Beyond Utopia: The Realist's Guide to Internet-Enabled Supply Chain Management

The solution to more efficient supply networks lies not with "frictionless" technologies, but with shared objectives and insights across the extended enterprise. Call it "Federated Planning." For decades, academics, economic philosophers, and Communist dictators dreamed of a Utopia founded upon a planned economy. In this magical place, an elite intelligentsia with perfect data, analyses, and insight would plan and control economic life; in this place the distortions of the market would be eliminated. The central planning concept clearly failed in its most radical form, the economies of the former Eastern Bloc. Yet today, core elements of the central planner's Utopian dream live on in academic papers, in the business press, and in the sales brochures of uncounted software and technology vendors. Nowhere is this fantasy more evident than in supply chain management. Armed with more real-time data, a better algorithm, more connectivity, and a bigger IT budget, managers (or their computers), the dreamers believe, could control their extended enterprise free of market imperfection. The Internet seems to be on the verge of turning such wishes into reality. Wireless technologies make it easier than ever to monitor inventories and equipment remotely and to track orders and trucks in real time. Web-enabled tools allow companies to view operational details of the partners in their supply network and to track demand at point-of-sale. Emerging tools are beginning to offer promises of seamlessly linked supply chains that - fueled by real-time data - will coordinate and ultimately optimize supply chain networks across the extended enterprise. The term extended enterprise resource planning (eERP) has begun to appear in the press to describe this phenomenon. We believe that attempts to create the Utopian planned supply chain will ultimately fail. Although we have no doubt there is true value to be gleaned from emerging capabilities, we also believe there is risk in becoming too enamored of their potential. We hold a more sober (but, in our opinion, more realistic) view of how companies can leverage emerging technologies to move toward the goal of achieving more effective supply chains. The key lies not in gaining more visibility or computational power, but in enabling supply chain partners to align business objectives and reengineer the supply chain across the extended enterprise. We call this approach Federated Planning.