supply chain improvement effort on a network basis

That means an inter-enterprise view is brought to the end-to-end processing, and partner
collaboration is considered as an important business strategy. The idea is to have
the most competent constituent of the extended enterprise assume responsibility
for the process steps for which it is most capable of performing. Forecasting
and planning go through another improvement cycle as companies begin to
collaborate to match actual demand signals with production and delivery capacity.
A form of advanced planning and scheduling is typically introduced in this
level. The concepts are basic, but implementation is difficult, as many companies
resist turning over responsibility for any processing to external organizations,
even when the data verify the higher capability. They also want to hold
back the sharing of vital information, until there is a better understanding of
what can and should be shared for mutual advantage.
Most companies start their network formation by working closely with a few
suppliers. They begin sharing a bit of previously sacrosanct data, with the
intention of finding the hidden savings that have been eluding the firms, in spite
of years of purchasing and supply relationships. Now the process maps describing
the supply chain steps are viewed with an eye toward how the business allies
can find areas of mutual benefit. Partnering diagnostics come into play as the
allies seriously analyze what takes place within the process steps, particularly
at the points of handoff. Frequently using reengineering techniques, the allies
develop improved process steps, often applying enabling technology to improve
the transfer of critical knowledge. Results generally provide a higher level of
improvement for each of the participating parties. The key in this area is to make
certain that the discovered savings are shared in some way between the parties
to the effort.
Distributors can play a key role in this area, as they work more closely with
the manufacturers to get the products and services to the end customer in the
most effective manner, with the appropriate amount of inventory. The results
of the survey to be cited verified that some of these distributors have made
substantial progress with their supply chain efforts and have advanced solidly
into level 3 and beyond. As the internal house begins to get in order, and key
distributors are made a part of the network, most firms then turn to a few key
customers and the analysis of the linked process steps continues, with the focus
moving toward optimization across the total network, not just the internal
processing.
(ASCM) efforts. Now the supply chain constituents are working closely together,
sharing knowledge across a communication extranet and collaborating
on how to increase revenues and better utilize combined assets, as well as
finding further cost and service improvements. A new set of metrics is introduced
to measure performance, with most of the measures focused on customer
or consumer satisfaction. This is truly the realm of the intelligent value network
we will describe and where the savings can reach as high as five to eight points
of new profit.
The fifth and final level of the evolution is darkened in the figure, because
it is more theoretical than actual, with only a handful of firms achieving full
network connectivity. That term is used to describe a condition in which the
linked organizations are sharing virtually all of the important data electronically
and are working together through some form of cybercommunication system.
This is the domain of high-technology companies (Intel, Cisco, Hewlett-Packard,
IBM), a few leading-edge consumer goods providers (Colgate-Palmolive, Procter
& Gamble, Nike, Dell, GE, Toyota), and a select group of experimenters trying
to determine the actual value of direct knowledge sharing.
This framework will be used throughout the text, as we describe how a
business organization can move carefully and effectively across the five levels
and attain the highest position of importance to the firm, its market, and its
customers. For now, the maturity model should be applied to consider how
companies are making progress across the described evolution and to determine
the values for moving to higher levels of performance. As we progress together,
we will also show what the documented results by level have been.