Digitally Integrating the Government Supply Chain: E-Procurement, E-Finance, and E-Logistics
By: Jacques Gansler, William Lucyshyn, Kimberly M. Ross
For much of the last decade, the business world has been striving to adapt to the tidal-wave-like changes brought about by exponential improvements in information technology, particularly as offered by the Internet. These changes have had a dramatic impact on the way business is conducted. Companies are exchanging goods, services, and information in new ways that are more efficient, blurring geographic boundaries and shortening cycle times. Even though the expectations for this new wave of technology-enabled trade, broadly defined as “electronic commerce” (e-commerce), have been high, e-commerce still represents a small fraction of total economic activity. Although much of the initial focus was on the business-toconsumer (B2C) segment, the emphasis has shifted to the more complex, higher payoff business-tobusiness (B2B) relationships. It is estimated by Forrester Research that B2B e-commerce will grow from approximately $1.0 trillion in 2000 to $2.7 trillion in 2004 (as reported in “Logistics @ Internet Speed: The Impact of E-Commerce on Logistics,” Year 2000 Report on Trends and Issues in Logistics and Transportation, Cap Gemini Ernst & Young with the University of Tennessee).
To fully understand the potential benefits of B2B e-commerce, one needs to look at the supply chain—the flow of goods and services, beginning with the procurement of raw materials, through manufacturing, storage, transportation, delivery, and maintenance, and ending with disposal. Information management is the key factor in successfully moving products through the supply chain. Organizations forecast final demand for their products, and then use that information to plan production schedules and alert suppliers. The suppliers plan and schedule production runs and arrange for the delivery of intermediary goods. The produced goods are stored, shipped, and tracked through the distribution network. Sales are monitored and compared to projected demands in order to avoid unintended surpluses or shortages at the retail level. Maintenance is monitored to project the need for repairs and spare parts. Finally, when products are no longer needed they are reused elsewhere if they are still functional, or they are appropriately disposed of.
Large volumes of data need to be coordinated, updated, and communicated at each step of the supply chain. Legacy paper-based systems are labor intensive, prone to error, and significantly slower. Additionally, a complex supply chain will generate large volumes of documentation—catalogs, orders, specifications, invoices, shipping notifications, payment information, etc.—that need to be kept up-todate. The information technology available today is well suited to handle the transfer and storage of this data in digital form. These advances have not been lost on senior federal government officials. The federal government, with its size and complexity, has a supply chain that dwarfs that of any private sector enterprise— even small savings and performance improvements would have significant overall impacts.