Let's take a quick look and analyze your position in the Supply Chain. You are either the one driving the truck, the one pumping the gas, or the one paying the other two. It does not matter if you are a vendor, supplier, manufacturer, dealer, service supplier or customer, the cost of freight either impacts the amount you charge, the amount you are reimbursed or the price you pay. It is safe to assume that you are the center of the universe for your personal Supply Chain and that suppliers and customers revolve around your business. That was easy, now let's move on.
A zeitgeist must first understand how the threads of history have been woven to reflect the patchwork quilt of the current generation, and only then endeavor to peer into the next. Let's take a moment to contrast emerging communication technologies as reflected with Supply Chain Solutions and transportation.
The Pony Express
The famous Pony Express operated from April 1860 to November 1861. The cost of mail was $5 per 1/2 ounce, later reduced to $1 per 1/2 ounce. The quickest run took 7 days and 17 hours to carry President Lincoln's inaugural address from St. Joseph, Missouri to Sacramento, California.
In 1825, British inventor William Sturgeon exhibited a device that laid the foundation for electronic communications, the electro-magnet. By 1830, an American, Joseph Henry used Sturgeon's device to send an electric current over one mile of wire which caused a bell to strike. By 1838 Samuel Morse gave a public demonstration of an electromagnetic device that embossed dots and dashes on a piece of paper. Five years later, Congress funded development to construct an experimental telegraph line. On May 24, 1844, the message "What hath God wrought?" was transmitted from the Supreme Court chamber in the United States Capitol to an office in Baltimore and officially opened the first completed telegraph line. Western Union built a transcontinental telegraph line in 1861, and suddenly news by wire traveled faster and reached more people than the parcels by Pony.
On March 10, 1876 Alexander Graham Bell invented the telephone. Telephones quickly surpassed telegraphs as lines were installed, because it brought instant communication and connectivity to the common man. Instant communication by phone quickly replaced Morse Code and Mail to stay connected.
Consolidated Freight, Low Rates and Speed
In 1907 James Casey borrowed $100 from a friend to establish the American Messenger System in Seattle, Washington. The 19 year old founded his company on the principles of courtesy, reliability and low rates. By 1913 his company acquired it's first automobile to consolidate shipments and carry more goods. In 1919 the company changed it's name to United Parcel Services, and in 1922 it acquired a Los Angeles company with innovative "common carrier" services. In 1929 UPS was the first package delivery company to use airlines, serving all US states by 1978.
On the first night of continuous operation In 1971, 14 Federal Express jets delivered 186 packages overnight to 25 cities. By 1981 Federal Express introduced the overnight letter and expanded service into Canada. In 1985, bar code labeling was introduced to trace packages. By 1995 FedEx acquires air routes with international authority to serve China. Ten years later FedEx announces development of a new Asia Pacific hub in China, and around the world flights Eastbound and Westbound.
The first recorded transcripts of a "Galactic Network" are attributed to J.C.R. Licklider of MIT in 1962. In 1964 Leonard Kleinrock of MIT published a book on the theoretical feasibility of communications using packet switching rather than circuits. The concept of open architecture networking was introduced by Kahn in 1972, and subsequently became known as a program called "Internetting". In 1991 Modems transmitted data at 14.4 kilobits per second. Speeds doubled to 28.8k by 1994, and eventually to 56k. Meanwhile, Bob Metcalf and David Boggs had developed the Ethernet at Xerox Palo Alto Research Center (PARC) in 1973. Xerox, DEC and Intel invested in development and agreed to make the technology free to anyone to build. By 1981 the technology emerged from the laboratory to the public as 3Com shipped the first Ethernet Hardware. As the ability to move parcels overnight has improved dramatically, so has the ability to transmit packets by increasingly high speed connections.
