Exam 12: B2b E-Commerce: Supply Chain Management and Collaborative Commerce

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Private industrial networks are Internet-enabled networks developed for the coordination of transorganizational business processes. These networks can be industry-wide, but often begin and sometimes focus on the voluntary coordination of a group of supplying firms centered about a single, very large manufacturing firm. Private industrial networks can be viewed as "extended enterprises" in the sense that they often begin as ERP systems in a single firm and are then expanded to include the firm's major suppliers.
The central focus of private industrial networks is to provide an industry-wide global solution to achieve the highest levels of efficiency. Private industrial networks serve different goals from Net marketplaces. Private industrial networks focus on continuous business process coordination between companies and usually focus on a single sponsoring company that "owns" the network, sets the rules, establishes governance, and invites firms to participate at its sole discretion. Private industrial networks focus on strategic, direct goods and services. Private industrial networks can do much more than just serve a supply chain and efficient customer response system. They can also include other activities of a single large manufacturing firm, including design of products and engineering diagrams, as well as marketing plans and demand forecasting.
Collaboration among businesses can take many forms and involve a wide range of activities - from simple supply chain management to coordinating market feedback to designers at supply firms. One form of collaboration is industry-wide collaborative resource planning, forecasting, and replenishment (CPFR), which involves working with network members to forecast demand, develop production plans, and coordinate shipping, warehousing, and stocking activities to ensure retail and wholesale shelf space is replenished with just the right amount of goods. If this goal is achieved, hundreds of millions of dollars of excess inventory and capacity could be wrung out of an industry. This activity alone is likely to produce the largest benefits and justify the cost of developing private industrial networks.
A second area of collaboration is demand chain visibility. In the past, it was impossible to know where excess capacity or supplies existed in the supply and distribution chains. For instance, retailers might have significantly overstocked shelves, but suppliers and manufacturers might be building excess capacity or supplies for even more production. These excess inventories would raise costs for the entire industry and create extraordinary pressures to discount merchandise, reducing profits for everyone.
A third area of collaboration is marketing coordination and product design. Manufacturers that use or produce highly engineered parts use private industrial networks to coordinate both their internal design and marketing activities, as well as related activities of their supply and distribution chain partners. By involving their suppliers in product design and marketing initiatives, manufacturing firms can ensure that the parts produced actually fulfill the claims of marketers. On the reverse flow, feedback from customers can be used by marketers to speak directly to product designers at the firm and its suppliers and "closed-loop marketing" can become a reality.