Opportunities for Action in Industrial Goods
Supply Chain Strategies for the
Internet Era
Supply Chain Strategies for the
Internet Era
Business-to-business e-commerce, Internet exchanges,
e-supply-chain management: great claims have been
made about the Internet’s ability to revolutionize sup-
ply chains. Now that the Internet hype is abating,
allowing reality to set in, what is actually happening?
How much value is the Internet creating, if any? And
how can your business benefit?
Many companies are hoping for significant results.
When The Boston Consulting Group recently sur-
veyed 250 supply-chain executives and general man-
agers at major U.S. corporations, more than half the
respondents reported that they see the Internet as a
way to “greatly improve” their supply-chain perfor-
mance. On average, they expect to cut unit costs by
3 percent per year while enhancing revenues by
5 percent. Moreover, they anticipate achieving similar
improvements annually over several years.
In fact, a number of companies are already realizing
gains of this magnitude. Some BCG clients are
engaged in initiatives that are yielding benefits equal
to 5 to 10 percent of total sales, with further gains still
available. However, most companies have seen only
limited benefits at best—and in many cases, these
benefits will offer no competitive advantage. Too
many companies are using the Internet just to make
simple enhancements to their supply chains. For
example, they are reducing materials costs through
online procurement and streamlining customer ser-
vice departments through online ordering. Although
these changes do generally lower costs and please cus-
tomers, competitors can quickly replicate them.
Other companies, hoping for more lasting results, are
making a different kind of mistake: they are piling
one Internet project on top of another until they find
themselves wrestling with an unmanageable range
of initiatives. Many of these projects will
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