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Wednesday
- September 13, 2000
Global E-Commerce Will Crush Supply Chains
With global eCommerce expected to reach $6.8 trillion
by 2004, resolving today's inadequate manufacturing techniques
and inefficient global logistics market is imperative. According
to two recent Reports from Forrester Research, Inc., the
high variability in global demand will force both manufacturers
and shippers to harness the Internet and create an information
pipeline -- weeding out today's weak supply chain links.
"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 because
multinationals will tailor their operations to eBusiness
manufacturing networks by 2005."
Processes that are barely able to handle today's
$57 billion in worldwide eCommerce trade 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 over the Net. The first
step for manufacturers will be to build manufacturing networks,
rather than focusing on supply chains.
Five years down the road, today's linear manufacturing
value chains will have broken down, replaced by networks
of manufacturing specialists that are all cooperating at
Internet speed to deliver products. Specialization will help
firms excel in core manufacturing and allow them to plug
into multiple networks. As they edge closer to eBusiness
networks, multinationals will look to add more dynamic planning
into their product development and manufacturing processes
to meet the market's wild demand swings.
"Global supply chains are further hampered
by today's logistics processes, which barely support the
task at 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 process 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 in-depth 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.
U.S. Tops E-Commerce Spending... By Far
When it comes to ecommerce, the United States is far
outspending any other country in the world. According to
IDC's Worldwide Internet Commerce Spending Market Map,
the United States spent $80.5 billion on ecommerce during
the calendar year ending December 31, 1999. Japan was a
distant second at $13.5 billion, and no other country comes
close to spending $10 billion.
"The United States is spending almost
six times as much as the next biggest ecommerce spender -
Japan," said Lloyd Cohen, Director of Worldwide Market
Analysis for IDC's Commercial Systems and Server research. "Part
of the reason for the large discrepancy can be attributed
to the fact that the United States has the most advanced
IT structure in the world."
In 1999, the United States spent close to $385
billion on IT, accounting for more than 46% of worldwide
IT spending. Japan is second in overall IT spending, with
close to $90 billion.
IDC's map also shows that at 43.8 million,
more PCs shipped to the United States than any other country
in 1999. In comparison, 4.8 million PCs were shipped to China,
the most populous country in the world, and 10.6 million
shipped in Japan.
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