The following HTML text is provided to enhance online
readability. Many aspects of typography translate only awkwardly to HTML.
Please use the page image
as the authoritative form to ensure accuracy.
Surviving Supply Chain Integration: Strategies for Small Manufacturers
the lessons of Dell's experience can be extracted and adapted to many other supply chain situations, even for SMEs.
By 1998, the success of the Dell model, as might be expected, was causing problems for competitors, including Fujitsu America, which had large inventories and high shipping costs (Washington Post, May 2, 1999). Customers had to wait 10 days for laptops, while competitors were delivering in five. In response, Fujitsu moved its distribution center from Portland, Oregon, to Memphis, Tennessee, and turned distribution over to FedEx Corporation, the parent company of Federal Express. In direct response to orders, FedEx coordinates the shipment of components from worldwide suppliers, oversees the assembly of PCs, and ships them out, all in three or four days. By early 1999, the cycle time on the ground was eight to twelve hours, and the goal was to reduce it to four hours. Fujitsu has essentially eliminated geographic proximity as an issue and has made maximum use of the benefits of globalization, including low cost. Even with the premium price of express shipping, this modification of the Fujitsu supply chain saved the company millions of dollars, slashed inventories by about 90 percent, and increased profits by 25 percent. Most important, these changes have enabled Fujitsu to compete effectively with Dell for Internet sales directly to consumers. However, as is evident from these examples, these innovations in supply chain integration can also impose large burdens on suppliers in terms of responsiveness, inventories, and management of their own supply chains.
COSTS OF INTEGRATION
The costs, complexities, and risks of fully integrating and managing a highly integrated supply chain can be as substantial as the costs of integrating and operating a corporation of comparable size. Thus, most supply chain integration efforts to date have been very limited in scope. Some of the major costs are listed below:
time devoted to managing, training, and support
effort devoted to becoming a better customer
investment in supply chain integration software and compatible information systems throughout the chain
Opportunity costs (i.e., investments in supply chain integration may necessitate foregoing other business opportunities)
risks of production stoppages
Because the extent of interconnectedness and interdependency makes highly integrated chains increasingly vulnerable to disruptions, the risk