Supplier Enablement

Supplier Enablement – $200Bn at stake

The idea of creative destruction was introduced by the economist Joseph Schumpeter describing the process of industrial transformation that accompanies innovation. That innovation looks to destroy that which is outdated and inefficent and renew with that which is updated (often enabled by technology) and efficient by comparison. I like this as a statement of what supplier enablement is all about.

Yesterday in this blog I referred to a report by a top academic on the impact of electronic business initiatives in the supply chain. The full 9 yards is available in a report for the Society for Information Management (SIM) and published on their web site.

In the SIM report it puts a value on the inadequacies of current supply chain methods of the automotive and electronics industries. Now, these are two industries that are acknowledged as being very progressive in terms of supply chain automation so they represent the best examples.

It is claimed that these inadequacies represent about 1.2% of the value of shipments in each industry. These are mega industries and that is a lot of money, the estimate is $5Bn for automotive and $3.9Bn for electronics.

In some industries the inadequacies will represent much more than 1.2%, perhaps 5% or even more. Someone is paying for that – the consumer.

When I write about supplier enablement I note that the business driver (profit driver) is the reduction of costs incurred by buyers and suppliers in the course of their trading.

The two industries above have an estimated $8.9Bn in added and unnecessary costs as a result of supply chain inadequacies. Let’s speculate what that value might be for the global economy. $100Bn? Perhaps $200Bn? It is a really big number anyway.

You want to pay a smaller price for your electronics and automobiles? Don’t we all.

It certainly appears there is scope for that and for these companies to achieve a handsome profit from improving the supply chain so let creative destruction do its work on that supply chain.

Now global business has already spotted the opportunity and is doing its job so this is work in progress and is starting to permeate the whole supply chain from top to bottom.

Make sure you don’t get left behind!

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posted by FrankB @ Monday, July 31, 2006