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The insideEdge (SAPinsider Vol. 2, Iss. 3)

by Albrecht Diener | SAPinsider

July 1, 2001

by Albrecht Diener, Senior Vice President, SAP AG SAPinsider - 2001 (Volume 2), July (Issue 3)

The Internet holds a bright promise for optimizing a company's supply chain, but it does not come without a price: there is a downside to the world of e-markets, online access to suppliers, and 24x7 contact with customers - a profit-threatening downside. That same ubiquitous, information-rich Internet minimizes barriers to entry for potential competitors, gives existing competitors easy access to your suppliers, enables suppliers to reach consumers directly, empowers consumers with unprecedented bargaining power, and heightens overall pressure for discounting. Companies whose profitability is subject to these pressures must ask themselves how they can leverage the Internet across their supply chain practices to rise above this fray. Ultimately, the answer must be to link to suppliers and partners in a way that offers visibility and control over the entire span of the supply chain.

     B2B practices and public marketplaces provide this linkage to some degree. Private exchanges, operating as central platforms, network a supply chain to act as an effective entity. Private supply chain exchanges enable you to exploit market dynamics and efficiencies, and can be used as strategic hubs to connect with other private supply chains as well as public marketplaces, thereby creating an intelligent network. The sequential concept of a supply chain will fall apart and the new exchange-based paradigm will drive multi-tier collaboration scenarios.

     mySAP Supply Chain Management (mySAP SCM) forms the Internet-based platform for supply chain processes, including supply chain exchange and marketplace linkages. This platform delivers a unifying data model that offers full integration of your systems with those of your suppliers and partners, allowing for things like multiple "locations," up and down your supply chain, for producing (or sourcing) materials, for the flow of materials between those locations, and for their dependencies on one another.

     On top of this virtual data model run mySAP SCM global planning and execution tools, which give you command of all your supply chain elements, to precisely align your purchasing, manufacturing, inventory, and transportation resources with supply and demand. Better still, all this can be done in real time, giving you the ability to react quickly, as well as to anticipate changing market conditions and customer requirements. These tools assure complete supply chain visibility over customer and supplier allocations, inventory levels, orders, forecasts, and production plans, and their built-in performance indicators allow ongoing optimization of costs. Of particular importance is Supply Chain Event Management (SCEM) functionality, which enables participants to monitor supply chain activities and objects, and notifies users of critical situations to drive proactive problem-solving strategies.

     Make no mistake, visibility and control over your entire supply chain is an imperative, and only web-enabled supply chains will survive. The winners will be those supply chains themselves - not individual companies - that compete most effectively against one another, taking advantage of global collaboration, execution, decision-making, and planning.

Albrecht Diener Senior Vice President,
GBU Supply Chain Management

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