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Surviving Supply Chain Integration: Strategies for Small Manufacturers
by facilitating comparison shopping, raising customer expectations, providing ready availability of customized products with expanded features, and reducing costs. The Internet is a powerful and effective integration tool that can enable substantial improvements across the supply chain. It offers SMEs, in their roles as suppliers, manufacturers, and customers, a huge potential for exchanging information easily and securely with other supply chain participants. According to J. Cohen, the Internet can save supply chain participants from 18 percent to 45 percent in logistics costs through quicker order placement, faster delivery of goods, fewer transaction errors, and more accurate pricing (Cohen, 1999). The Internet can also be used to help manage inventory by providing a framework for just-in-time manufacturing. Inventory reductions during the past 10 years were enabled primarily by expensive electronic data interchange systems that linked inventory databases. Only wealthy companies could afford these systems. Now, versatile applications of the Web are providing similar opportunities for SMEs at substantially lower costs. The Internet can also be useful for removing traditional geographic barriers to collaboration and integration within the supply chain.
By using the Internet as an integration tool, SMEs can
improve reaction to changing demands and markets
optimize resources throughout the supply chain
more efficiently source lower cost materials
achieve shorter lead times and better due-date performance
Although face-to-face contacts and the use of telephone, fax, and surface mail are still essential, they are no longer sufficient to ensure competitiveness. Effective communication requires additional capabilities, such as e-mail, electronic data transfer, and more. Even small suppliers should consider creating a supporting information infrastructure of appropriate size and complexity to provide information in useful form to the right people at the right time. New communications technologies can provide substantial benefits to members of the supply chain. For example, traditional methods of processing purchase orders are slow and costly. The OEM receives a customer order, enters it into the MRP (materials requirements planning) system, writes its own purchase orders in response to component forecasts from the MRP system, and sends them to suppliers. Upon receiving the orders, suppliers execute the same procedures in their companies, and so on throughout the supply chain. With current electronic communications technology, purchase orders for lower tier parts and services can flow almost instantaneously and at virtually no