Saturday, September 25, 2010

Developing a Supply Chain Environment

Developing a SCM environment for one small segment of an industry, say between a convenience store and one supplier, does not constitute a supply chain. It's only one small part of a much larger picture that spans the life cycle of everything you do and each product you sell or use internally.

It's doubtful that a true supply chain exists for any industry at the moment, but we're getting there. It can't be dictated by one single individual or organization. It has to be built from the inside and expanded bilaterally in an environment of non-competitive cooperation. Put plainly: In order to gain admission, we must share information that does not impede our ability to compete.

We haven't even settled the problems of receiving invoices electronically. Suppliers are being asked to exchange information in a never ending conglomeration of formats – XML, EDI, CSV, paper invoice, FAX and even voice mail — and every industry is trying to create their own unique methods of communication. Is it any wonder our suppliers are unable to give retailers what they need? This is analogous to railroad companies adopting different systems of rail widths prior to the Civil War. The Intercontinental Railway pushed our country ahead by one-hundred years, and look at the fortunes that were made during the process. In order for any technology to mature, sooner or later an agreement must be made as to exactly what technology will be used.

Think of the things you are doing now where the costs could be shared by competitors. Obviously electricity, telephone service, roads and public transportation are four of them. What else, and where do we draw the line? To what lengths are we willing to hold on in order to keep what we have now?

So the big question remains: do we want to share information to become more profitable? If so, we cannot continue to operate in our own closed environment and attempt to communicate through endless flavors of disparate interfaces. We need to explore ways to integrate our information in secure, non-competitive environments.

I think history and the Internet have already made that choice for us. If not, you would not be reading this article right now.

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