Thursday, May 25, 2006

Bits, Bytes and Guanxi

You order a laptop from a website (or maybe Ariba Buyer), and that order engages one of the fastest, competitive and dynamic supply chains in the world. The laptop you order is high-tech, the company that you order it from is high-tech, so the supply chain must be too, right?

Not necessarily.

The laptop supply chain combines the lean technological integration made possible by ERP and e-procurement with intimate neighborly relationships among suppliers to deliver your laptop door-to-door in less than a week.

In a study sponsored by Arizona State's W.P. Carey School's Center for Advanced Procurement and The Personal Computing Industry Center at UC Irvine and San Francisco State's Institute for Next-Generation internet, this interesting combination of technology and guanxi is highlighted. (Link:"Take note: Laptop Supply Chain is Not What You'd Expect")

At the top of the supply-chain, the world is highly automated. Forecasts and procurement information is highly integrated between OEMs and their first Tier of suppliers, primarily based south of Shanghai.

As you proceed down the supply chain to the component level, those relationships become more and more relationship based. Forecasts are shared by voice, phone and fax. Special requests that are articulated directly by human beings, not computers. Fierce business competitors will collaborate to help each other overcome short-term shortages and disruptions - a network of highly personal, albeit low-tech network of companies and coworkers working together to fulfill more and more complex demands -- what the Chinese call guanxi.

To be successful in this environment a company has to know not only how to share the data, but when to say "Gan Bei" -- the right balance of technological efficiency and global savoir faire. This is what we strive to deliver at Ariba, Inc. and is probably part of the reason that you saw HP and Dell speaking in Vegas last week.

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