1.
Upstream supply chain:

Disintermediation offers the opportunity to buy direct from the supplier with reduced costs and shorter cycle times.

Re-intermediation offers the chance to use business-to-business exchanges to source products at lower costs
Downstream supply chain:

Disintermediation offers the opportunity to sell direct to the customer with lower cost of sales and improved lead time for customers.

Re-intermediation offers the opportunity to compete in new marketplaces through B2B exchanges
A more detailed discussion can review the different options for distintermediation and reintermediation.
2.
Without any restructuring of the supply chain technologies such as e-mail, web-based ordering, EDI and order tracking can be used to reduce costs and cycle times.
Distintermediation and reintermediation options are also facilitated through e-mail, web sites,
EDI and e-commerce.
1.
Approach 1. IBM. Vertical integration. Approach 2. Dell. Virtual integration.
2.
Some of the main advantages and disadvantages are shown in table.
Advantages and disadvantages of vertical integration and virtual integration
Approach 1. IBM. Vertical integration
Advantages Disadvantages
Approach 2. Dell. Virtual integration
Advantages Disadvantages
Control of manufacturing quality
Less pressure on manufacturing costs
Excellent control of costs through supplier competition
Less direct control on quality (although can swap to other suppliers)
Lower overhead in dealing with third parties (easier to integrate systems internally)
Costs of systems all borne by manufacturer
Fewer assets. Costs of inventory borne by suppliers. Costs of data integration shared with partners.
Emphasis on management of suppliers
– More responsive to short and medium term market demand variations
More responsive to short and medium term market demand variations
The market success of Dell suggests their approach is superior.
–

3.
Information systems can help both situations through using enterprise resource planning systems, EDI and groupware systems to integrate market research, product design, sourcing, material requirements planning, production, warehousing and distribution. As is pointed out in the table it may be easier to integrate systems with vertical integration, but more of the cost is borne by the manufacturer.

E-mail messaging and WAP

Groupware for new product development (across intranets and partner extranets)

Auctions on business to business exchanges

On-line catalogues tailored for buyers

Price comparison engines (agents)

Extranet facilities (Dell Premier Pages)

Order tracking

CAD/CAM systems

Barcodes for traceabilty

Document management systems for sharing standards, technical specifications, engineering drawings and user guides.