Electronic Commerce Shaking Up Businesses.

• Position: Brief Article

Airlines place 4,000 orders daily over the Internet for spare parts from a leading aircraft manufacturer, cutting average pre-Internet delivery times of about a week to a day. Computer and clothing retailers use a transportation company's web site to track packages, rerouting some already en route to different stores or customers to save space and time in warehouses. A high-tech company puts out a contract for a bid on the Web, forgoing months of negotiations with potential suppliers. Examples such as these, discussed at a Stanford (Calif.) University conference on cybertrade ventures, illustrate that, as the Internet expands consumer power, businesses are rapidly becoming demanding customers, too.

"The flow [of power] has reversed. Customers are dictating terms and conditions to suppliers," notes Dale Hayes, vice president of electronic commerce, United Parcel Service. UPS now has cell phones and computers on its 157,000 trucks so drivers can update the status of packages every 10 minutes. "We are not in control of our supply chain any more, whether we like it or not.... Our customers are."

"The basic idea is that [the Internet] intensifies competition in the marketplace, which increases value," explains Jin Whang, a professor in Stanford's Graduate School of Business. It also increases pressure on businesses, which are beginning to realize they may not survive unless they adapt quickly.

The Internet is having a huge impact on companies' supply chain management. Small component manufacturers, who once had no choice but to be part of a global supply chain controlled by a brand-name...