Supply-Chain.com - From Virtual to Reality

It’s easy to order goods in the virtual world of the Internet: one click and it’s done. But for the company involved, the real work begins when it gets the product to your door. Professors Enver Yücesan and Luk Van Wassenhove survey the state of B2B supply chain management and investigate the pressures that developments in “e-frastructure” are exerting on it.

by Luk Van Wassenhove,Enver Yücesan
Last Updated: 23 Jul 2013

The explosive growth of electronic commerce has significantly affected the management of supply chains. While the Internet allows an almost instantaneous transfer of information, there is a bottleneck in the manufacturing and supplying of the physical goods.

As businesses expand onto the Internet, some realize that the advantages of e-commerce can be offset by the inefficiencies of traditional supply chain management. That’s why many are initiating efforts to develop new supply chain strategies.

Enver Yücesan, INSEAD Professor of Operations Management, and Luk Van Wassenhove, INSEAD’s Henry Ford Chaired Professor of Manufacturing and Professor of Operations Management, begin their paper with a set of working definitions of supply chain management networks. They show how better design can lead to easier coordination. They describe and identify the causes of the “bullwhip phenomenon” – how demand increasingly varies at each new point on a supply chain as one moves from the manufacturer towards the customer.

This paper also introduces the concept of three-dimensional concurrent engineering (3D-CE) whereby products, processes and supply chains are designed simultaneously. It gives you examples of manufacturers who have taken this on board as well as how approaches should vary with different types of products.

The authors look at how new technologies and ways of thinking are changing the “who delivers what to whom,” and at the same time, they show how e-procurement and its focused drive on cost reduction can depersonalize relationships within supply chains.

As you might have guessed, the crux of this story is closely linked to the Internet. While the current technology isn’t helping manufacturers make the ideal choices of suppliers just yet, they know that the Internet holds the key. It’s simply a matter of time, since the required developments are imminent.

INSEAD 2002

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