US models out of step with Asia reality

Stanford business school professor believes that B2B commerce may be global but execution of management models has to have local genesis as cultures affect adoptability.

SCMP - E-commerce models for managing supply chains in the United States may not work in Asia and those companies that innovate will be the most successful, according to Stanford University Professor Hau Lee. The director of the supply chain management executive program at California's Stanford Business School on Sunday said he was taking a global approach to his research, with Greater China a major focus.

With e-commerce now influencing supply management operations, it was important to find the right model for each country or region.

"One of the reasons why there is this globalization of our curriculum is that US models work in the US, but when they started pushing them in Japan, they were not as well integrated to the use of personal computers," said Prof Lee.

"Credit cards are not as common in Japan as they are in the US and Europe."

This meant that if a company wanted to push e-commerce in Japan, it had to create its own model.

The outcome is a business venture called 7dreams.com between 7-Eleven stores and a diverse group of companies selling such items as concert and airline tickets and Sony products.

Prof Lee said he expected this model could work well in the mainland.

In a society more debt averse than the United States, customers in Japan are now able to go online and order, for example, Sony headphones, or other items not normally stocked in a 7-Eleven store.

Then, instead of the goods being paid for online and sent to their homes, customers can pick up the items that have instead been delivered to a designated nearest 7-Eleven store. The item is paid for in person with cash.

"I think it works well in Japan because of the cultural characteristics of the country," said Prof Lee.

"Most Japanese people go to work using trains so the 7-Eleven stores are conveniently located.

"I suspect that there might be a similar type of model in the mainland." In Taiwan, 7-Eleven is looking at a similar model, he said.

While Prof Lee believes many companies worldwide are substituting traditional technology with e-commerce in supply chain management, many are averse to taking the next step.

"The previous technology could have been faxes, for example, to perform transactions or send invoices," he said.

"Many of these tasks can be substituted by the Internet," he said, adding that "substitution" was the first 'S' of the e-commerce evolution in supply management.

The next step for a company is "scale", or using the Internet to increase the scale of service, such as allowing more purchases more often, creating a company more sensitive to changes in the market.

A third step just emerging is "structural", which could involve a direct shipment without intermediaries by using Internet technology.

An example would be a software company that no longer sells physical floppy discs to clients but allows them to download updates and new versions through their personal computers, meaning there is no physical product.

"I think most companies say they have an Internet strategy and then when I examine them all they are doing is looking at a set of tasks and substituting it with the Internet," said Prof Lee.

"They do not continue the evolution and there could be the danger of that happening here," said Prof Lee.

"If everyone is staying at the same stage, then the benefits are limited.

"The companies and the people who recognize it first will be ahead."

Prof Lee views the mainland - poised to become a member of the World Trade Organization - as becoming the major manufacturing base of the world.

"They [the mainland] are in an evolving state and when you are in an evolving state there are great opportunities for change. We want to be the leading edge institution," said Prof Lee.

During his career, the Hong Kong-born and educated Prof Lee has worked as a consultant for companies including Hewlett-Packard, Nortel Networks, Sun Microsystems, Apple Computer and Eli Lilly.