Private Industrial Networks

1. What are private industrial networks?

Private industrial networks are web based networks that manage the interactions between definite companies in all belongings of the whole supply chain – from suppliers over the wholesaler to the retailers and finally to the customer – from the manufacturer to the end customer. The network is also named as a collaborative system, because the network improves the efficiency in all linked parts.

2. Characteristics of private industrial networks

There are several main characteristics of private industrial networks:

  • Increase in the buying and selling efficiency in the supply chain
  • Financial risk reduction, because of closer linkage between the different parties in the supply chain
  • Capacity and resource planning throughout the industry
  • Better communication in the supply chain for improving the relationship between buyers and suppliers

3. Industry-wide private industrial networks

Many large companies, regardless of which industry, operate their own private industrial networks. Examples of the different industries are:

To get a little bit closer view of a private industrial network the retail player Wal-Mart will be pictured. Nowadays Wal-Mart operates the largest supply chain in the world. The retailer developed the private industrial network from an in-house platform, where just large suppliers were linked to, until to an external platform via the internet, where all suppliers have the possibility to communicate with Wal-Mart to become a collaborative forecasting, planning and replenishment system. This system saved Wal-Mart a sustainable growth also during the recession in 2009, while rivals get in trouble of declining revenues from 10-20%.

4. Private industrial networks and collaborative commerce

Collaborative planning, forecasting and replenishment (CPFR) is a concept, throughout the network, to enhance supply chain management by forecast demand, develop production plans, coordinate stocking, warehousing and shipping to make sure to get the most efficient stocking level throughout the whole supply chain. This could be realized by a close connection and fast communication in the whole loop – supplier, company and customer. Furthermore this system can improve quality and quantity controls.

5. Implementation Barriers

  • Suppliers do not want to get linked to the network
  • Do not know how to handle the platform
  • Expensive to build up and implement it through the whole supply chain

6. The long-term dynamics of private industrial networks

In short term the benefit of a private industrial network is really low because of the high input which you have to invest. But at the long-term view the output of benefit is huge.

Further Reading

  1. E-Commerce 2010 by Kenneth C. Laudon and Carol Guercio Traver. Person 2010. Section 12.
  2. Laudon and Traver 2010. 12.37-8.
  3. How Wal-Mart Works by Caroline Wilbert. HowStuffWorks. 2007.
  4. How Wal-Mart Lost Its Technology Edge by Thomas Wailgum. CIO. October 2007.

Marcel Thiel 2013/05/29 17:20

logistics/private_industrial_networks.txt · Last modified: 2013/05/29 15:20 by m.thiel
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