2004 Articles
October 21, 2004
AMR Alert - Compelling Events are Shaping Supply Networks
AMR Research - AMR Alert
Efficient inter-enterprise collaboration and profitable trade is leading many companies to explore new options and create supply networks. The promise has been hyped by consultants, analysts, and visionaries, but organizations and trading relationships have just not been ready, successful relationships have been sparse, and technologies never matured.
The Bottom Line: Technology used to create supply networks is largely immature with many companies relying on phone/fax, Electronic Data Interchange (EDI), or custom systems. However, technology pockets are developing for industry-specific networks.
What It Means: Compelling events are changing this landscape, albeit slowly, with three events altering inter-enterprise processes: use of lower cost labor offshore for apparel, footwear, and soft goods; compliance with the U.S. Sarbanes-Oxley Act (SOX) for high-tech electronics and service parts depot management; and warranty compliance for service. Here’s what each means:
Offshore sourcing--The Apparel and Soft Goods industries want low costs and adaptive supply chains and so are implementing infrastructures for offshore sewing. Logility in the United States and TXT e-solutions in Europe are helping companies like Burberry, Lacoste, Fendi, Koret of California, and Wilsons Leather re-shape supply chains for offshore manufacturing. The Takeaway: In offshore sourcing, trading partners need visibility into manufacturing and logistics.
SOX compliance--Just-In-Time (JIT) and Vendor-Managed Inventory (VMI) programs have crossed organizational boundaries for years in Automotive and Consumer Products. But the more stringent guidelines of SOX, which was passed in the wake of corporate scandals and enforces corporate accountability, are forcing companies to adopt more discipline. This is helping sales of RiverOne in High-Tech and Electronics and Baxter, MCA, Servigistics, and Xelus in the management of parts at third-party depot locations. The Takeaway: With SOX, inventory-owned and located at a third party must be tracked with higher levels of accountability. Technology can help.
Labor management for warranty compliance--Managing labor for warranty service is easier in areas of high population density. But in more rural areas, service is often contracted to third parties. Technology for the visibility of warranty labor and job dispatch for third-party contractors is now available from ServicePower. This is the result of the merger of ServicePower and KeyPrestige in 2004. The Takeaway: Network relationships are not just for material management.
Conclusion: Three different events--three different processes--are forging movement in the shaping of supply networks. Albeit it’s slow, inter-enterprise processes are forming with the help from technology.