Every transaction, at least in which physical goods change hands involves the flow of goods, the flow of information, and the flow of funds. There is the transport of goods from the supplier to the purchaser, the exchange of information about those goodswhether electronic or paperin the form of sales receipts, shipping documents, and inventory lists, and there is an exchange of funds to pay for those goods. Although the benefits of integration would have been unprecedented, for decades the three flows have remained separate. Also, the optimization of any one of the flows will not produce the requisite benefits. For reaping maximum benefits, the combination of the three flows have to be optimized. This paper studies the conditions that have led the industry to acknowledge the relationship between these three flows, how their integration will improve efficiency all along the value chain, and the key challenges faced by the decision makers for achieving that integration. A case study of a hypothetical company Reliablecure, an Indian medical supplies company, is presented to illustrate how it could get the highly perishable surgical wound adhesives from its manufacturing facility in Austria to surgeons across the US, just by integrating these flows seamlessly across the value chain.
Companies
today invest large amounts of capital and human resources attempting to eliminate
every bit of inefficiency out of their physical supply chains. At the same time,
they are investing millions on solutions to streamline their financial supply
chain. Both of these efforts have yielded significant benefits. Yet they fail
to capture the full economic value and efficiency that could be achieved through
closer collaboration between the physical and the financial supply chains. Two
supply chains exist virtually in all forms of commercethe physical supply chain
and the financial supply chain (Thompson, 1998). More recently there have been
talks of a thirdthe information supply chain.
The
management of the physical supply chain has evolved from an emphasis on the individual
logistics functions like transportation and warehousing, to the integration of
those functions within the organization, and now to planning and collaboration
between the trading partners (Taylor, 2003). Over the past few years, most well-run
companies have focused on improving their physical supply chain efficiency (Carr,
et al., 2004). In doing so, they have realized such benefits as short time
to market, reduced production costs, lower inventory costs, and closer collaboration
between the trading partners (Boubekri, 2001). |
