SUPPLY CHAIN

Supply Chain

Supply Chain

Introduction

During the Internet euphoria that prevailed at the time we held our conference on May 17-19, 2000, ICT advances were forecast to transform world business by linking suppliers, firms and customers in a seamless web that would cover the entire world. It would be the "end of geography" according to many, a state of development that would lead to:

* infinitely responsive and elastic supply chains that included the most efficient firms at every step of value added, and that could be instantaneously constructed or deconstructed for each product or process as conditions warranted;

* an international distribution of value-added activities that matched the relative competitive advantage of each geographic location, thus assuring global diffusion of the benefits of globalization (as long as the facilitating IC technologies were locally available); (2)

* immediate delivery and superb service to customers in any part of the globe, coordinated by specialized fulfillment companies and virtual service teams;

* rapid and accurate product development, the result of combining extensive databases on customer preferences with specialized producers, and the ability to simulate market conditions and test prototypes globally and cheaply;

* mass customization of products and services, specifically tailored to different cultures or national idiosyncrasies, at no incremental cost relative to standardized mass production;

* a redefinition of corporate boundaries that would outsource all but the most central processes to specialized firms, leading to a reconfiguration of conglomerates and multinational firms into virtual corporations and networks of alliances;

* self-regulated markets subject to the constant pressures of competitive entry by an almost limitless number of potential combinations of firms, each with the capacity to complement their skills and resources efficiently, and requiring no intervention by governments;

* companies that would increasingly be "born global", immediately having a global presence and avoiding the long and expensive process of building an international network of affiliates and personnel; and

* of course, the lowest prices and highest consumer surplus possible.

The crash of the dot.coms in the second half of 2000 and the dramatic drop in the value of high- technology company shares that followed have sobered the mood and brought considerable realism to the market and to these predictions. We have been reminded that in this brave new world not everything is new, not every idea or theory has to be revised, and not every economic law has been repealed. The "dream" of the rapid deployment of a perfectly interconnected world, with a multitude of small and specialized firms combining and recombining instantaneously in an ever-changing network of collaborative alliances, remains just that, a dream.

But to conclude from this that the impact of the Internet and other ICTs is equivalent to that of any other management tool or, worse, just a passing fancy, is equally wrongheaded. There is little doubt that the ICT revolution will indeed transform business processes, customer relationship management, supplier and procurement systems, the structure of industries, and, perhaps, the very nature of ...