A pragmatic executive may find it hard to imagine a supply chain supported by perfect information: accurate, free, and in real time. But the increasing power of information technology, an explosion of telecommunications bandwidth, and the miniaturization of electronics are quickly making that scenario a reality. For instance, it already is possible to know in real time the location and condition of a trailer in North America or a package shipped by an express parcel carrier. In the not-too-distant future, it will be possible to know the location and condition of every container of product shipped. Supply chain capabilities that only recently were mere imaginings are now—or soon will be—reality. These new capabilities have vital implications for your company today.

Advances in technology and access to perfect data are creating a competitive field distinguished by new levels of supply chain speed and global reach. Meeting these new performance benchmarks challenges companies in every industry. In markets where advantages disappear with remorseless speed, each company must be uniquely better than its competitors. This new environment challenges an organization's capability to change and to understand the many new breakaway business models that are rapidly emerging to fill competitive voids. One of these represents a new kind of business relationship; it's called Fourth Party Logistics.

Technology has become pervasive. In fact, it is difficult to imagine applications for which enabling technology does not already exist. Deploying these applications is a matter of practicality, not possibility. The snowballing evolution of technology requires that you revisit these imaginings frequently, because costs for certain technologies can drop by half each year. The landscape of technology continues to broaden and expand geometrically in every direction. (Exhibit 1 gives a sense of the current and projected e-Business growth.)

To show the impact of technology changes, let's look at just one application—Web-based calendars—and consider its ramifications for supply chains of the future. Several Internet start-ups are creating Web-based calendars. A growing number of people link to the Internet and leave the connection open 24 hours, seven days per week, receiving information such as stock prices in real time. This open channel to the Internet is becoming increasingly economical; therefore, it is likely to spur the use of Internet server-based calendars that would be "on" full time, available for viewing by you and select colleagues. This calendar would look and feel much like a wall calendar. However, it could become an open collaborative workspace for meeting, arranging, and scheduling. This technology is feasible, it is current, and soon it will be unremarkable.

Now, extrapolate this calendar to a production schedule—a kind of calendar—linked to a powerful simulator, enabling you to view your supply chain almost like a movie. This supply chain calendar might be enabled with intelligent agents, called bots, that would mimic intelligence and be devoted to specific tasks. A series of bots may be devoted to replenishment; another to search for unusual product movement patterns; another to evaluating macroeconomic factors such as exchange rates. Add to this mix RF (radio frequency) tags for each SKU (stock-keeping unit) so that each SKU reports its location and condition in real time. All of this technology discretely exists now. What is missing is the competitive imperative to assemble it.

The cost of many technologies may be halved with each year. The cost of mips (million instructions per second) has fallen by more than 50 percent per year for the last 20 years. We are so far along this path that mips are almost free. Telephony and data transmission costs also are decreasing rapidly. Long-distance telephony is dropping rapidly in price so that data transmission and Internet access have become practically free. Combined with this cheap transmission is the ubiquitous creation of information by a slew of new monitoring devices and techniques, such as the package tracking mentioned above. All of these innovations are creating a data-intensive atmosphere that surrounds the business decisions that drive our supply chains.

Such cheap, accurate, real-time information has profound implications for planning, executing, and adapting the supply chain. It creates the foundation for an enormous competitive imperative of supply chain speed and global reach.

The availability of free, perfect, and instantaneous data is a foundation of a perfectly competitive market. The significant feature of the e-Economy is the ability to identify and reach market equilibrium very rapidly. Such companies as Amazon.com, E-Bay, and Priceline.com are essentially perfect electronic markets. The supply chains that support the e-Economy will be vehicles of equilibrium and vehicles of advantage. Survival under these conditions requires fluid and swift supply chains whose primary competitive advantage is speed and excellence of execution.

Dell Computer is an excellent example of how speed in the order-to-delivery cycle has reshaped the entire personal computer industry. High-tech electronics often have product lives that are shorter than their supply chains from raw material to customer.

Order-to-delivery pressures are driving changes in many industries outside high technology as well. The automotive industry is in the throes of becoming essentially a capital-intensive fashion business, as auto manufacturers work to decrease design time for new vehicles significantly. Auto manufacturers are configuring manufacturing to be able to accept an Internet order and deliver within five days. The manufacturer that succeeds will see a dramatic impact on profits.

Achieving such rapid manufacturing and delivery performance requires supply chain precision. It demands precise events, precise knowledge, precise communications, and precise execution. Implicit in this precision is a synchronization of all the granular events of a typical supply chain: engineering design, sourcing, supply, manufacturing, inventory, transportation, warehousing, order management, marketing, and sales. The future supply chain will sense and assemble these events synchronously.

The synchronization cannot be limited to a single company. It must extend to all the activities of the partners in the supply chain. The needed synchrony can only exist with open sharing of data among the supply chain participants. Technology is providing the medium for networked communication among all participants—not just bilateral EDI. This networking and sharing of information, however, will only be possible with a shift in the way companies interact and operate together. Collaboration, not contractual obligation, will have to be at the core of supply chain partnerships. This model for competitive speed is termed an e-Synchronized supply chain: an entire supply chain working together in a technology-enabled synchronization providing the optimal response to consumers' demand.

