Lack of supply chain standards costing billions of dollars


Inadequacies in managing inventory, scheduling and accounting information cost the automotive and electronics industries a combined total of almost $9 billion annually, according to a newly released study* commissioned by the National Institute of Standards and Technology (NIST). Almost all of these costs could be eliminated with optimally integrated systems for exchanging information throughout supply chains, the study concludes.

Conducted by RTI International (Research Triangle Park, NC), the analysis found that only a handful of firms are close to achieving "ideal" information integration with some or most of their supply chain partners. The lack of widespread interoperability costs the auto industry more than $5 billion a year and the electronics industry almost $3.9 billion a year, or about 1.2 percent of the value of shipments in each industry.

An underlying problem, according to the study, is the lack of universally accepted and implemented standards for the format and content of messages that flow between supply chain partners. This reduces opportunities for cost savings and leads to duplication of effort, maintenance of redundant systems, and investment in inefficient processes such as manual entry of data when machine sources are available.

RTI defined excessive costs for several categories of logistics and accounting information flows, and used case studies and Internet surveys to determine costs per occurrence for each category. These results then were combined with secondary data on sales, employment and wage rates to estimate industry-level impacts.

The study is part of NIST's strategic planning process for implementing the 2002 Enterprise Integration Act, which authorizes the Institute to help industry improve supply chain integration.

Source: Eurekalert & others

Last reviewed: By John M. Grohol, Psy.D. on 21 Feb 2009
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