InformationWeek
Defining The Business Value Of Technology
September 14, 1998
Executive Report: The Value Chain
By John Soat
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any IT managers think of a supply chain in terms of software that links a manufacturer with its provider of raw goods. Supply-chain software is generally used to schedule manufacturing runs and control inventory. Maybe that's why two-thirds of IT managers responding to a recent InformationWeek Research survey said they have no plans to deploy a supply-chain system.But that doesn't mean IT managers aren't interested in using IT to improve relationships with suppliers and customers. Take, for instance, Bruce Parker, CIO of United Airlines. While the company doesn't run traditional supply-chain software, Parker is concerned with improving interactions with his suppliers-from Boeing and other manufacturers to caterers-and his customers, whether they ship freight or occupy seats.
To better describe the equation that involves suppliers, providers, and buyers, InformationWeek has coined the term value chain. IT is at the forefront of improving and enhancing the value chain.
First, the value chain uses technology already in place. For example, electronic data interchange-what Walter Curd, director of IT at Fujitsu Microelectronics Inc. refers to as "tried-and-true EDI" -is still the technology of choice for the value chain. Of IT managers in the InformationWeek Research survey with supply-chain plans, more than three-quarters cited EDI as the technology most helpful.
The value chain also uses emerging technology. In the InformationWeek Research survey, the Internet was second to EDI as the most popular supply-chain platform. "Working the Internet into the value chain is my shot at doubling or tripling this company," says Alan Biland, CIO of Snap-on Inc. in Kenosha, Wis. He's using the Internet to expand his customer base beyond his traditional franchisees to directly interact with end users.
Some technologies hold great promise in expanding the value chain. Enterprise resource planning systems, such as those from Baan, PeopleSoft, and SAP, offer a technology standard that value-chain partners can use as a platform for communication and interaction, something that was missing when enterprise software was all homegrown, proprietary systems. Expanding the limits of the supply chain is what the value-chain equation is all about. IT is playing a big part in redefining and re-energizing that equation.
John Soat is news editor at large.
"Executive Report: IT Innovators"
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