Future of the E-Supply Chain:

In the last decade, many developments have taken place in supply chain applications. The trends for the coming decade are still more interesting to consider. The following trends are likely to be important over the next decade: integrated make-to-stock, continuous replenishment, build-to-order and outsourcing supply chain management.

Integrated Make-to-Stock

This model is suitable for a mass-production environment. In this model, production is carried out on the basis of forecasted demand. The companies do not wait for customers to place orders. They manufacture goods and ship them to distributors from where it reaches retailers through different intermediaries. At each level, the goods are stocked by intermediaries till they are purchased. Companies following a make-to-stock model include Coca-Cola and Procter & Gamble.
Traditionally, resources may be underutilized owing to part purchasing, product over design, lengthy inventory process and lack of streamlined logistics. Companies now try to overcome these limitations by sharing information across the supply chain.

Continuous Replenishment

Organizations involved in manufacturing products or services adopt the continuous replenishment model, which is primarily suited to the packaged goods industry. This model is altered depending on the level of organizational integration. But the major purpose of the model is to coordinate the processes in the organization. For example, CVS, a leading drug retailer, has been growing at a rapid pace. It has acquired companies like Revco to enter new markets. McKesson, a wholesale drug distributor, is a critical supplier in CVS' supply chain. McKesson generates a turnover of over 20 billion dollars each year and has customers spread across 50 states. Customer orders are received in the electronic format, and electronic fund transfer handles receipt of payments and payrolls. Inventory management is supported through electronic data interchange. To understand McKesson's supply chain, we first need to understand the drug industry. There has been large-scale consolidation resulting in top five players capturing 57% of market share. There has been consolidation of drug stores as well. McKesson's strength is its distribution channel. The objective of the company is to be the leader in healthcare and pharmacy supply chain.

Build-to-Order

The shift from mass production to mass customization brought about changes in the supply chain. The major elements in a build-to-order (BTO) model are:

• Mass customization
• Realization that inventory can be substituted with information.

This is especially true for industries where there is rapid and continuous technology change. Large stocks of products may become obsolete. Hence, companies try to be more flexible in the procurement process.

For example, let us take the case of the supply chain integration of Ingram, a logistics and order management company, and Solectron a high volume manufacturer. Jointly they offer build-to-order, configure-to-order, and other assembly services for PCs and peripheral devices. In the traditional SCM, demand forecasts drove production but in e-supply chains, production is driven by demand. This is achieved by matching supply and demand in real time. Now let us look at how this supply chain partnership works. Orders received by Ingram from its customers are electronically transferred to one of the nine manufacturing units owned by Solectron. Once the product has been manufactured, it is shipped to the distribution center or directly to the customer. The entire process is completed within seven days.

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