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378 SUPPLYCHAINMANAGEMENT AND THEINTERNETopportunities to be won from collaboration and offers
some potential ways to overcome barriers to collabora-
tion. Most of the improvements in efficiency from the In-
ternet happen only when the separate parts of a supply
chain work closely together. There are considerable gains
from collaboration, but there are perhaps as many hurdles
to be overcome. Managers of supply chains must be even
more aware of the barriers to collaboration and work to
use the Internet to overcome these barriers. The demands
of information sharing and collaboration in an extended,
real-time enterprise are much greater than in traditional
supply chains and will require organizational innovations.
Collaboration is difficult to achieve because different
firms have different economic interests, goals, and ways
of conducting business. Additionally, there are technical
barriers, including problems in developing systems based
on Internet standards that link legacy systems and pro-
vide a communication path between firms in the supply
chain; integrating EDI systems to Internet systems;
defining standards for content management; establishing
XML and ebXML standards; providing common systems
for logistics and procurement; and defining datamining
standards.
Competing efforts by different firms to control the in-
formation system and capture profits from its use create
conflicts among the members of a supply chain. The bene-
fits of collaboration and coordination may flow dispropor-
tionately to one part of the supply chain, although these
benefits can only be achieved through working together.
Moreover, different firms have different levels of risk as-
sociated with their position in the supply chain, and this
invariably affects the measures they use to define the op-
eration of the supply chain and choices on production, re-
supply, promotions, and product development and inno-
vation. The willing transfer of vital information by parties
that could use it to achieve market advantage or improve
the strategic position of a supply chain partner is prob-
lematic. An end seller will need to devote considerable
resources to a complex information gathering system in
order to obtain real-time point of sale data, and will share
this information only for a fee. Achieving genuine infor-
mation visibility across several organizations, given the
variety of these constraints, is perhaps unattainable.
Simulations of supply chain operations help to iden-
tify many of the benefits and barriers to information shar-
ing and coordination (Zhao, Xie, & Zhang, 2002). Several
factors can influence the magnitude and distribution of
the benefits, including different patterns of demand vari-
ation at the retail level (amount of demand fluctuation and
whether demand is rising or falling through the period),
different levels of capacity tightness (high and low), and
different kinds of coordination and information sharing
(no sharing, sharing of demand forecasts and order in-
formation, and amount of advance time for coordination
of orders). Also the benefits themselves can be differen-
tiated by costs for retailers, costs for suppliers, costs for
the entire supply chain, service levels for suppliers, and
service levels for retailers. The results of repeated simula-
tions suggest a complex pattern of benefits. Information
sharing is uniformly beneficial to all parties in the supply
chain, with the best performance coming when order in-
formation is shared. Coordination of ordering benefits allparties but provides the greatest benefits to suppliers, who
are able to improve capacity utilization with more order
information and a longer planning horizon. Likewise, in-
formation sharing and order coordination under different
demand patterns generate much larger gains for suppli-
ers than for retailers, because suppliers are able to use
the information to adjust capacity utilization. Although
suppliers almost always experienced large gains, when
demand is falling and capacity utilization low, retailers
find their total costs rise and service declines under infor-
mation sharing and order coordination. These differential
benefits suggest some of the barriers to coordination and
information sharing in a supply chain. Despite the large
gains to the entire chain, the uneven distribution of the
gains means some mechanism for redistribution of the
gains is needed to reap these benefits.
Another useful way to highlight some of the barriers to
collaboration is to examine the metrics needed to evaluate
an Internet-enabled supply chain, and the issues related to
reaching agreement about the metrics and trigger points
for decisions. Efforts at collaboration engage the differ-
ent needs, expectations, and interests of different firms in
a supply chain. One firm might prefer an exclusive focus
on measures such as its inventory turns or capacity uti-
lization, whereas a much better approach for enhancing
collaboration would be metrics that provide measures of
performance across the chain and identify points where
weakness can damage the entire operation. Thus, effec-
tive measures need to be multifunctional and cross enter-
prise. With an Internet-enabled supply chain, these kinds
of measures are more easily attained. However, this means
shifting the emphasis from the individual enterprise to the
supply chain (extended, real-time enterprise) as a whole in
its capacity to provide customer satisfaction (Hausmen,
2000). Getting separate firms to accept this kind of inter-
chain thinking can be difficult; these difficulties become
obvious when we consider some of the actual metrics.
The Internet creates new opportunities to interact with
customers and to provide products more closely cus-
tomized to individual customer preferences. However,
supply chains may be organized so that only the firm fac-
ing the customer is focused on this opportunity. In this
setting, customer service measures will be based on either
“build-to-stock” or “build-to-order” products; different
firms in a supply chain with different emphases will find
agreement on such measures difficult. The firm building
to customer order will want measures of rapid customer
response time throughout the chain, but may need to deal
with companies having a build-to-stock approach. Simi-
larly, an integrated supply chain will need to provide in-
ventory measures across the entire chain, not just at a sin-
gle firm, and then use these measures to compete against
other supply chains. Such measures must aggregate the
inventory of upstream suppliers and downstream end cus-
tomers. Measures of the speed of flows must also consider
the entire system and each of its links to materials.
Obviously, developing this information, sharing it, and
agreeing on its meaning for managing the supply chain
can encounter many difficulties, primarily because firms
are not in the same situation. A firm that centers its value
proposition on low cost will need measures different from
those of a firm that emphasizes customized products. Just