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Chapter 11 • Supply Chain Management 315

Today, with the use of Unigraphics, GM’s collaborative design and product development,
the time to market for a new vehicle is 18 months. With new systems in place, GM will be
redesigning and turning out new cars once every three weeks for the next five years. In addition
to reducing time to market, GM is enjoying quite a bit of savings. Before the collaborative design
and product software was in place, GM would build around 70 cars per model to test crash. Since
these models were prototypes, parts were ordered in small batches, thus carrying a heavy price
tag. Each prototype car could cost around $1 million. Currently, GM builds only 10 cars per
model for test crashing, and the rest is taken care of virtually. Once a virtual car is crashed, math-
based models and real-time online reviews can be sent back to suppliers with new specifications
for certain parts based on the virtual crash results.

SUPPLY WEBS As stated before, supply Webs are also known as an exchange. A supply Web is a
virtual location where buyers and sellers can meet and negotiate products, prices, and quantity.
Back in early 2001, Forester Research recorded more than 2,500 exchanges worldwide. Within a
few years more than 50 percent of the exchanges have gone out of business due to lack of
customers, lack of cash, or lack of both. A few success stories exist. ChemConnect is an online
chemical exchange that has been around since 1999. They are now part of Intercontinental
7
Exchange and provide exchange services to several large companies worldwide. So how does the
exchange work for ChemConnect? One of ChemConnect’s 9,000 members may hold a reverse
auction. In a reverse auction Company X will post a request that it will purchase 10 tons of a cer-
tain acid for $1 million. Suppliers will bid against each other to sell Company X the acid requested.
In the end of the reverse auction, Company X buys 10 tons of acid from Supplier Y for $900,000,
$100,000 less than the original bid, as a result of the competitive bidding process via the reverse
auction. The benefit? The entire reverse auction process only took 30 minutes! In the past Company
X would have to call on suppliers around the world to see if they had the amount they needed and
priced at what they wanted to pay and could take weeks or months to complete the transaction.

E-LOGISTICS The Council of Logistics Management defines logistics as that part of the supply
chain process that plans, implements, and controls the efficient and effective flow and storage of
goods, services, and related information from the point of origin to the point of consumption in
order to meet customers’ requirements. Thus, e-logistics is applying the concepts of logistics
electronically to those aspects of business conducted via the Internet. In today’s world most
companies outsource the handling of e-logistics. Amazon has partnered with almost all of the big
delivery companies (e.g., FedEx and UPS). It is much easier and cost-effective to plug into
FedEx’s infrastructure than it is to hire a logistics department and purchase the expensive equip-
ment that would be required to maintain e-logistics. The downside for Amazon is loss of control.
If a customer of Amazon does not get their package as promised on a certain day, that customer
will be calling Amazon, not FedEx. Online buyers today want to purchase a product online and
then track that package until it arrives on their doorstep. The driving need for e-logistics is that
today’s buyer has much higher expectations. Online customers will not tolerate partial orders,
back orders, or poor return policies. Traditional delivery of large bulk or stocking items to a
single known location has changed; now many small parcels are being delivered to many
unknown locations based on demand, price, and convenience.

7 ICE Buys ChemConnect’s Trading Business for Undisclosed Sum. (June 2007). Gas Processors Report [serial online], 25,
www.proquest.com/ (accessed January 16, 2008). Available from: ProQuest Information and Learning, Ann Arbor, MI
(accessed November 11, 2007), Document ID: 1295470561.