Economic history teaches valuable lessons about inflection points and the wisdom of acting on them. They occur when many of the old rules and assumptions no longer apply. A few notable examples in the past century include:

• Henry Ford's assembly line that opened an age of mass industrial production.
• Aviation, which opened the possibilities of global business connections.
• The transistor, which paved the way for a computer age.
• And of course, computer- to- computer communication, which led to the Internet and World Wide Web.

Could supply chain management be on the brink of such an inflection point? Certainly, the ground rules are changing. Geopolitical uncertainty, disruptive technologies, new business models, emerging economies, new consumer expectations, and demographic shifts are all occurring at breakneck speed. At the same time, two remarkable trends - fast-evolving networking technologies, and the exploding growth of trade across national borders - continue to flourish.

These trends are taking us into a world of synchronized commerce - a world where the flows of goods, information and funds are converging. How might new ground rules and the possibilities of synchronized commerce cause us to rethink some long-held assumptions about global supply chains? To help answer that question, UPS recently decided to pull together many of the world's best thinkers on the global economy and supply chain to examine it, and to learn from each other.

Together with Harvard Business School Publishing, UPS set out to map the developing new world of synchronized commerce in a recent summit called "Longitudes 04." Attendees heard the global economy perspectives of Robert Rubin, former Secretary of the Treasury; Carla Hills, former U.S. trade representative; and Frederik Willem de Klerk, former president of South Africa and Nobel Peace Prize recipient. Organizers also assembled a select group of seasoned supply chain experts who represent major global corporations and academia.

The New York conference proved so insightful, UPS has decided to continue the global economy summits twice a year in different regions of the world through 2007 to build on the dialogue began in New York.

What have we learned so far?

The emerging consensus is that commerce - increasingly practiced on a global scale - will only become more complex in the coming years. And as it does, a compelling need arises to simplify and synchronize business processes. In fact, the Longitudes counselors advised C-level and supply chain executives that they could stake out great advantage ahead if they closely aligned their supply chain strategies to five key business challenges, including:

• Growing by reaching new markets
• Improving customer service
• Differentiating from competitors
• Improving cash position
• And, enhancing productivity

The Longitudes experts agreed, by effectively synchronizing the flows of goods and information, the supply chain can profoundly influence each of these priorities.

Reaching new markets

Longitudes speaker Bob Moffat, senior vice president of integrated supply chain for IBM, pointed out that supply chains can drive top as well as bottom-line growth. And a company doesn't have to be a multibillion dollar corporation to gain this advantage.

Genuine Guide Gear (G3) of Vancouver is a specialized maker of high-end backcountry ski equipment. The company wanted to expand its sales to specialty shops across the border in the U.S. by using an established supply chain. G3 relied on an outsourcing partner to create a logistics solution that would get its equipment to American customers faster.

Today, the logistics firm assembles all U.S.-bound shipments at its distribution center in Canada. It then clears these multiple orders as a single shipment through customs. This consolidation saves time, paperwork and transportation costs. Once the consolidated shipment arrives at its delivery company's warehouse in the U.S., the shipment is separated out into individual orders and delivered to retailers and ski resorts. G3 gets an instant U.S. presence by using an established supply chain. And the best news is the partnership is doubling top-line sales revenue almost every year.

Exploring the customer mindset

Whether it's serving new customers in new markets or existing customers, the essential foundation of supply chain management lies in a deep understanding of customer needs, believes Hau Lee, professor of operations, information and technology at The Stanford University graduate school of business.

"You really have to go into the mindset of your customers to truly understand what they want," he said. Lee relayed a story told by former basketball star and entrepreneur, Magic Johnson, about an inner city theater owned by Johnson that ran out of food on its opening night. Despite the theater manager's 30 years of experience, he didn't completely understand his immediate customers' needs, and consequently, did not accurately forecast demand. He didn't realize that in the inner city, people don't have enough money to go to a movie and dinner. Instead, they eat dinner at the movie theater, consuming far more hot dogs than years of experience at suburban movie theaters would suggest.

The point is that customer needs ultimately drive demand. And demand, in turn, is the key driver of the overall supply chain. Every organization needs to examine its customers' needs. Not surprisingly, today's airports are under a lot of pressure to enhance customer satisfaction. The Singapore Airport is one of the best. It's been recognized as one of the world's most efficient at getting people on to their final, local destinations.

Many airports measure how fast they can get a passenger out of the plane, through baggage pick-up, through customs, and outside the terminal. The Singapore Airport goes one step further. It measures how fast a passenger can get a taxi. It's that a crucial detail,
yet, it was a performance measure no one owned. Airports cared about what went on inside the airport; the taxi drivers cared about the congestion on the road. But if you're the traveler, what good is it to get out of the airport in three minutes, and then wait 45 minutes for a taxi?

The Singapore Airport understands this and has stretched its performance measures to focus on all the activities associated with the passenger experience - including ensuring access to cabs. Stretching performance measures is best seen from the holistic rather than fragmented point of view. It's what will make the integrated supply chain really integrated, said Lee. The Longitudes counselors also pointed out that a key way to ensure better customer service is to deliver complete supply-chain visibility. Visibility, of course, allows companies, customers, and supply-chain partners to look up and down the supply chain, to see exactly where an order is, where it's headed, and why.

