12.1 Introduction

Today's market and business environments are inherently complex, dynamic and global. Customers are becoming more informed and demanding. To stay competitive, enterprises must improve their flexibility, efficiency and responsiveness by transforming their business and operational models.

During the past 20 years, supply chain management has evolved from the internal efficiency improvement and cost cutting focus of the 80's, to the limited information sharing of the extended supply chains and the ERP implementation for transaction efficiency of the 90's. However, a major issue with the ERP system is its lack of flexibility and speed to support decision making throughout the internal and extended supply chain to meet changing business requirements. By the mid 90's, Advanced Planning and Scheduling (APS) tools, implemented with legacy and ERP systems, allowed "what-if" analysis and optimization of supply chains during planning and execution cycles. In the late 90's, the development of packaged applications, e-Commerce and e-Business offered Internet connectivity and limited capability for supply chain collaboration and near real-time information sharing and decision making.

However, despite the implementation of the supply chain management tools and the Internet connectivity, enterprises still found that they often sub-optimize their operations. Furthermore, the ROI of supply chain management package implementations is constantly being questioned. Forrester reported (based on interviews of 25 firms) that companies overspent on supply chain optimization packages and got diminished returns: 80% of the companies spent more time than expected; and, on the average, companies spent...