chain and logistics

Many businesses prosper or fail depending on the success of their relationship with their suppliers and with those who they supply. Businesses that rely on other businesses to this extent are in what is called a supply chain - each supplying each other right up to the final link in the chain, the consumer. The Internet can help make this relationship work more effectively and efficiently. This section of the e-businessguide will explain:
• what is a supply chain
• why collaboration is important
• how the Internet can assist
• what standards exist that help coordinate online activities
• the nature of global supply chains
• how the Australian Government's ITOL program can help businesses
• what you can do to investigate supply chains in your industry
About supply chains
A supply-chain encompasses all activities and information flows necessary for the transformation of goods from the origin of the raw material to when the product is finally consumed or discarded. This typically involves distribution of product from the supplier to the manufacturer to the wholesaler to the retailer and to the final consumer, otherwise known as nodes in the supply-chain. The transformation of product from node to node includes activities such as production planning, purchasing, materials management, distribution, customer service and forecasting.
While each firm can be competitive through improvements to its internal practices, ultimately the ability to do business effectively depends on the efficient functioning of the entire supply-chain. For example, a wholesaler's inability to adequately maintain inventory control or respond to sudden changes in demand for stock may mean that a retailer cannot meet final consumer demand. Conversely, poor sales data from retailers may result in inadequate forecasting of manufacturing requirements.
However, it is not simply about passing information from one node in the supply-chain to the next. The dispatch and distribution functions need to work effectively as well, so movement of product from one node to another happens in a timely manner and meets production scheduling.
All that said, there can be little point trying to improve your bottom line through transforming your own business without similar changes to the way your supply chain as a whole is functioning. That is, there needs to be consistency between individual business objectives and the objectives of the supply-chain, and access to information in order to provide visibility of data flows.
Collaboration
Technology solutions can support greater data visibility and integration of dispatch and distribution with production scheduling. However, one element that underpins management of the supply-chain is collaboration.
Collaboration means firms share information in an accurate and timely manner so all businesses in the supply-chain can adequately plan forward inputs and outputs, dispatch product, manage risk and maximise return on investment. This improves the overall functioning of the supply-chain and ultimately the individual firm's bottom line. The key to collaboration is communication and the key to better communication is electronic transfer of information.
The Internet
Proven supply-chain models rely on the Internet to transfer information electronically, which underpins communication and collaboration between businesses along the supply-chain. Using the Internet in this way has a number of benefits, which include:
• saving money and time by removing paper transactions - purchases orders, invoices, consignment notes - and speeding up response times
• reducing errors in the information passed along the supply-chain by avoiding re-keying data from hand-written or faxed documents
• improving satisfaction of customers or suppliers (i.e. next node in the supply-chain) with the delivery of information in 'real time' (i.e. at the point at which product is moved)
• integration of dispatch and distribution data with product development data at each node of the supply-chain, resulting in real cost savings.
Standards
For information exchange associated with the movement of product along the supply-chain to work effectively, the adoption of agreed data standards and conventions is required. That is, for collaboration to result in benefits to all in the supply-chain, different systems need to be able to exchange information with each other. If agreed standards are used, with each firm suitably equipped to use information exchange standards and participate, then each business, as well as the supply-chain as a whole, will benefit.
Data standards have been developed and independent advice (such as from your industry association) should be sought in your decision about which data standard to adopt when exchanging information on the Internet. When deciding what standard to use in exchanging data along the supply-chain a number of questions should be asked, such as:
• Are the standards consistent with globally-agreed standards and is the technology, on which they are based, proven?
• Does the standard provide unique identifying numbering for products and businesses?
• Is there standardised supporting information such as date and address?
• Does the standard allow the information to be read in a machine-readable format (i.e. via a barcode)?
• Are there standard message formats for the transactions and business documents you normally use?
Global supply-chains
As part of the trend towards globalisation, the largest engineering and construction organisations are pre-qualifying firms and purchasing equipment and services through global supply chains (GSC). To access GSC, you need to be internationally competitive and possess global capability. It is important to be aware that pre-qualification does not guarantee success. You need to follow up with project-specific marketing and promotion. Once registered, and with proactive marketing firms, you can benefit from stable, long-term partnerships with project execution managers. You need to be able to provide competitive, quality equipment or services to strict timelines and exact specification. Advances in e-business and online procurement are playing a major role in the development of GSC. You should develop 'e-literacy' in order to enter the GSC market. Targeting GSC is a new and exciting way to enter global markets, because it is efficient and cost-effective. You can supply to any project anywhere being undertaken by the GSC operator. Regional procurement centres for large E&C companies, such as Singapore, are able to forward capability information to projects outside their region at no extra cost to the supplier.
See the Austrade website for more information: http://www.austrade.gov.au/australia/layout/0,,0_S2-1_CLNTXID004-2_-3_-4_-5_-6_-7_,00.html#globalsupply
Information Technology Online (ITOL)
This is an Australian Government funding program administered by DCITA. It is designed to accelerate the national adoption of e-business solutions, especially by small to medium enterprises (SMEs), across a broad range of industry sectors and geographic regions.
ITOL encourages industry groups and small business to identify and adopt commercial uses of the Internet to support productivity and profitability. The ITOL Program is a catalyst for industry groups to work collaboratively to solve common problems on an industry-wide basis, rather than working individually and developing multiple solutions and in some cases unnecessarily duplicating efforts. The preferred e-business solutions are open and inclusive for all participants.
The objectives of the ITOL Program are to provide assistance to a broad range of activities throughout Australia that:
• encourage collaborative industry-based projects which aim to accelerate the adoption of business-to-business e-commerce solutions across a wide range of industry sectors, especially by clusters of SMEs
• foster the awareness and strategic take-up of innovative e-commerce solutions within and across industry sectors which deliver sustainable economy-wide returns and contribute to increased competitiveness.
DCITA has produced a guide to successful e-business collaboration which is available at: http://www.dcita.gov.au/communications_and_technology/publications_and_reports/2002/december/forging_and_managing_online_collaboration_the_itol_experience2
More information on the ITOL program can be found at: http://www.dcita.gov.au/communications_for_business/funding_programs__and__support/ITOL
What to do

This guide has just been produced by the Australian Government (DCITA) in conjunction with relevant associations, agencies and companies that specialise in the area of e-procurement and e-catalogues. It was funded through the Australian Government's Information Technology Online (ITOL) grants program.
Consider your supply-chain and research the firms and functions and whether using the Internet can enable your supply-chain to function more effectively. Then research the data you need from another node in the supply-chain to conduct your business.
For collaboration to work it may be necessary to champion its cause and discuss with others how to collaborate to share data openly to improve supply-chain management.
Seek advice from your industry association for guidance on technology solutions and open standards to adopt in information exchange and messaging of business documents.