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Information technology plays a strategic role in the digital supply chain of an extended enterprise by changing the nature of the relationships among a broad array of partners such as upstream manufacturers, midstream intermediaries and downstream retailers. The web is having a significant impact on how firms interact with each other and their customers. Past stumbling blocks for supply chain integration such as high transaction costs between partners, poor information availability, and the challenges of managing complex interfaces between functional organizations are all dissolving on the web. The focus of the paper is probing the efficiency improvement of implementation electronic base SCM instead of traditional form. First the overview to conventional model is carried out and then, the e-business model is categorized as: e-Commerce, e-Procurement, and e-Collaboration.
In the past decade Research in Supply Chain Management and Electronic Commerce has boosted up as firms have escalated attempts to amalgamate operations and improve service to various and demanding customers. Central to this theme is the need for firms to consider extra-organizational opportunities to have collaboration and coordination with partners to make sure that the supply chain is both efficient and amenable to dynamic market needs. The existence of such collaboration and coordination opportunities causes new challenges and complexities due to the increased scale and scope of the problem, and potentially conflicting motivators among different supply chain players. Induced by these new challenges, this special issue includes a variety of coordination and collaboration problems, highlighting the role that information and related technologies play in alleviating and enabling supply chain integration.
Supply chain management (SCM) is the way of directing materials, information, and funds across the supply chain route, from the suppliers to the final consumer. It also includes after-sales service and reverse flows such as doing by customer returns and packaging and disposable products recycling (See Figure 1).
Figure 1. A Schematic of a Supply Chain
The old inventory management (or traditional logistics management) organizes inventories at multiple sections of a single firm; in contrast, SCM coordinates materials, information, and financial flows among multiple firms. A substantial deal of attention has been shifted toward the SCM in recent years for a number of reasons. Actions taken by one member of the chain can affect the profitability of all others. Competition which once used to be firm-to-firm rivalry has now changed into supply chain against supply chain. Also, as firms successfully decrease inter-operations-inefficiencies, the next chance for improvement is through better coordination with suppliers and customers. A severe global competition which existed during the 1970's and 1980's, forced a lot of manufacturers to improve the quality of their products and try to reduce their production costs. After 20 years, manufacturers found that the biggest challenges that confronted them in the new era were outside of their immediate control the solutions of which were better coordination with upstream and downstream partners of theirs. Having reduced their own costs, they found out that the poor coordination could be very costly. For example, both Proctor & Gamble and Campbell Soup sell products with somewhat stable consumer demand. Yet both these firms were faced with a highly variable demand at their factories. After some investigation, they found that the wide fluctuations in demand were generated by the ordering procedures of wholesalers, retailers, and distributors. For example, after a minor increase in consumer demand, the stocking managers a few stores came to decide to increase the size of orders placed at the retailer's distribution center. The distribution center managers, not unaware of the actual store demand, yet faced with the increase in orders, placed even larger orders with the wholesaler to keep the products available. The snowballing effect was off and when it affected the factory, the demand was highly exaggerated. (See Figure 2.) This phenomenon -the bullwhip effect- has many grounds. Sometimes it is caused by the members of the supply chain predicting in isolation, like the above example. Due to the fact that the changes in demand are hidden, order batching may also have the snowball continued. Some of these actions may beÂ aggravated by the company's marketing practices. For example, in the grocery industry, cause grocery chains place very large orders at the time of sale promotions - termed forward buying. These sudden rises in demand cause shortages at the up level while filling up down-level warehouses. Regardless of the cause, the result is a highly misrepresented demand signal for supply chain's up-level members. These large demand vacillations wears away order fulfillment and raises costs. Luckily, the bullwhip can be moderated into an integrative approach that utilizes communal well-timed information shared by supply chain partners and firm relationships that enable coordination.
