E Business In A Supply Chain Business Essay

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Electronic business mainly referred to as eBusiness or e-business can be defined as the application of information and communication technologies in support of all the activities of business. It focuses on the use of ICT to enable the external relationships and activities of the business with the individuals, the groups and the other businesses. E-business is also about using Internet technologies to provide superior customer service, streamline business processes, increase sales, and reduce costs. E-business involves business processes of the entire value chain i.e. electronic purchasing and supply chain management, processing orders electronically, providing customer service, and also cooperating with the business partners.

E-business Features

Traditional levels of accountability are mandatory.

Customer-centric knowledge is core to eBusiness strategy, planning and execution. 

Marketing and promotional effectiveness is the next critical eBusiness performance measure, as it commands a dominant share of operating expenses. 

Speed and immediacy of response drive profits and customer satisfaction. 

Traditional business performance measurement approaches no longer apply.  

Enterprise Operations

The integration of systems inside and outside the organization can provide value for both customers and the organization. One of the requirements for e-business is to link front-end with back-end systems in order automate the online operations of the organization.

Front-end activities deal directly with the customer while back-end systems include all of the internal support activities that do not deal directly with the customer. Some enterprises have different geographic locations for front-end and back-end office activities and rely on the integration of the associated computer and network systems for successful corporate operations.

Order placement through point-of-sales systems

Production tracking

Customization of products based on user requirements

E-business in a Supply Chain

A supply chain is a system of people, resources, organizations, activities, technology and information involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer.

E-business involves the execution of business transactions over the Internet. Companies conducting ebusiness perform some or all of the following activities over the Internet across the supply chain:

Tracking orders

Filling and delivering orders

Paying and receiving payment.

E-BUSINESS ON SUPPLY CHAIN PERFORMANCE

Impact of E-business

E-business allows firms to enhance revenues by direct sales to customers. Manufacturers and other members of the supply chain that do not have direct contact with customers in traditional retail channels can use the Internet to shrink the supply chain by bypassing retailers and selling direct to customers This geographical centralization reduces required inventory levels because of increased economies of scale in the supply and reduced aggregated variability in the demand.

Impact of E-business

An e-business can decrease processing cost if they can increase the amount of customer participation. For example, customers purchasing online from L.L. Bean do all the work of selecting the product, placing and order, and paying.

Maintaining a competitive supply chain requires relentless reduction of costs. In the area of order operations this includes reducing the steps and time required to enter an order, as well as avoiding mistakes that would require manual corrections later.

SUPPLY CHAIN MANAGEMENT

Supply chain management (SCM) is the management of a network of interconnected businesses involved in the provision of product and service packages required by the end customers in a supply chain Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption.

Supply Chain Management (SCM) emerged in the 1980s as a new, integrative philosophy to manage the total flow of goods from suppliers to the ultimate user and evolved to consider a broad integration of business processes along the chain of supply . Keith Oliver coined the term "supply chain management" in 1982 Oliver, a vice president in Booz Allen Hamilton's London office, developed an integrated inventory management process to balance trade-offs between his clients' desired inventory and customer service goals. The original focus was the "management of a chain of supply as though it were a single entity, not a group of disparate functions," with the primary objective of fixing the suboptimal deployment of inventory and capacity caused by conflicts between functional groups within the company. SCM evolved quickly in the 1990s with the advent of rapid response initiatives in textile and grocery industries, and was refined by large retailer Wal-Mart who used point-of-sale data to enable continuous replenishment. Supply chain is a term "now commonly used internationally - to encompass every effort involved in producing and delivering a final product or service, from the supplier's supplier to the customer's customer". As the name implies, the primary focus in supply chains is on the costs and efficiencies of supply, and the flow of materials from their various sources to their final destinations. Efficient supply chains reduce costs.

Organizations increasingly find that they must rely on effective supply chains, or networks, to compete in the global market and networked economy.  In Peter Drucker's (1998) new management paradigms, this concept of business relationships extends beyond traditional enterprise boundaries and seeks to organize entire business processes throughout a value chain of multiple companies.

Porter's Value Chain

One model to help understand this network of processes and services is what Michael Porter (1985) calls the 'Value Chain'. Porter's work on competitive strategy suggests that organizations should re-evaluate their value chain and concentrate on the operations that they can do best. Other processes should 'out-sourced' to specialists. E-Business has facilitated this by providing a set of standards for participants to work with.

The progress of Dell from a business in 1984 offered a simplified product offering with orders taken by fax/telephone - a simplified service with wide reach. In moving to Internet delivery, Dell then offered individualized configurations, price combinations and technical support. These enhancements could only previously have been obtained from specialized dealers or direct agents at a premium price and Dell now offers these to a wide audience at a very competitive price. The customer wins as their needs are at the centre of the process.

Porter distinguishes between primary activities and support activities. Primary activities are directly concerned with the creation or delivery of a product or service. They can be grouped into five main areas: inbound logistics, operations, outbound logistics, marketing and sales, and service. Each of these primary activities is linked to support activities, which help to improve their effectiveness or efficiency.

There are four main areas of support activities: procurement, technology development (including R&D), human resource management, and infrastructure (systems for planning, finance, quality, information management etc.). The chain consists of a series of activities that create and build value. They culminate in the total value delivered by an organisation. The 'margin' depicted in the diagram is the same as added value which expresses the way a business differentiates itself through configuration of its value chain.

The drivers for product differentiation and value creation are policy choices (what activities to perform and how), linkages (within the value chain or with suppliers and channels), timing (of activities), location, sharing of activities amongst business units' learning, integration, scale and institutional factors.

