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FUTURETRENDS 383be used to get instant feedback on the effectiveness of
these strategies.
The Internet-based information system extends to the
supply chain base in much the same way as it extends
out to customers (Kraemer & Dedrick, 2001). The Dell
supply chain is composed of a relatively small number of
suppliers, each with a very strong relationship with Dell.
The supply chain is global, as is the assembly system. Dell
receives real-time information from its suppliers about
their capacities, inventory, quality measures, and costs,
and suppliers receive information from Dell on demand
forecasts, sales, quality measures, and customer needs.
The assembly plants receive orders every two hours and
establish a new production schedule. Suppliers maintain
component inventories close to the assembly plants. Typi-
cally, Dell is able to assemble an order in one day (Holweg
& Pil, 2001).
Dell ties this supply chain together with the informa-
tion that comes from customers. First-tier suppliers are
able to see Dell’s demand forecasts (updated through an
Internet portal) and are able to gauge their operations ac-
cordingly. Providing direct information about sales and
demand forecasts in real time to suppliers mitigates the
bullwhip effect. Suppliers, aided by real-time informa-
tion, are in a position to produce for end demand and
make adjustments separated only by lead time (Kraemer
& Dedrick, 2001; Kraemer, Dedrick, & Yamashiro, 2000).
The information system also permits some suppliers to
ship parts of the end product directly to the customer,
thus avoiding shipment to the Dell plant and reshipment
to the customer.
For Dell itself, all inventory is work in progress;
there is no finished goods inventory, since products are
shipped as soon as they are assembled and tested. This
Internet-based information integration has significantly
contributed to the remarkable decline in inventory, from
an average of about 35 days of component inventory
on hand in 1995 to less than 4 days in 2001 (Kraemer
& Dedrick, 2001). Dell also provides information about
product defects for use at the point of production to
improve quality control. Integration of the supply chain
is enhanced by suppliers who are in close physical prox-
imity to Dell, holding inventory within a few minutes of
the assembly factory. Information is also used to establish
very tight integration between delivery and service. The
integrated supply chain permits a very simple yet pow-
erful push–pull system. Information about end demand
is used to pull the individual product through the supply
chain system and to push components to the assembly
floor in a flexible and adjustable manner. However, the
Dell system does not reach the high standard of a build-
to-order system, primarily because suppliers are required
to maintain inventory levels and do not have complete
access to customer orders and therefore cannot base their
production on this information (Holweg & Pil, 2001).
Dell exemplifies a systemic understanding of how sup-
ply chain management must operate in an extended real-
time firm. The benefits include reduced costs for sales, ser-
vice, and supply chain operations, plus improved quality,
delivery time, and service satisfaction. Dell’s performance
is better than that of its less Web-enabled competitors,
and its broad capabilities have been essential in increas-ing its market share. Nonetheless, Dell has also experi-
enced some of the same inventory problems as Cisco as a
result of a misalignment with suppliers.NMS Communications
The experience of NMS Communications helps to illus-
trate many of the issues in developing an Internet-based
supply chain strategy. In particular, this case depicts the
consequences of integrating the supply chain with near
real-time information and the impact of this informa-
tion on the operation of the firm. NMS produces printed
circuit board assemblies for the telecommunications in-
dustry to enable transmission of voice over Internet pro-
tocol (Arntzen & Schumay, 2002). Manufacturing of its
products and new product prototypes is completely out-
sourced. Similar to Cisco and Dell, this is a business
with high rates of technological change and the need for
rapid delivery and quick time-to-market for new prod-
ucts. However, NMS operated its supply chain based on a
traditional build-to-forecast system. This led to many ex-
pectable inventory and product development problems:
excess inventory, parts shortages, long customer order cy-
cle times, low delivery predictability, high end-of-quarter
peak loads, and slow new product development. Recog-
nizing many of these problems, NMS developed a plan
to shift to an Internet-based, build-to-order supply chain
and reposition itself as the integrator of the entire supply
chain. NMS wanted to become the core of an extended,
real-time enterprise. The effort to achieve this led to an un-
derstanding of the enormous changes in internal thinking
and external relationships required by this plan.
To support these changes, NMS created a “hub-and-
portal” IT architecture to integrate its internal systems
and connect electronically with key customers and sup-
pliers. The portal is multimode (it operates using XML,
EDI, Web-based, and extranet capabilities) and supports
the integrations of business processes, along with visibil-
ity and collaboration across the supply chain. Customer
orders are posted to a Web site available to manufacturers
and suppliers. The consequences for NMS and its relation-
ship to customers and suppliers were substantial. These
are summarized in Table 3.
NMS found the transition process to be difficult, pri-
marily because of the scope of the changes required.
Clearly, operating in near real time as an Internet-based,
build-to-order firm requires rethinking much of opera-
tions. At the same time, many benefits and competitive
advantages are also available.FUTURE TRENDS
What is the future role of the Internet in supply chain
management? Adoption of Internet-based business-to-
business systems has been slower than many predicted,
perhaps affected by the bursting of the dotcom bubble.
What trends can we expect? The projection of one study
(Carter, Carter, Monczka, Slaight, & Swan, 2000) is that
before 2010 the Internet and World Wide Web will be-
come the “backbone of electronic purchasing,” integrat-
ing supply chains by providing the medium for all basic
and essential transactions and communications, operat-
ing as the basis for access to “critical” information and