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Chapter 9 Achieving Operational Excellence and Customer Intimacy: Enterprise Applications 379

The Internet helps companies manage many aspects of their global supply
chains, including sourcing, transportation, communications, and international
finance. Today’s apparel industry, for example, relies heavily on outsourcing
to contract manufacturers in China and other low-wage countries. Apparel
companies are starting to use the Web to manage their global supply chain and
production issues. (Review the discussion of Li & Fung in Chapter 3.)
In addition to contract manufacturing, globalization has encouraged outsourc-
ing warehouse management, transportation management, and related opera-
tions to third-party logistics providers, such as UPS Supply Chain Solutions and
Schneider Logistics Services. These logistics services offer Web-based software
to give their customers a better view of their global supply chains. Customers
are able to check a secure Web site to monitor inventory and shipments, helping
them run their global supply chains more efficiently.

Demand-Driven Supply Chains: From Push to Pull
Manufacturing and Efficient Customer Response
In addition to reducing costs, supply chain management systems facilitate
efficient customer response, enabling the workings of the business to be
driven more by customer demand. (We introduced efficient customer response
systems in Chapter 3.)
Earlier supply chain management systems were driven by a push-based
model (also known as build-to-stock). In a push-based model, production
master schedules are based on forecasts or best guesses of demand for products,
and products are “pushed” to customers. With new flows of information made
possible by Web-based tools, supply chain management more easily follows a
pull-based model. In a pull-based model, also known as a demand-driven or
build-to-order model, actual customer orders or purchases trigger events in the
supply chain. Transactions to produce and deliver only what customers have
ordered move up the supply chain from retailers to distributors to manufac-
turers and eventually to suppliers. Only products to fulfill these orders move
back down the supply chain to the retailer. Manufacturers use only actual order
demand information to drive their production schedules and the procurement
of components or raw materials, as illustrated in Figure 9.4. Walmart’s con-
tinuous replenishment system described in Chapter 3 is an example of the
pull-based model.
The Internet and Internet technology make it possible to move from sequen-
tial supply chains, where information and materials flow sequentially from
company to company, to concurrent supply chains, where information flows
in many directions simultaneously among members of a supply chain network.
Complex supply networks of manufacturers, logistics suppliers, outsourced
manufacturers, retailers, and distributors are able to adjust immediately to
changes in schedules or orders. Ultimately, the Internet could create a “ digital
logistics nervous system” throughout the supply chain (see Figure 9.5).

BUSINESS VALUE OF SUPPLY CHAIN MANAGEMENT
SYSTEMS

You have just seen how supply chain management systems enable firms
to streamline both their internal and external supply chain processes and
provide management with more accurate information about what to produce,
store, and move. By implementing a networked and integrated supply chain
management system, companies match supply to demand, reduce inventory

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