Wild swings of demand will crush brittle supply chains

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The high variability in global demand for e-commerce will force manufacturers and shippers alike to create an information pipeline – weeding out the inflexible links in the supply chain.

With global e-commerce expected to reach $6.8 trillion by 2004, according to recent reports from Forrester Research, today’s manufacturing techniques and global logistics markets are quite inadequate.

“Global manufacturers shouldn’t be surprised that their supply chains are inflexible – they’re held together with string and bailing wire,” said Navi Radjou, analyst at Forrester. “They should let specialization and networked assets drive the next round of supply chain upgrades. Multinationals will tailor their operations to eBusiness manufacturing networks by 2005.”

Processes that are barely able to handle today’s $57 billion in worldwide e-commerce will be paralyzed by the $6.8 trillion expected in 2004. Forrester believes that companies will thrive in the Internet economy by participating in eBusiness networks – resilient structures of interdependent players cooperating in real time.

The first step for manufacturers will be to build manufacturing networks, rather than supply chains.

Five years down the road, today’s linear manufacturing value chains will have broken down, replaced by networks of specialists cooperating at Internet speed to deliver products. Specialization will help firms plug into multiple networks. Multinationals will add more dynamic planning into their product development and manufacturing to meet the wild swings of demand.

“Global supply chains are hampered by today’s logistics processes, which barely support the task in hand, preventing shippers from handling many more customers,” said Stacie McCullough Kilgore, senior analyst at Forrester. “As international trade ramps up, today’s structures will leave shippers with increasing challenges like more customer returns, increased legal risks, and greater liability.”

To succeed in global trade, international stakeholders must deploy an always-on global information pipeline, instead of tying information to cargo. This net infrastructure will incorporate an open tracking system, a trader collaborative engine, and applications and services that enable traders to adhere to government regulations.

Global logistics has long been fertile ground for intermediaries that take advantage of its inefficiencies and complexity. By 2003, startups will support procurement, track product, and match complementary shippers for cargo-space sharing. As physical goods and information separate, online providers will assume new roles by 2004.

For the report ‘Manufacturing Deconstructed’, Forrester conducted interviews with 50 global manufacturing executives – 40 working for US-based multinationals and 10 for European- and Asian-based multinationals. For the report ‘Delivering The Global Goods’, Forrester interviewed 40 logistics managers in American, European, and Asian companies.



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