The Next Generation of Supply Chain Integration
Common approaches to improving the supply chain involve faster delivery or lower cost for transportation. Solutions are typically centered on geographic locations of hubs, consolidated carriers and maximized routes. In some cases the response is a galleria of products and processes housed in a consolidated campus, while another strategy promotes multiple regional facilities for geographic convenience. There is a common theme that the supply chain is viewed as a freight problem with a geographic solution. The dilemma of reducing cost is measured in time or transportation, with the scales continuously pivoting to and fro. Sometimes the objectives favor customer satisfaction, speed to market and the ability to deliver, while in other instances the burden favors the bottom line.
Fortunately there is an alternative. It is not about moving products more quickly, or choosing the most economical method of transportation, or the geography. The new objective for business is moving items less.
For years companies have utilized computers and internal IT development to create sophisticated reports that measure business according to antiquated rules. The idea that generating forecasts for purchasing and rotating inventory is based on the assumption that stock must be owned and managed in-house. IT development has been used to provide expanded reports and expedited processes based on existing procedures. This frequently results in a company investing millions of dollars to improve algorithms that forecast purchases, increasing manual intervention to correct predictions in direct proportion to the number of variables. Not surprisingly, such IT investments typically do not yield the desired bottom line results.
Next generation of Supply Chain Integration utilizes network connectivity with multiple vendors to reduce freight, transportation, geographical boundaries and in some cases ownership. IT development is focused on integrating partners in collective, secure and collaborative networks for shared visibility and planning. Data is moved more effectively and efficiently than products, parts or parcels. Ownership transfers when orders transmit, and inventory is managed in a manner that mitigates movement. Vendor Managed Inventory can be achieved simultaneously with multiple vendors and numerous customer partners through sophisticated impartial third party integrators. The exchange of products and purchases can be replaced by a data exchange, creating total cost reductions that benefit the bottom line.
The next generation of Supply Chain Integration can be achieved by major manufacturers, dealers, distributors and service providers through third party integration and common platforms. The greatest savings in the supply chain are not related to a truck, a plane or a warehouse. The greatest efficiencies in the supply chain are coming from IT. Much like the impact of the telephone and telegraph to the Pony Express, the Internet is providing the next generation of improvements for our supply chain.
This concept is already entrenched in e-commerce. Individuals operating home based businesses are selling goods on eBay, procuring supply in direct proportion to demand. It is not uncommon for individuals to sell products on eBay that are acquired from a local vendor or craftsman. The seller on eBay is the impartial third party integrator between the supply and the demand, leveraging the convenience of the Internet to connect the interested parties. This is a very simple example of using technology to minimize inventory ownership by maximizing technology. Imagine how much more effective the solution can be for complex integration of multiple suppliers with diverse geographic locations and reduced transfer of inventory. This is the concept of the next generation of Supply Chain Integration.
We are only at the beginning of this transformation. Some companies have already realized the financial benefits of leveraging IT solutions to maximize and compress the supply chain. Recognizing and understanding this transformation is the first step, what you do with this knowledge is the next. Experts in technology and supply chain solutions are available to help guide you and offer the secure buffer that is your link between multiple vendors. The direction is not as difficult as you may imagine. Trade in your microscope from studying your exchange of products or parts, and turn it in for your periscope to data exchange.
Words of Wisdom
"Technology is dominated by two types of people: those who understand what they do not manage, and those who manage what they do not understand." - Putt's Law
"With leaders, the future calls to them in a voice they can't drown out. The future is more real than the present; it compels them to act." - Marcus Buckingham, "Three Things You Need to Know"
"Reinvention. What a quintessential America idea. It's the frontier spirit. It's Ben Franklin. It's Ralph Waldo Emerson, and by God, it's Tony Robbins and Stephen Covey too. They all understand the American impetus and genius for wholesale self-reinvention. We survive by staring change in the eye, and adapting." - Tom Peters
About the Author:
John Mehrmann is a freelance writer and President of Executive Blueprints Inc., an organization devoted to improving business practices and developing human capital. http://www.ExecutiveBlueprints.com provides resource materials for trainers, sample Case Studies, educational articles and references to local affiliates for consulting and executive coaching.
http://www.InstituteforAdvancedLeadership.com provides self-paced tutorials for personal development and tools for trainers. Presentation materials, reference guides and exercises are available for continuous development.
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