This link from allen yesterday had such a limited response that I thought I'd go ahead and post the article directly. I have no idea what the markket will do to the price today, but with background information like this, the wait/weight is softened.
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May 04, 1999 18:12
Electronic Commerce Shakes Up Corporate Control of Supply Chains
STANFORD, Calif.--(BUSINESS WIRE)--May 4, 1999--Airlines place 4,000 orders daily over the Internet for spare parts from a leading
aircraft manufacturer, cutting average pre-Internet delivery times of about a week to a day.
Computer and clothing retailers use a transportation company's website to track packages, rerouting some already en route to different
stores or customers to save space and time in warehouses.
A high-tech company puts out a contract for a bid on the web, forgoing months of negotiations with potential suppliers. The result in a
month: a $14 million contract, down from $24 million for a similar contract the previous year.
These are a few examples of business-to-business cybertrade, which last year was at least five times the volume of consumer retail
business conducted on the Internet, according to Forrester Research, a market research firm. The business examples, discussed at a
Stanford conference on "cybertrade ventures" held April 28, illustrate that as the Internet expands consumer power, businesses are
rapidly becoming demanding customers too.
"The flow (of power) has reversed. Customers are dictating terms and conditions to suppliers," said Dale Hayes, vice president of
electronic commerce for United Parcel Service (UPS), a transportation company that now has cell phones and computers on its 157,000
trucks so drivers can update the status of packages every 10 minutes. "We are not in control of our supply chain any more, whether we like
it or not. You, our customers, are," Hayes said.
"The basic idea is that (the Internet) intensifies competition in the marketplace, which increases value," said Jin Whang, a professor at
Stanford's Graduate School of Business.
It also increases pressure on businesses, which are beginning to realize they may not survive unless they quickly adapt, a number of
speakers said at the conference, which was hosted by Stanford's Global Supply Chain Management Forum and the San Francisco Bay
Area World Trade Center.
About 100 business executives came to campus to trade cybertrade experience and expertise, especially as it affects their ability to
manage their global webs of business partners, both suppliers and distributors. The Stanford forum, founded in 1995 and directed by
engineering and business Professor Hau Lee, hosts several conferences annually for businesses that manage complex international
chains of suppliers.
The forum also conducts research to advance the theory and practice of global supply chain management and teaches students in several
countries, partly by having them work as international teams on the supply chain problems of real companies. (For more information on the
Stanford Global Supply Chain Management Forum and upcoming conferences, see www.stanford.edu/group/scforum.)
The Internet is having a huge impact on companies' supply chain management, Professors Lee and Whang wrote in a recent newsletter
article. Small component manufacturers, who once had no choice but to be part of a global supply chain controlled by a brand-name
corporation, are now able to compete directly for sales with former business partners, and new start-up companies are offering customized
products at lower prices or speedier delivery times. In order to stay competitive, many long-standing companies are finding they have to
electronically share information that they once considered proprietary with business partners and sometimes with customers.
When a consumer orders a computer on the web, the order information may flow directly to the factory floors of several companies that
make the components, speakers said. "Transaction times are no longer batch; they are now real time," said Ken Ouchi, chief information
officer of Solectron Corp., which builds customized manufacturing systems for supply chain integration.
The package tracking system of UPS is accessed about 600,000 times daily, mostly by people who are not looking for a lost package,
Hayes said. They are accessing UPS's information network to plan their unloading of new inventory or checking for proof of delivery so
they can demand payment on time to improve their cashflow and reduce bad debt.
One grocery chain, according to Peggy Gideon, director of application engineering for Sprint, makes more money selling information on its
customers' purchase habits to its suppliers than on selling food and household supplies. Sprint builds and operates "virtual private
networks" between companies and their divisions.
The next step for electronic commerce will be an explosion of online services, as companies concentrate on their core competencies,
several speakers said. "In chapter one of e-commerce, companies tried to draw eyeballs to their websites," said Joseph Beyers, vice
president and general manager of the Internet software business unit of Hewlett-Packard Co. "At H-P, we see companies wanting to
simplify their lives."
Beyers predicted many companies will reduce their information technology departments and investments in software and hardware by
demanding a host of electronic business services provided to them through restricted-access websites, called extranets. Business
software and hardware suppliers that want to stay in business will be forced to provide these services as modules that companies can pick
and choose, or find partners that will. Among the services Beyers envisioned being accessed by "people, their cars and cell phones" are
bidding, bartering and billing services as well as navigation aids, food ordering, currency optimization, data mining on demand, home
buying and accounting.
Companies leading the way in e-commerce are in the high-tech industry but also in the sectors of finance, aero-auto manufacture and
consumer products, said David Cope, vice president of marketing for Extricity Software, a provider of business-to-business integration
software.
E-commerce problems abound, speakers said, from a lack of trust among businesses to security concerns to potentially running afoul of
antitrust regulations for information sharing, speakers said. On the technical side, getting different information systems to work across
companies is no small challenge -- one that, according to Cope, must include the ability for each company to add, change or delete
information without first needing consensus from other partners. Large companies that have tried to set standards for online catalog
updating, inventory and sales reporting have found their market power on the Internet isn't sufficient to force others to follow suit, said
Solectron's Ouchi. An open consortium called RosettaNet is now making some progress, he said.
Business executives in the audience repeatedly questioned speakers about the problem of building trust in cyberspace. They pointed to
frustrating delivery delays and other problems with the quality of Internet services in recent months. Those invited to give formal
presentations conceded there were problems but said it was a mistake to judge e-commerce by what has been visible to date. Said Joe
Slota, vice president of customer supply chain for Philips Lighting Co., "This baby has not even broken gums yet."
Note to Editors: For information available on the World Wide Web, see www.stanford.edu/group/scforum.
CONTACT: Stanford News Service
Kathleen O'Toole, 650/725-1939
kathleen.otoole@stanford.edu
or
Supply Chain Management Forum
Hau Lee, 650/723-4289 (for Comment) |