No one can afford the risk of black holes of information anymore.

On the other hand, a company can greatly enhance customer service by providing richer, more up-to-date information about shipments in progress. Imagine a service that would give high-volume shippers detailed visibility into the status of multiple shipments.

They can share this information electronically with their customers who can feed it into their own systems like inventory and accounts payable. Visibility tools like this can help companies provide instant answers to customer questions, and to do a better job of troubleshooting if something goes wrong.

Differentiating from competitors

When you understand the customer, you can gain a springboard to competitive advantage, believes Lee. He points to the Spanish apparel manufacturer, Zara, as a prime example of a firm that uses an holistic supply chain to differentiate its products in the fast-changing, highly competitive fashion marketplace. Zara has been growing 20% since the 1990s and the company's net profit margin is 10%. That compares to an apparel industry average of 3-4%. The apparel maker's highly flexible, cross-functional supply chain allows it to introduce an incredible 12,000 new products a year. A retail cycle that normally consumes many months, or even years, has been narrowed by Zara to a single month. Could that produce retail shortages?

Zara doesn't worry about that because shortages convey an image of scarcity and hot products. That prompts customers to buy now, and to return often to see what's new.

In a nutshell, Zara has designed a supply chain that differentiates its products to match its particular business plan objective - to satisfy customers' ever-changing appetites for new styles. The fashion manufacturer is willing to invest in information technology to achieve that alignment objective. That includes equipping retail store managers with personal digital assistant devices.

The managers continually monitor customer preferences and use the PDAs to electronically forward data on customer behavior to a central planning office. Design decisions are made only after incorporating the critical, up-to-the minute customer behavior data from the stores. The Zara supply chain is all about using the best information possible to achieve an advantage. Zara's flexibility, pointed out Lee, also makes it well prepared to adapt quickly when unexpected events occur.

Can manufacturers in other industries achieve similar advantages? What about an appliance maker? Longitudes panelist Rueben Slone, vice president of supply chain, North America, for Whirlpool Corporation, put the advantages of product differentiation this way: "If I can redesign the product, if I can make it in a smaller plant, if I can make it with smaller parts, If I can ship it in smaller pieces, if I can get closer to the consumer and change it, I can change the rules of the game."

Improving cash position

The rules of the game can also be changed to improve cash position, explained Bob Moffat. In overseeing a US$40 billion dollar supply chain, Moffat's team has pulled out more than US$7 billion in cost from the IBM supply chain. Follow the money, advises Moffat, and you'll find a way to improve the bottom line. Put another way, Victor Fung, chairman of Li & Fung Limited of Hong Kong, explained that the money to be followed is what he termed, "the soft US$3."

According to Fung, for every US$1 spent on factory cost, a product is going to cost US$4 by the time it reaches the customer, or US$5 if it's made in China. The US$3 or US$4 beyond manufacturing cost amounts to the soft costs associated with supply chains. They include: overhead, transportation, cost-insurance-and-freight, duties, in-store delivery and discounts in price due to overstock. Thinking holistically about the supply chain, he says, affords great opportunity to make a dent in these soft costs.

To achieve that, one has to look end-to-end, says Fung, "from raw material to consumer."
If soft costs make up 75% of typical manufacturer- to-consumer supply chains, no wonder Wall Street likes well-oiled supply chains. An Accenture study found that from 1995 to 2000 the companies deemed to have the best-run supply chains had stock-market capitalization rates that were 7-26% above industry averages. Taking maximum advantage of the capability to synchronize the flow of goods and information becomes a sure way to maximize cash flow.

Boosting productivity

Of course, increasing productivity is an ongoing C-Level priority. And it's here that several Longitudes experts believe we've just tapped the surface when it comes to what supply chains can do. Bob Moffat pointed out that to attain maximum productivity supply chains must be synchronized outside - as well as within - the four walls of the company. "I look at parallels outside the IT industry. I look at the Wal-Mart's and the Proctor & Gamble's. They understand the supply chain has to expand beyond their four walls. It can no longer be how efficiently can they do something inside their walls. It's really, how do they span, how do they make it so their suppliers and retailers are more productive, so they can get that moment of truth for the customer."

As companies seek out ways to boost productivity, they'll increasingly focus on their core competencies and leave supply chain design and execution to partners with the expertise, scale, and resources to get all elements of the supply chain to operate in unison.

As a group, the Longitudes supply chain experts agreed that the supply chain had reached a point where it could make a significant difference on each of the five key universal business challenges.

A common theme that emerged is that the supply chain no longer should exist independently. In an era of synchronized commerce, it must exist to help the company achieve its business plan priorities. A clear supply chain strategy then must flow from, and be tied to, the company's overall business strategy.

As such, the future is going to belong less to how well functional supply chain silos are managed, and more to how supply chains are designed and led.

"We don't need firemen anymore," concluded Jim Miller, vice president of manufacturing operations for Cisco Systems, Inc., in describing the future of supply chain leadership. "We need arsonists."