Study: E-Commerce To Test Supply Chains

Manufacturers and shippers need to shore up weak supply links or risk crumbling under the surging demand of a global e-commerce market that is set to skyrocket to $6.8 trillion (US$) by 2004, warn two new reports from Forrester Research.

The studies, “Manufacturing Deconstructed” and “Delivering The Global Goods,” found that the networking processes in place are barely able to handle today’s $57 billion worldwide e-commerce trade and would be completely paralyzed by the forecasted increases in online transactions.

“Global supply chains are further hampered by today’s logistics processes, which barely support the task at hand, preventing shippers from handling many more customers,” Forrester senior analyst Stacie McCullough Kilgore said. “As international trade ramps up, today’s structures will leave shippers with increasing challenges like more customer returns, increased legal risks and greater liability.”

Meeting Supply and Demand

Companies can improve their chances of prospering in the Web economy by harnessing the Internet and creating fluid information pipelines, Forrester said. These pipelines, or e-business networks, would rely on interdependent, specialized suppliers to cooperate in real time.

Multinational firms could then aggressively extend their product development and manufacturing goals to keep pace with frenzied demand swings in the market.

“Global manufacturers shouldn’t be surprised that their supply chains are inflexible — they’re held together with string and bailing wire,” said Forrester analyst Navi Radjou. “They should let specialization and networked assets drive the next round of supply chain upgrades because multinationals will tailor their operations to e-business manufacturing networks by 2005.”

Nonstop Data

To succeed in global trade, Forrester said, international stakeholders must create an information pipeline that is constantly operational, rather than tie data to the cargo. This Net infrastructure should “incorporate an open tracking system, a trader collaborative engine and applications and services that enable traders to adhere to government regulations,” the firm said.

By 2003, Forrester predicts, “startups will support procurement, track product and match complementary shippers for cargo-space sharing,” then further evolve the following year as physical goods and information separate. As a result, intermediaries will no longer take advantage of the natural inefficiencies of global logistics.

About the Studies

For the report “Manufacturing Deconstructed,” Forrester interviewed 50 global manufacturing executives — 40 of them working for U.S.-based multinationals, 10 for European and Asian-based multinationals.

Forty logistics managers from American, European and Asian companies were interviewed for “Delivering The Global Goods.”