A new competitive pressure that adds to the complexity of an e-Synchronized supply chain is the global reach now required of any industry. The personal computer industry—launched as recently as the early 1980s—has become a truly global industry. During this short time, we have seen the ascendance, fall, and re-ascendance of IBM. We have seen the creation of Dell from nothing to become the industry leader, and we have seen the waxing and waning of various Japanese consumer electronics companies such as Toshiba, Sony, and NEC.

But possibly the most interesting and instructive global industry is cement. A headline in the June 19, 1999, edition of The Economist said, "Cement is an unlikely example of a global, knowledge-based industry." Yet in the cement industry, the company with the best technology, the best databases, the best communications networks, and the best supply chain wins. Currently it is possible to make cement in Thailand and market it in California with considerable margins.

From products that were introduced in the 1980s to the cutting-edge versions of ancient materials, many industries now must create their competitive advantage at a global level.

The emerging e-Economy rewards speed, precision, flexibility, and global reach. It rewards first movers disproportionately, punishes the average, and destroys the laggards. This presents extraordinary challenges for all companies.

The classic challenges of recognizing, reacting to, and implementing change are accentuated by the pace of change. The latest technologies have shorter and shorter half-lives. Consequently, so do all the processes and learning associated with them. As these technologies wax and wane, so do whole industries associated with them. Change affects everything—even some of the hardest, most tangible assets of the supply chain. For instance, modern warehouses are more rectangular today than in the past to accommodate flow-through merchandise. They're also much taller to accommodate materials-handling equipment and conveying.

The best companies must learn faster, deploy faster, and adapt faster, despite the pace of change. Achieving e-Synchronization is not about an individual technology. It is about integrating suites of communications technology, planning technology, and operations technology with superior processes—executed faster than the competition.

The most difficult part of business change is always organizational issues. An e-Synchronized supply chain is no exception. It challenges the managerial model of companies and the values associated with those models. Synchronization requires efficient, instantaneous communication. This means broadly sharing information as it is produced. It also means collaborating to achieve common goals among the sharing community.

This model is radically different from the traditional top-down command-and-control approach. This traditional model, which was designed to control information, creates a time lag as information is sequentially held by supervisors, processed, and then passed on to subordinates.

A faster managerial model today is a web—a network of open, instantaneous communication. The geometry of this web is defined by the end-customer. And each company will aspire to different nodes and positions in this web. Such a web is necessarily a collaborative model.

This collaborative model relies on trust. Trust will be a key attribute of emerging e-Synchronized supply chains. The greater the trust, the greater the sharing—and the faster information and products move. Faster products achieve the first-mover advantage, rewarding trust, thereby creating more trust. In Alan Greenspan's term, we have a "virtuous cycle."

In many industries, the competitive pressures are such that evolutionary change is not sufficient. Completely new breakaway business models are needed to reinvent how the business should operate from the ground up. Amazon.com is the classic breakaway. There are numerous other examples, and there will be more. In the future, the health and success of these breakaway models will be determined by the flexibility, scalability, and adaptability of the supply chains that support them.

In this climate of immense change, significant business opportunities can arise as the dynamics of a supply chain or a whole industry are completely reshaped. Opportunity exists for a breakaway or an established player that can reinvent some or all of its operations and partnerships. Attacking the opportunity requires rapidly forming collaborative relationships to assemble the required technological and supply chain capabilities.

Every opportunity differs, but a new formal model of these collaborative arrangements is emerging to attack many of these opportunities. We call this model Fourth Party Logistics, or 4PL. The characteristics of such an arrangement follow:

• It is a collaborative relationship between two or more organizations. We have used the term shared sourcing to typify its business arrangement.
• It is led by a knowledge-based integrator.
• It spans supply chain disciplines.

The following example illustrates the concept. A large European agricultural and construction equipment manufacturer needed to exploit new technology and integrate information, which was stored on six different systems across Europe. Although the company recognized what needed to be done to improve its bottom line, it lacked the resources to achieve its goal. A Fourth-Party Logistics solution was employed to bridge this gap. The 4PL organization brought together the necessary skill sets to bridge the gaps between the vision and reality. The 4PL replaced all information systems with one common central system that was linked to a standard warehouse system at each depot. Transactions per day nearly doubled, while online availability increased from 94 to 99 percent. Response time and system reliability improved so much that they were no longer an issue.

Such business arrangements have at their core collaboration and trust—attributes that underpin every 4PL relationship. This is because the success of these relationships depends on sharing data, sharing goals, sharing risk, and sharing reward. The 4PL relationship provides the framework to create the right kind of venture or alliance to support these shared objectives and shared metrics.

What distinguishes a 4PL partner? If the primary objective of an e-Synchronized supply chain is speed, then it necessarily will have to be flexible, unfettered, and scalable. Likewise the 4PL collaborators will be asset-free: flexible, unfettered, and scalable by alliance and sourcing. We have described how technology and, more importantly, the skills and knowledge to employ it pragmatically are at the heart of competitive speed. The best 4PLs will have broad and deep skills in the use and integration of technology but will not be bound to any individual technology. These 4PLs will be pragmatic supply chain visionaries that can recognize potential capabilities and assemble technology as rapidly as it develops.