VALUE PROPOSOTION OF E-BUSINESS IN SUPPLY CHAIN

Supply chain model defines three activities:-

Value Activities: the physically and technological distinct activities a firm performs, including both primary and support activities. Supply chain analysis reveals opportunitites to add value by improving cost, responsiveness to customers, efficiency, quality etc.

Support Activities: Activities that support primary Activities and each other by providing purchased inputs, technology, human resources, and reliability.

Primary Activities: Activities involved in the physical creation of a product or service and its sale, transfer to buyer and after sale assistance.

PRIMARY ACTIVITIES

Inbound Logisctics- means procurement of Activities like vendor selection, shooping, negotiating supply contracts.

Operations- It includes conversion of raw material into finished products.

Outbound Logistics: It represents the actual storing, distributing and shipping of final product.

Marketing and Sales: It includes advertisements, product promotion, sales management, identifying the product etc.

Services: the outputs means satisfying the customers, improve image of firm, increase in production, sales and so on.

SUPPORT ACTIVITIES

Corporate Infrastructure: It includes general management, accounting, finance, planning, legal services, quality management.

Human Resources

Procurement

Technology Management

IMPORTANCE OF SUPPLY CHAIN MANAGEMENT IN E-COMMERCE

Supply Chain Management (SCM) is an essential element to operational efficiency. SCM can be applied to customer satisfaction and company success, as well as within societal settings, including medical missions; disaster relief operations and other kinds of emergencies; cultural evolution; and it can help improve quality of life. Because of the vital role SCM plays within organizations, employers seek employees with an abundance of SCM skills and knowledge.

A company's competitive strategy defines the set of customer demands that it seeks to satisfy through its products and services. A supply-chain strategy determines the nature of procurement of raw materials, transportation of materials to and from the company, manufacture of the product or operation to provide the service and distribution of the product to the customer, along with any follow-up service.

The ultimate objective of SCM is to achieve a 'strategic fit' between the company's competitive strategy and supply-chain strategy. This strategic fit can be achieved by Understanding the customer demand, which helps the company to define costs and service requirements and understanding the supply chain that helps the company to design and manage its supply chain in accordance with the customer's demand. If any mismatch exists between what the supply chain is capable of doing with respect to customer demands, the company can either alter the structure of the supply-chain design or alter its strategies.

During the industrial age, companies succeeded by how well they could capture the benefit from economies of scale and scope & technology. The success accrued to companies that could embed the new technology into physical asset that offered efficient customer service. The emergence of the retailing era, which stared in the last decades of twentieth century, made obsolete many of the fundamental assumption of industrial age. The retailing age environment requires new capabilities in organization for competitive success .the ability of a company to mobilize and exploit physical, tangible assets enable an organization to develop customer relations and loyalty, introduce innovative produce and services, produce customized high-quality products and series at low -cost and with short lead time, mobilize employee skills and motivation for continuous process imprudent and deploy information technology effectively. as more and more homogenous products are available across markets that are becoming more homogenous, the imperatives is to reach the market at the right time and place at lowest total cost. New technologies and the ever-increasing intensity of competition are forcing organization to re-examine how they do business, meet new customer -driven challenge, companies are re-investing their supply chains in order to succeed. Consider a series of companies in a supply chain, each of who orders from its immediate upstream member. In this setting, inbound orders from a downstream member serve as a valuable informational input to upstream with the globalization of the world economy, the diversity and environmental factors that influence a company's global strategies and approach, supply-chain drivers influencing the companies to become increasingly global. Different approaches to globalization require different degrees of supply-chain integration, as well as different supply-chain strategies and structures. Whatever approaches to globalization and global supply-chain management are adopted, companies face the challenges of understanding and managing the greater complexity and risks inherent in the global environment.

Organizations increasingly find that they must rely on effective supply chains, or networks, to compete in the global market and networked economy. this concept of business relationships extends beyond traditional enterprise boundaries and seeks to organize entire business processes throughout a value chain of multiple companies.

During the past decades, globalization, outsourcing and information technology have enabled many organizations, such as Dell and Hewlett Packard, to successfully operate solid collaborative supply networks in which each specialized business partner focuses on only a few key strategic activities (Scott, 1993). This inter-organizational supply network can be acknowledged as a new form of organization. However, with the complicated interactions among the players, the network structure fits neither "market" nor "hierarchy" categories (Powell, 1990). It is not clear what kind of performance impacts different supply network structures could have on firms, and little is known about the coordination conditions and trade-offs that may exist among the players. From a systems perspective, a complex network structure can be decomposed into individual component firms traditionally, companies in a supply network concentrate on the inputs and outputs of the processes, with little concern for the internal management working of other individual players. Therefore, the choice of an internal management control structure is known to impact local firm performance

In the 21st century, changes in the business environment have contributed to the development of supply chain networks. First, as an outcome of globalization and the proliferation of multinational companies, joint ventures, strategic alliances and business partnerships, significant success factors were identified, complementing the earlier "Just-In-Time", "Lean Manufacturing" and "Agile Manufacturing" practices. Second, technological changes, particularly the dramatic fall in information communication costs, which are a significant component of transaction costs, have led to changes in coordination among the members of the supply chain network .

The importance of Supply Chain Management thus is in :

* Reduced inventories along the chain

* Better information sharing among the partners

* Planning being done in consultation rather than in isolation

The benefits too would be reflected in terms of :

Lower costs

Better customer service

Efficient manufacturing

Better trust among the partners leading to win-win

Process integration and other efforts result in improved quality as higher profit margins shall get reflected in creation of better facilities for manufacturing, product design research, enhanced customer service.

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