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Summary

The transformation from SCM to extended enterprise thinking is more than just developing a new vocabulary and seeing this change as a fad. Firms that embrace this thinking have already acknowledged that the pace of change is such that speed and adaptability are critical to their future success and that they have no choice but to change.

There exists a strong rationale for why change is essential; nonetheless, change will come at a price in the short term as management grapples with the loss of old-fashioned control and the need for information-intense exchanges that are fundamental to the process. Seamless delivery, transparency in all aspects of logistics, and permeable boundaries are less problematic than is the need to trust other network members, especially in light of the historic nature of their relationships. Trust will build slowly but it must be built, for it is the bedrock of the extended enterprise’s foundation.

If a company is to embrace the extended enterprise, senior management must be firmly behind it and must demonstrate a consistent and clear commitment to the norms and values that guide behavior. Because trust is key to the success of these collaborative relationships, there can be no question as to the buyer’s intentions. If senior management does not align its strategy with its systems and processes, there is room for confusion.

As stated previously, the extended enterprise is the entire set of both upstream and downstream collaborating companies, from raw material to end-use consumption, that work together to bring value to the marketplace. Its primary goal is to leverage the skills/capabilities of its members to achieve a sustainable competitive advantage relative to other competitive supply chain networks by better meeting and anticipating end-use customer needs. This goal can be achieved only if:

  • Each supply chain member is valued, given voice, and is taken into consideration when short- and long-term plans are developed.

  • Reward and risk are shared equitably across the entire supply chain, and performance is measured at both the firm and the extended enterprise levels.

  • All members value learning and share their knowledge such that all members benefit from new product innovation, as well as innovative processes, systems, and procedures that transcend the entire network and serve to link all the members.

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