26 May 2011 What else has the internet ever done for purchasing
This is the second article in the series reflecting on how we got here.
In the facebook age, when the digital natives – those who don’t remember a time before the internet – are emerging as the new generation of business leaders, thinkers and politicians, it can be easy to forget how today’s business technology evolved. And it’s easy to dismiss it. But knowing a little more than best practice and understanding why we do stuff the way we do is enlightening and helps inform us about the future evolution of business technology.
What the internet did for purchasing and finance – part 2
It’s not just the technology – it’s a way of thinking – an attitude to business. By utilizing the technology and sharing information the modern enterprise is able to operate within a virtual extended enterprise.
Instead of managing supply chain processes internal shared processes can be opened to business partners. An this has a dramatic effect. In the retail industry for example EDI is established as a core collaboration component. By linking directly to retail stores suppliers are able to capture electronic point of sale data ralating to their products sold across all of a retailer’s stores and arrange shipment to replenish the shelves.
Before EDI was introduced in the automotive industry, the process of receiving goods could took up to five days. Parts were offloaded by the pallet load, details input into the inventory system and inspected and stored. By communicating in real time using EDI and redesigning the process using conveyors, smaller packages could be delivered directly to the assembly line.
Supply chain software was focused almost exclusively on direct material – raw material and commodities core to the buyers’ business but as the internet grew as a credible business tool and as it’s ubiquity became assured the wider application application of supply chain software became compelling and the 90’s saw the birth of supply chain and purchasing applications such as e-procurement and many dared to believe that the benefits of the extended enterprise could be extended to indirects too.
They were wrong.
But not completely wrong. Using detailed demand planning, vendor managed inventory and JIT delivery and other supply chain management techniques is like taking a sledgehammer to crack a nut. It is way over the top. But applying the lessons learned from the extended enterprise is worth while when applied to the financial supply chain – and that goes for indirect spend as well as directs.