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April 3, 2000

Supply Chains Go Global

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Illustration by Kitty Meeks

Related links:

sidebar: Tighter Supply Chain Helps Lucent Speed Deliveries

sidebar: RosettaNet Helps Companies Speak The Same Language

Businesses Seek To Cut Weak Links From Supply Chains (3/6/00)

Marketplaces Bring Order And Efficiency To Supply Chains (2/28/00)

Managing The Supply Chain (2/14/00)

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Stride Rite employs buyer agents to source merchandise. Later this year, Stride Rite will roll out an order-management system that will be connected to its shipping and logistics system from Rockport Trade Systems Inc. and PKMS warehousing system from Manhattan Associates. The homegrown supply-chain system will let Stride Rite service reps track a specific order for a customer--even if it's part of a much bigger shipment. "We'll have visibility of the entire supply chain, from the time the shipment leaves the Far East until it arrives at the warehouse doors," says Martin Temple, Stride Rite's director of order fulfillment.

Stride Rite opted to use a multiproduct, best-of-class solution rather than a single enterprise resource planning system because the multiproduct system can be more easily tailored to meet the needs of a footwear merchandiser. For example, one homegrown module in its supply-chain system specifically tracks shoes by style, colors, and width.

Tailoring supply-chain systems to meet the needs of business partners can be crucial to the success of businesses that trade globally. Especially for makers of commodity goods, how well a company executes a global supply chain can differentiate its products from those of competitors. "It's more how you use information within the supply chain to make decisions than who participates in it," says Jayashankar Swaminathan, an assistant professor of manufacturing and IT at the University of California's Haas School of Business in Berkeley. A company can make a commodity a noncommodity by providing additional benefits to its customers, such as sharing better information or providing delivery and logistics services. "You can create a stickiness to your relationships through your supply chain, and the product won't be based just on cost," Swaminathan says.

But determining the cost of products when sending goods from one nation to another can be a mystery. Customs duties, tariffs, and taxes change frequently and vary widely from country to country. Frequent importers have traditionally relied on freight-forwarders and custom brokers familiar with custom duties and taxes to help determine entry costs.

DHL Airways, in Redwood City, Calif., is piloting an Internet service to demystify customs fees by letting shippers determine duties and tariffs--which can be double or triple a product's cost--before shipping merchandise overseas. Companies, especially those new to global sales such as Internet retailers, couldn't determine the duties and taxes assessed until the shipments cleared customs. "That resulted in a lot of E-tailers getting returns," says Phil Oberhausen, director of E-commerce programs/IT at DHL. "It gets too risky to make these kinds of shipments."

Phil Oberhausen Photo by Alan Blaustein The DHL service, which uses software from Syntra Technologies Inc., initially will calculate duties, tariffs, and other charges on shipments involving the United States and 12 other countries. By midyear, DHL's landed-cost generator will include customs information from a total of 50 nations. Customers will be able to access the service through a Web site, but DHL expects larger customers eventually will be able to integrate the Syntra system with their supply-chain systems over the Net.

Another factor influencing the increasing expansion of supply chains is the development of standards--based mostly on the Internet--that can be used by supply-chain partners, such as XML. "No one wants to affiliate with a vendor's standard," says Hollis Bischoff, VP of E-business strategy at Meta Group. "They want standards to be independent."

That's the job of groups such as RosettaNet, the 200-plus member consortium formed two years ago to create supply-chain standards for the computer and electronics parts industries (see sidebar story, "RosettaNet Helps Companies Speak The Same Language"). A new E-service, Viacore, is piloting a hub on the Internet where distributors, suppliers, and customers can go to see what companies are using which RosettaNet interfaces, known as Partner Interface Processes. That information can then be used to initiate and coordinate supply-chain partnerships. David Lafferty, VP of E-commerce at Tech Data Corp., an $11.5 billion computer hardware and software distributor in Clearwater, Fla., sees Viacore as a place where Tech Data can attract new customers as well as sign up supply-chain partners.

The supply-chain dynamic is changing, as companies attempt to reach the farthest ends of the planet to coordinate manufacturing, shipping, and distribution. Standards and technology allow companies usually restricted geographically to compete on a global basis. "It's no longer me against my biggest competitor," says Meta Group's Bischoff. "It's who can ship fastest, get the supply the cheapest. It's about my entire chain competing against my competitor's chain. You can stomp over one company, but you can't stomp over a 50-company-strong supply chain."

Says Avent's Brunell: "Because of technology, we can view the world as a single, global village." Making sneakers in China may not be what Marshall McLuhan had in mind, but it's a powerful message in any medium.

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