Thu, Jul 19, 2001 page17

• E-logistics' benefits still nonexistent

  AHEAD OF ITS TIME Internet-based supply chain tools that link companies around the world have yet to become widespread in Taiwan

  • By Dan Nystedt / STAFF REPORTER
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  During the height of the Internet craze, high-tech multinationals promised big savings on the cost of doing business via the Web. And one way of doing that was by using software that enabled companies to control inventories and logistics online.

  Ironically, Internet leaders such as Cisco Systems Inc and Nortel Networks Ltd -- who claimed to be on top of Internet systems -- announced billions of dollars in inventory write-offs recently.

  Cisco Systems recently wrote-off a US$2.3 billion inventory of excess equipment while Nortel Networks shed US$19 billion in inventory write-offs.

  The trouble appears to be that despite the hype, most companies have not yet completed their in-house systems to make electronic-logistics work, according to Aivars Lode, president of Descartes Systems Inc, a Canadian supply-chain management software firm.

  Taiwanese manufacturers hope he's right. The government is betting on Internet-based supply chain tools to hook companies here up to their multinational partners, like IBM, Hewlett-Packard Co and Compaq Computer Corp, which together source over US$15 billion in high-tech products from Taiwan.

  The Ministry of Economic Affairs is promoting a plan to put 20 of Taiwan's biggest manufacturers on Internet supply-chain management systems by the end of 2003. Over 1,800 small-parts component makers supply these 20 firms, and every one of them will be integrated into the e-supply chain system.

  According to Hwang Jong-chiou (黃重球), director general of the Department of Industrial Technology, his department is in charge of making e-supply chain management "a standard for doing business in Taiwan."

  The only major corporation hooked into an e-supply system here so far is IBM. Big Blue's Taiwan office estimates it has already saved over NT$740 million (US$21 million) on procurement efforts in Taiwan over the 10 month period from July 2000 to May 2001 due to the system.

  Over 20 local firms are hooked into IBM's system, including electronics powerhouse Hon Hai Precision Industry Co Ltd (鴻海精密), notebook maker Quanta Computer Inc (廣達電腦) and memory chip producer Nanya Technology Corp (南亞科技).

  IBM makes purchases, receive orders, finds the best shippers, manages its component pipeline and researches new ways to be more efficient, all over the Internet.

  For example, IBM has already cut its emergency inventory to just two weeks from four, making downturns easier to handle since less inventory is being carried. The company is also better able to keep tabs on unreliable firms that deliver products late or damaged.

  Matthew Miao (苗豐強), chairman of computer maker and distributor Mitac-Synnex Group (神通聯強集團) figures e-supply chain management will cut his ware-housing time from one month down to one week. Less product sitting idle in a warehouse equals cash, since the price of computers and other information technology prices drop 25 percent each year -- around 6 percent per quarter.

  Through the firms' own Internet logistics system, the Mitac-Synnex Group figured out that trucking a computer from San Francisco to Los Angeles costs more than shipping it from Memphis, Tennessee to Los Angeles due to taxes and other costs. These savings add up.

  Add to that the fact companies spent US$3.4 trillion on global logistics last year, and the potential for any firm to benefit from an e-supply system becomes apparent.
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