With the exciting announcement that General Motors, Ford Motor Co. and DaimlerChrysler are joining forces to create a new e-commerce company to help them - and presumably other automakers - buy their parts, it will be interesting to see how this new entity handles some of the complexities inherent to large supply chains.
Regardless of industry, supply chains tend to be long and complicated. They often are remote and isolated from their customers. Knowledge is seldom shared along the chain. Each link tends to be self-contained, and communication is difficult.
It's been proven inefficiencies can be countered by improving relationships among the links. At DaimlerChrysler, we introduced concepts such as sharing cost savings so each link could improve its profits, improve management communications with its suppliers and coordinate unique suppliers. Web-based industry portals like the automakers are forming can help improve those relationships that are so important.
While companies want to cooperate with one another, they also want to maintain their autonomy. They want their own structures and profit streams and want to manage their own investor and shareholder responsibilities.
Protection of proprietary data will be a key question for the new GM, Ford and DaimlerChrysler venture. Online auctions for mops and brooms are one thing, but that doesn't mean real-time access for proprietary parts, such as auto components or medical devices, is feasible.
I don't know about you, but I'd think twice before I'd open a Boeing bolt buy to Third World suppliers. Between hackers and data mining, there is real concern about who owns the data exchanged on the Internet and how to protect it.
There are other issues.
For instance, who shares in the volume created by companies joining into group auctions? Just placing a large company's buy on the Web and allowing suppliers access to that volume discount raises questions of who shares in the higher volume. Eventually, because sharing of volume is the leverage issue, antitrust laws may have to be changed.
What about assignment of responsibilities?
The business world is not a club, fraternity or sorority where it's all for one and one for all. Each separate element accepts its own responsibility for its role. I hire you to do a job, and you may subcontract it out to another.
My agreement is with you, and my recourse is with you legally, not the subcontractor. If we open up the chains, this definition of responsibility may shift. The rule and laws that support this will have to change as well.
I believe the future of b2b supply chain management will continue to depend on company-to-company relationships. Once security and protection of data are assured, the expansion of b2b Internet activity will depend on the trust level companies have with one another.
The business world operates through a complex system of transactions and laws that can be changed but not eliminated. Trust in communications, whether in written or electronic forms, must be preserved.
Challenges ahead for expanded b2b Web activity include:
Development of new business rules
Protection of corporate-to-corporate relations
Confirmation of security and protection of the use of data
Definition of the roles and responsibilities of individual companies in the supply chain.
Don't misunderstand these concerns. They can be resolved, and we can continue to make productivity gains that we've seen in the economy the last few years.
The control of something as open as the Web is not a popular subject, but with industry procurement, financial and legal experts must be involved along with software developers. The creation of an industrywide channel will allow original equipment manufacturers to work together to define the new rules that will permit the opportunities of the Internet to be shared by all.
Based on remarks Feb. 15 at the FIRSTAR Distinguished Business Lecture Series in the Richard T. Farmer School of Business at Miami University in Oxford, Ohio.