Harry Potter has thrilled the kid's world with its magicwand. But the overwhelming customer-demand of Harry Potter's book is met byefficient supply strategy that captures the attention of very few. Scholastic,the publisher and distributor of Harry Potter and other popular children'sbooks used different magic-wand to weave magic in its vast supply network. Itmanaged its distribution network through electronically powered supply chain.And the result was dramatic - revenue was doubled and earnings per share wereclimbed over a five-year period. The publisher and distributor has successfullymanaged the phenomenal demands of Harry Potter through its cost-effective,customer-centric supply chain strategy built over improved electronic links itestablished throughout every nodes of its supply net-work.


Similarly, Dell Computer outperformed the competition interms of shareholders' growth by over 3000%over an eight-yearperiod, 1988-1996. The formula of this astounding success is again virtualintegration, a strategy that is achieved by blurring the traditional boundariesbetween suppliers, manufacturers, and end users through electronicallyinterlinking every parts of its supply chain.


But not everyone was so successful. Living.com purchasedShaw Furniture Gallery, one of the largest furniture stores in US, in March of1999, to vertically integrate with top-line furniture manufacturers. After aninvestment of $70 million in e-business as the exclusive Amazon.com furniturelink, Living.com declared bankruptcy on Aug. 29, 2000. Same fate met withPeapod, founded in 1989 and based in Illinois, US. Considered one of the America's leading and highly experienced online grocers, Peapod suffered a loss of $29million in 1999, and was later sold-out!


Why, in some cases, does the new business model fail whilein other cases it generates incredible success stories? Alternatively, if Delland Scholastic can use the Internet and other electronic technology to developsuch an effective business model, what inhibits other experienced firms likePeapod, once entertained more than 130,000 customers, from adopting similartechniques and improving their business performance?


"It is the better understanding of supply chainstrategies in commensurate with organization goals and overall businessenvironment", says David Simchi-Levi ofMassachusetts Institute of Technology. According to David, Internettechnology has forced companies to redefine their business models so as tocreate new opportunities. While acknowledging that the influence of theInternet and e-commerce on the economy in general has been tremendous, he foundthat reasons for the failure of Living.com, the on-line furniture mall, areinvestment in a new information system that did not function correctly in the specificbusiness environment. Moreover switching to a carrier that had no experiencewith furniture delivery also led to an amazing 30% return rate, triggering toLiving.com's downfall. Similarly, Peapod, the online grocery store, collapseddue to high delivery costs of its transporters.


These examples confirm that correct software tools whenapplied through right supply chain strategy can have a major impact on businessperformance. Developing integrated supply chain strategy is a necessary precursor before implementing electronic technology. Peter Nygrd, Chairman of NygrdInternational, a global clothing enterprise based in Manitoba, US, says,"As apparel manufacturers develop quick response methods, a limitingfactor to the overall supply chain can be the textile cloth manufacturingindustry. Integrated strategies must be established between the textilesupplier, apparel manufacturer, retailer and ultimately, the consumer, toensure rapid delivery of fabrics to coincide with the time of need." NygrdInternational with sales in excess of $300 million, manages a textilesupply chain within the US market and other key countries including Korea, Japan, Europe and Indonesia. At the center of its efficient supply chain management of vastglobal network of suppliers and customers is installation of EDI or electronicdata interchange.


Sheldon Leith, a partner with Ernst & Young's consumer products and retail group also observes, "The key value of automatic stock replenishingthrough electronic network system is that there's less labor and lessstockpiled inventory. Overall, it automates paper-based processes, saves timeand energy, which can be reapplied throughout the business."


But howmuch this electronically enabled stock-replenishment improves fill-Rate andcustomer satisfaction, which are so crucial in surviving today's volatilemarket. Consider the case of Wal-Mart, the world's largest retailer. It hasbeen at the forefront of stock replenishing, offering shoppers more than a 98-per-centchance of finding a complete selection. Wal-Mart uses Retail Link, asoftware system that provides vendors with up-to-date access to point-of-sale price and volume information, as well as its inventory positions and forecast of future needs.In the opinion of Narendra Mulani of Accenture andHau Lee of Stanford University, who studied success formula of Wal-Mart,implementation of Retail Link helps the vendor to position the rightinventories, and to interact with Wal-Mart about movement and promotions for products and categories. Also agreed Peter Nygrd, Chairman of NygrdInternational. He found that using EDI within the supply chain is necessary tomanage the constant change driven by consumer demand.


Technology has become a core component of virtually every supply chain innovation. The Internet brings immediacy to almost any supply chain event by capturing real-time customer demand, and by maximizing visibility into asset status, including location of goods-in-transit, inventory positions, and supplier capacity. Use of technology, even as simple as using e-mail, can sometimes prove very effective. For instance, U.K. based photography firm Double Red, sends its photos by e-mail rather than by post. Its customer base has increased by 40 per cent because they can now meet tighter deadlines. Music retailers can now make it easy for customers to download music over the Internet rather than post out CDs. It is also cost-effective for software sellers to offer customers the facility of logging on, paying for their software and downloading - all via the company's web site.


E-powered business is estimated to skyrocket to $1.3 trillion in 2004 with the promises of convenience and cost reduction, as predicted by Forrester Research group. In parallel, the Internet and other emerging e-business models have produced expectations that many supply chain problems will be resolved by virtue of these new technology and business models. E-business strategies are supposed to reduce cost, increase service level, increase flexibility, and of course profits, albeit sometime in the future. Various electronic technologies inserted into supply chain give the supreme confidence to entrepreneur. Peter Nygrd echoed the same buoyancy, when he said "the company guarantees 100 per cent correct orders delivered within 24 hours or the merchandise is free".


About the Author:


The author is a senior supply chain professional with experience in companies like Arvind, Morarjee Brembana, and Raymond. He is currently with KDS Group as Chief Operating Officer. He has several articles to his credit.


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