cost throughout the supply chain. Although up-front investments for these electronic systems can be significant, they reduce the administrative costs of placing orders and can dramatically improve lead times and responsiveness.
There are many levels of data and communications integration. An SME, commensurate with its resources, should determine the appropriate level. At a minimum, the basic capabilities should include electronic networks based on generally accepted data transmission protocols, such as e-mail and file data transfer on the Internet, and private couriers, such as FedEx. No SME can expect to remain competitive without all of these. The following statistics provide examples of the ubiquity of these technologies (Ferguson, 1999):
A billion e-mails were sent in 1998.
Worldwide fax transmission minutes increased from 255 billion in 1995 to 395 billion in 1998 and will continue to grow rapidly for the next several years.
Faxes account for one-third of phone bills at large corporations.
With lower phone rates and better equipment, the average cost of sending a three-page long-distance fax dropped from $1.89 in 1990 to $0.92 in 1999 via stand-alone machine and to $0.30 via PC.
All levels of integration require the use of a common syntax and semantics so that cross-organizational data can be interpreted identically by all participants in the supply chain. Integration at the highest levels may involve object-oriented data modeling, data warehousing, high-level data protocols, and knowledge-based systems to provide almost instantaneous sharing of knowledge. Implementation of these systems requires extensive time and capital, as well as cultural changes associated with the transition from independent tools used by individuals to dependent tools that link people and organizations throughout the chain.
Recommendation. Although the highest levels of communication capabilities can provide incredible competitive power, they are too complex and costly for most small and medium-sized manufacturing enterprises (SMEs). These technologies should be monitored closely, however, because their costs and ease of implementation are improving dramatically. Internet technologies can provide many of these capabilities today at far lower cost, and SMEs should take advantage of these easy-to-use technologies.