The Internet Encyclopedia (Volume 3)

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384 SUPPLYCHAINMANAGEMENT AND THEINTERNET

Table 3Consequences to NMS Communication of Real-Time Operation

Changes in the process of production

Reduction of inventory levels meant that much greater agility was needed to deal with variations in demand and the

uncertainties of the supply chain

Increased agility was accomplished through the following:

1. Greater modularity in components.


2. The time required to shift from producing one product to another was reduced from six hours to a few minutes.


3. The ability to see through to actual demand gave suppliers and manufacturers the ability to adjust production
   based on real-time data and minimize the use of forecasts.


4. Production shifted from a two-week schedule based on forecasts to a daily schedule based on actual orders.


5. The push–pull boundary was altered significantly. Where once customers pulled products only from finished
   goods and the forecast governed a large-batch manufacturing system, now customers would pull out of the
   vendor’s raw materials inventories (still partly based on forecasts) into a flexible manufacturing system.
   Changes in customer relations
   NMS and the contract manufacturer can now use the information about orders and production capabilities and work
   with customers placing large orders.
   Similarly, real-time communication across the supply chain permitted an iterative process of demand management
   between the NMS sales department and the contract manufacturer.
   Demand management strategies based on lead times for production were implemented to reduce the variability
   of demand.
   Virtually all customers were eager to participate in the new system.
   Changes in product development
   Delays and flaws in new product development not discovered until production had begun. This was caused by
   poor communication between product design at NMS and the production engineers at the contract manufacturer.
   The implementation of the Internet-based communication system led to a reduction of six weeks in new product
   development time.

measures of performance, facilitating complex partner-

ing relationships that will provide the core competencies

of many firms, supporting an expanded role for “demand-

pull” business models, increasing the global reach for sup-

ply chains, and altering the skill set required of managers

of supply chains.

Achievement of these predictions will require solutions

to a multitude of problems. The integration of informa-

tion systems is a considerable technical challenge; bar-

riers to cooperation are created by conflicting interests

among supply chain partners; goals are misaligned due to

poor communication, even though the environment per-

mits rich information flows; and management of a sys-

tem with constant iterations and improvisations is com-

plex and difficult, especially across multiple enterprises.

Nonetheless, there are compelling business reasons for

adopting the model of an Internet-based business in sup-

ply chain management.

GLOSSARY

Bullwhip effect The tendency for small variations in

demand by downstream end customers to result in de-

mand amplification and increasingly larger inventory

levels and inventory variation across upstream stages

of the supply chain.

Demand-based management Actions taken by a firm

to influence the overall level of demand and the mix

of products purchased to account for the needs and

capabilities of the firm that supplies those goods.

E-business The marketing, buying, selling, delivering,

servicing, and paying for products across nonpro-

prietary networks that link an enterprise with its

prospects, customers, agents, suppliers, competitors,

allies, and complementors.

E-procurement The use of the Internet to purchase sup-

plies through auctions, trading networks, or collabora-

tion with long-term suppliers.

Extended enterprise The operation of a business

through use of an integrated information system that

aligns the various firms to permit collaboration with

customers, strategic partners, and other parties in the

supply chain.

Push–pull strategies Different strategies of production:

push is production based on a forecast of demand; pull

refers to production to fulfill a specific order.

Real-time firm The operation of an extended enterprise

so that information about orders, operations, suppli-

ers, and logistics is available in real time and permits

new forms of management and relationships with cus-

tomers and suppliers.

Supply chain The system of all organizations and steps

in production, assembly, exchange, information trans-

actions, financial flows, physical movement, and coor-

dination from raw materials to final product.

Supply chain collaboration The coordination of deci-

sions in a situation of coupled outcomes to produce

plans superior to those available without coordination

of decisions.

Supply chain integration The coordination and syn-

chronization of supply chain operations through the

sharing of information in real time by all parties.

Supply chain management The organization, design,

and optimization of the business processes and the