming customers with requests can be directed to the appropriate to customers. online order visibility demands extremely stocking locations, thus displacing the flow The following are key strategies to consider: reliable fulfillment processes and yet mar- of physical goods. • Know your best customers. gins are being squeezed because customers Synchronet, for example, operates an e- • Beware of unobtainable synergies. are not used to paying for picking, loading, marketplace for exchanging shipping con- • Make physical assets pull their weight. and delivering – activities they previously tainers. If company “A” needs to ship from • Use the latest collaborative tools an did themselves. Companies are employing a Hong Kong, but only has empty containers processes. variety of models to meet this challenge. in San Francisco, it will be matched with • Pick the right partners. In the B2B realm another example arises company “B” that does have an empty con- We have reviewed four developments in from e-marketplaces that match buyers with tainer in Hong Kong but requires one in San supply chain business models. Stepping sellers. They are recognizing that confirma- Francisco. A further example is a Korean back to consider their effect on the overall tion of availability and delivery in real time cement company with East Coast operations business model, we quickly see how tightly is a key requirement. So e-marketplaces that serves customers on the West Coast by interconnected these ideas are. Therein lies such as Quadrem are placing a strong partnering with a West Coast cement com- a very tough challenge. What can seem like emphasis on features such as physical track- pany. By “swapping” orders, they avoid the a wonderful opportunity in one area, from a ing, returns management, carrier selection, high cost of transporting cement. wider perspective, can raise conflicts that advanced shipment notice receipt, and sup- prompt a totally different strategic decision. plier inventory visibility. Leveraged Shipments For instance, the seemingly valuable At the heart of integrated fulfilment, suc- Leveraging the existing physical channels capability of an e-marketplace to identify a cess lies in replacing physical flows with that are already in place for the delivery of lower spot-buying opportunity may directly information flows and leveraging, as far as other products is another strategy. ECLine is impede the collaborative supplier relations possible, the current physical a start-up Korean LSP that serves over 70 e- required to co-design a product. Or the wider to deliver to the “last mile.” The following tailers. It has recruited a network of highly variability of supply it creates might cause strategies can help achieve this. localized home delivery providers (called havoc to a make-to-order program. “dealers”). Each dealer is selected due to This dilemma is at the heart of the syn- Logistics Postponement their familiarity with a specific area of a city chronization referred to earlier as the final One strategy is to “postpone” shipments and through their other business interests. step in maximizing the value a supply chain so avoid shipments that become unneces- ECline’s trucks pick up packages at the e-tail can generate. sary or inappropriate as demand changes. client’s site and drop them at the dealers’ So how do you go about achieving syn- Many third-party logistics service providers depots. The dealers then take multiple daily chronization? The first step is to get your (LSPs) are investing heavily in information milk runs on motorcycles to deliver the aim right. It is common for the top 20% of

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customers to generate 80% of revenue and the best financial opportunities is not example of many developments in this area profits, and yet the majority of supply chain enough. Synchronization is based on the is Multi-Channel Order Flow Management designs still cater to the least profitable cus- complex and well-timed interaction of many pioneered by companies such as Yantra and tomers. But in the future, revenue and players. Multi-company supply chain plan- Vigilance. It provides capability to cus- profit-driven supply chain will be the “gold ning and flawless execution therefore tomize availability and execute customer standard.” So a careful, dispassionate become critical. But sharing data and people orders across myriad channels. review of where you can make the most to successfully do this is still a big hang-up Despite the difficulties, the rewards of money – and please your best customers – for many companies. So draw up an infor- synchronization are worth the struggle. is a crucial first step. mation-sharing plan that details the most Ericsson’s global “Time to Customer” sup- In serving your best customers, recognize valuable information needed by your part- ply chain re-invention program employs that additional or complementary offerings ners. Also define those processes and activ- many synchronization concepts. It has seen that look good on paper, are often less attrac- ities that can be shared and how to transition a 50% increase in the number of orders tive to the market or much harder to achieve to new, less costly methods. delivered within one week and surveys show in practice. Therefore it pays to make sure These activities will identify who the right the number of very satisfied customers has that any supposed synergies are tested dili- partners are to make synchronization hap- tripled. Synchronization is now embraced as gently in real-world client pilots. Conversely, pen. This is often a tough decision – your a competitive focus for the next decade. it makes no sense to apply all additional longest-term partners may not be up to the As we summarize our thoughts for this, offerings across every product, vendor, and challenge. And those partners who do make the third volume of The ASCET Project, one customer – so look to utilize less costly alter- the grade must be clearly informed about conclusion emerges: Supply chain manage- native channels (perhaps Web-based or dis- how their relationships are to be trans- ment is no longer the collection of opera- tributor-based) where necessary. formed. Such rationalization must also tional disciplines it once was. New ideas Next, be clear why you own physical become an on-going program that monitors and technologies have blurred functional assets and collaborate with supply chain channel relationship and generates new and organizational boundaries. But each partners on the optimal levels of ware- ideas to enhance customer value. development is only a piece in a constantly houses, inventory, and transport. Despite The day-to-day operation of a synchro- evolving puzzle – a piece of the overall significant rationalization in the past nized supply chain requires tools and business model. Our final admonition is to decade, significant, duplicative supply chain methodologies that are very different from be clear how your company can create assets still clog existing channels. Physical the past. Complex orders must be tracked value now and in the future. Keep this book assets must pull their own weight – so make and monitored as they move across the sup- as your guide as you select, adapt, and sure yours provide substantial benefits over ply chain and metrics must evaluate cus- implement opportunities to synchronize borrowing, sharing, or paying for their use. tomer-level revenue and profitability, not your supply chain. Simply knowing which model presents just traditional cost/service trade-offs. One

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