February 2002 | Commentary | Supply Chain Technology

The Search for e-Business Enlightenment

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A zen approach to logistics? It's not as far-fetched as you might think. In an industry where the quest for perfection is persistent, if fleeting, an enlightened approach to e-business and supply chain management has some merit.

In their book The Seven Steps to Nirvana (McGraw-Hill, 2001) Mohan Sawhney and Jeff Zabin draw on this parallel, pointing out some interesting strategies and identifying the state of e-business transformation. Both authors convey an important set of messages in this time of e-business reorientation and business recovery. Amid this confusion, it is important to see the Internet and e-business, and what they stand for, in a clearer light.

Sawhney and Zabin do two interesting things in their book. First, they give a step-by-step analysis of how we can view business opportunities within the perspective of evolutionary e-business initiatives, while at the same time navigating the new e-business infrastructure. This is the core of their book's thesis.

Secondly, Sawhney and Zabin provide a sharp overview of key issues in today's world, such as business process reengineering, enterprise resource planning (ERP) and its relationship to data across enterprises, the place of customer fulfillment within customer relationship management (CRM), and the differences between traditional organizations and e-organizations.

Their view of ERP provides a critical understanding of the supply chain's whys and wherefores. In the past few years, ERP has essentially been developed as the backbone of an enterprise's internal processes. The advent of supply chain management and customer relationship management has changed the context within which ERP must operate.

"While ERP systems allowed for synchronization of data and business processes within an enterprise, they did not allow for synchronization of data across enterprises," Sawhney and Zabin suggest. "Currently, inter-enterprise business processes such as supply chain management still rely on sequential transmissions of information from the manufacturer's ERP system to the supplier's ERP system (upstream in the supply chain) and to the reseller's ERP system (downstream in the demand chain).

"Even collaborative planning and forecasting in supply chain management rely on sequential information transfer, because the different entities in the supply chain operate autonomously, and operate their own business processes," the authors add.

It is too early to know just how the mix of ERP, SCM, and CRM will work itself out. If ERP is the internal backbone, then SCM and CRM have to become, in some measure, the external backbone. The task will be to turn enterprises—and the web in particular—into one backbone of many integrated parts.

Sawhney and Zabin take an evolutionary approach to customer service fulfillment. Essentially they see each fulfillment activity—taking orders, forecasting customer demand, managing supplier relations, and managing reseller relations—moving through four stages: inform, automate, integrate, and reinvent.

Sawhney and Zabin specifically look at managing supplier relations within these four parameters, as follows:

  • Inform— At the inform level, product information and specifications are online, but there's no process visibility for suppliers. Production and inventory status is communicated through EDI.
  • Automate— At the automate level, inventory, demand, and production plans are communicated electronically via the Internet. There is limited process access for suppliers.
  • Integrate— The integrate level reaches complete visibility of production, inventory, and forecasts to suppliers; integrated and collaborative planning with key suppliers.
  • Reinvent— Finally, the reinvent level defines multiple integrated channels—private, public, and consortia exchanges; spot and systematic sourcing; creation of dynamic supplier "webs" assembled in real time for specific customers.

Regardless of where an enterprise fits into this evolutionary scheme, it can be valuable to picture the fulfillment tree by its various branches of activity.

Sawhney and Zabin offer a progression of steps toward an e-business organization in a manner similar to their fulfillment paradigm.

Summarizing the differences between a traditional business and an e-business, the authors write, "the traditional organization is hierarchical, inflexible, risk-averse, and optimized for stability. By implementing the seven steps for organizational change, it evolves into an organization that is decentralized, flexible, and optimized for speed. The organizational change that e-business engenders may be the most valuable, if not entirely anticipated, consequence of e-business transformation."

No one to our knowledge fully anticipated that e-business would become a true harbinger of organizational change at the levels these authors suggest. It now seems altogether reasonable that e-business and organizational maturity and efficiency are intricately tied together.

For more information about Seven Steps to Nirvana, Mohan Sawhney can be reached at: mohans@nwu.edu and Jeff Zabin at: zabin@7s2n.com

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