Figure 2. An Illustration of the Bullwhip Effect
Such inter-firm consolidation, which has been the dream of management theorists for a long time, began to gain momentum in the late 1990s. It can be argued that managers have always been inclined toward integration, but the implementation of a more "systems-oriented" approach seemed impossible by the lack of information technology. Industrial researchers reviewing 1950's have stated that supply chains should be considered an integrated system. With the recent burst of inexpensive information technology, businesses can be predicted to get more supply chain focused. However, while information technology is without a doubt a powerful facilitator of the integration, it alone cannot account for the radical organizational changes in both of the whole industries and individual firms. There was also a need for a sea change in management theory. Two basic catalysts have conjured over the past decade to start the needed change in management theory. The first is the shift of power from manufacturers to retailers. Wal-Mart, for instance, has pushed lots of manufacturers to improve their inventory management, and even come to manage their own products' inventories in Wal-Mart distribution centers and stores. Most of the major retailers, following Wal-Mart's lead, are starting to ask the suppliers to stiffen their inventory management and ameliorate their capabilities in order fulfillment. Second, the Internet and associated e-Business initiatives are putting squeeze on managers to reconsider their supply chain strategies. The virtual supply chain is facilitated by e-Business; companies' managing these virtual networks, amplifies the importance of integration. Amazon.com is a brilliant example of the kind of firm managing the flow of information and funds via the Internet. How to manage the flow of products efficiently remains today's challenge.
Key Components of Supply Chain Management
Supply chain management covers wide range of disciplines and employs lots of management and engineering tools. Twelve discrete management areas have been identified in supply chain management each of which represents a supply chain issue that the firms are faced with.
The twelve categories we define are
Transportation and logistics
Outsourcing and logistics alliances
Sourcing and supplier management
Marketing and channel restructuring
Inventory and forecasting
Service and after sales support
Reverse logistics and green issues
Product design and new product introduction
Information and electronic mediated environments
Metrics and incentives
Location bears on a wide range of issues facing a firm is faced with in a facility location decision. Among the twelve categories, making decisions in this area takes a longer time than the other levels. Having made the decision, at this level the supply chain's physical structure is set and thus constraints are created for more tactical decisions, such as inventory planning, logistics, and transportation. Taking lots of the differences (both quantitative and qualitative) existing between different locations, choices can be made in this respect based on country differences, government incentive, taxes and duties and transportation costs, using engineering tools such as mathematical models of facility location and geographic information systems (GIS). Also considered here are exchange rate, scale and scope's economies and diseconomies, availability of labor and skill, and quality of life issues for employees. Mathematical optimization using binary integer programming models, simple spreadsheet models and qualitative analyses are all used here.
Transportation and logistics
Transportation and logistics includes all the processes in which goods get carried and stored through the supply chain, including warehousing, transportation, and material handling. Decisions here are made based on the assumption that location have been decided upon beforehand and the firm has chosen where to build the factories, distribution centers and retail outlets. However, when managers are to decide on the kind of transportation to use and which factory to supply a given distribution center, the two categories interact. This category addresses a great deal of crucial choices related to transportation management including, dynamic fleet management with global positioning systems, vehicle routing, and merge-in-transit. Also issues on warehousing and distribution like cross docking, vendor hubs and materials handling technologies for sorting, storing, and retrieving products are included here. With the rapid growth in the number of firms involved with the global management of materials, logistics services' outsourcing has gotten so popular.
Outsourcing and logistics alliances
Outsourcing and logistics alliances study the supply chain effect of outsourcing logistics services. With the rapid raise in the number of the third party logistics providers, a wide and ever expanding group of technologies and services have come to be examined, like supplier hubs managed by third parties.
Sourcing and supplier management
The sourcing and supplier management is about the outsourcing components and the management of the suppliers who provide those components. Make/buy decisions fall under this category. Top-ranked managers and strategists are involved in making these decisions because the future of the firm can be defined by them. Like IBM's decision to outsource its central processing unit to Intel and its PC operating software to Microsoft! Also in area of the sourcing and supplier management falls the global sourcing. While the location category shows the location of the facilities that belongs to the firm itself, this category relates to the location of the suppliers of the firm. Upon deciding to outsource a specific component, and having chosen a supplier, the firm must manage its ties with the supplier carefully. We have observed two competing trends in recent years. Some firms use multiple suppliers for specific components and some other firms outsource to a sole supplier.
