The Internet and Supply Chain Management
The computer age has affected society in numerous ways, few of which were anticipated in advance. We do not have the sentient computers once anticipated by science fiction; instead we have e-mail and the Internet. The Internet itself has had impacts its pioneers are unlikely to have imagined. Among them is the transformation in the supply of physical (not to mention digital) goods to industry and consumers: the field of supply chain management.
According to one description, "the supply chain for a manufacturer begins with a consumer, who creates demand for the products, and ends with the ingredients and packaging supplier" (quoted in Warkentin, Bapna, and Sugumaran, 2000, p. 45). This characterization is at first glance the exact opposite of what we might expect. A supply chain, as traditionally envisioned, runs from the ultimate supplier of raw materials, through production and distribution stages, and ultimately to the end consumer. This after all is the direction in which freight moves. Ore goes to a steel mill, ingots to a car plant, new cars to the dealer's lot, from which customers ultimately drive them home.
Yet this traditional picture of the supply chain presupposes customers who will in fact pay to drive the car off the lot. Demand, not supply, ultimately drives all markets. Until recently, however, the fact û or hope û of demand was so far removed from the practicalities of supply-chain management as to be effectively hidden. Some specific transactions, particularly near the supply end, might take place under a pre-established contract. In the end, though, everyone involved had to hope that the customers would buy the cars.
The development of Internet commerce, however, has radically transformed this guesswork process into a real-time loop in which the physical flow of goods in one direction is directly shaped by a flow of demand information in the other...