Lack of effective standardization can lead to incompetence in any supply chain. However, any supply chain that has integrated standards can help save a lot of money for any industry. There are several supply chain standards that have currently been established in several industries. According to the National Institute of Standards and Technology (NIST) study, it indicated that millions of dollars could be saved annually if enterprise integration could be well developed in supply chain in various industries. It was projected that an industry such as the auto industry could save to the tune of one billion dollars annually if it had a properly integrated supply chain. Likewise industries such home construction as well as shipbuilding could also save millions of dollars through better enterprise integration. This paper looks at how setting supply chain standards will improve supply chain management.
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Lack of efficient standardization eventually leads to massive inefficiencies that eventually accumulate to massive loses for their respective industries. The main objective for standards is to be able to restructure dealings throughout the supply chain so that not only will the pace at which transactions are done will be greatly be improved but also the delays as well as accounting will be tremendously change for the better and hence save millions of dollars. For example: should a popular car manufacturer alter its bonnet design specifications, it will be much easier for the suppliers to respond to the new specifications.
In a scenario without standards, the compatibility among computer-aided design and manufacturing (CAD/CAM) systems, users will be required to spend more on translators which eventually will lead to added costs. Without standards, large equipment makers require their suppliers to purchase similar CAD/CAM systems they use. But with National Institute of Standards and Technology, the legislation would assist the National Institute of Standards and Technology speed up work on the standards for the exchange of product design data, which can be used to support data exchange across a wide range of industries.
One of the key benefits of National Institute of Standards and Technology is its capability to offer vendor-neutral testing mediums to find out the product interoperability. More manufacturers now understand that there are many ways they can limit costs in the supply chain when they get their enterprises integrated through standardization. The motivation for enterprises to press on for standards is never always obvious; however the savings are mainly in the supply chain according to an analyst at Forester Research Inc.
In the supply chain, there is always disproportion between the savings and the power. The suppliers enjoy the savings while the manufacturers have the power. Because of the detailed study that has been done on standardization, the congress is reflecting on sanctioning 47 million dollars that has already been approved but only pending in the senate to assist in building up supply chain integration standards which could go a long way to help enterprises save millions of dollars through their supply chains. This has the full support of the industry groups.
Various industries already have the supply chain standards in place. RosettaNet for one has set standards for the high-tech sector and is now trying to establish global standards; however there seem to be problems in other industries. Despite all the shortcomings, the standardization efforts are well underway and there is no looking back whether the government decides to support or not.
Patrick Thibodeau (2006), Supply chains, Web.