Marketing and channel restructuring
While the sourcing and supplier management category points out the relationships at the upstream level, marketing and channel restructuring is focused on downstream. It is about important decisions related to taking the products from a company's factories all the way into the hands of the customers. Together with facility location, these decisions affect the structure of the supply chain as well as define an interface with marketing. While the inventory and forecasting category describes the quantitative aspect of these relationships, this category covers negotiations, relationship management, and also the legal property. Above all, it studies the role of distribution strategy and channel management. Not only it affects the accessibility of products at the retail level but also defines the way information and materials flow through distribution. Many industry initiatives have concentrated on management of the channel as they struggle to extenuate the bullwhip effect. Many of the previous studies indicated that centralized warehouses are designed to cushion factories from variability in retail orders. The held inventory in these warehouses should let factories to smoothen production while satisfying variable demands of the customers. However, empirical data has shown that exactly the reverse occurs. Orders at the higher levels of the supply chain show more variability than those at levels closer to the customer. In other words, the bullwhip effect is genuine and permeative. Some recent innovations can palliate the bullwhip effect, like: an enhanced communication about consumer demand, via electronic data interchange (EDI) and the Internet, and everyday low pricing (EDLP). In fact, the number of firms making and receiving orders, via EDI and the Internet is blasting. The data available and its availability speed to supply chain partners can radically decrease inventories and increase customer service. Other initiatives can also moderate the bullwhip effect. For example, alterations in pricing, promotions and channel initiatives, such as coordinated planning, vendor-managed inventory (VMI), forecasting and replenishment (CPFR), and continuous replenishment, can considerably reduce demand variance.
Inventory and forecasting
Inventory and forecasting bears techniques for continuous inventory management and demand prognostication. It's been a long time that statistical models for forecasting and inventory planning have been used by the Operations managers and industrial engineers. When considering the problems of supply chain, inventory costs are often the easiest to identify and reduce. Although costs saved by, e.g. sharing information with supply chain partners can be discovered using Stochastic inventory models, but in order to coordinate multiple locations, more complex models are required.
Service and after sales support
The service and after sales support category covers the crucial, but often unmarked, issue of providing service and service parts. For some pioneering firms, ability in this area is directly connected to their reputations, and a significant percentage of sales is generated by this capability. In this category is the Stochastic inventory models for slow-moving items.
Reverse logistics and green issues
Reverse logistics and green issues are emerging dimensions of supply chain management. This area studies both of product returns issues (reverse logistics) and environmental effect issues. Direct shipment of products ordered over the web has caused considerably new and important problems in handling customer returns economically. Increasing regulatory pressures are pushing managers to, when dealing with product recovery, take into consideration the most efficient and environmentally friendly way. The term "product recovery" is used for the handling of all used and waste products and materials. Trying to decrease the total amount of waste, product recovery management tries to recover as much economic value as possible. The authors also offer a framework and a series of definitions that can be reference for managers to think about the issues in an organized way (see Figure 3). These authors review the distinction among versatile alternatives of product recovery including repair, refurbishing, remanufacturing, cannibalization, and recycling.
Figure 3. Product Recovery Options
Product design and new product introduction
The product design and new product introduction category concerns design issues for new product introduction in respect of modularity, mass customization, delayed differentiation, etc. One application of "supply chain thinking" is the increase in the use of delayed product differentiation. Traditionally, products produced to be used globally would be customized at the factory to fit local market characteristics. Although product customization is desirable, managing worldwide inventory is often a nightmare. Using deferment allows the product to be redesigned in a customized way specific to the local tastes in the distribution channel. The same product is produced and distributed to the world (Figure 4). Thus if the products are well-sold in France, but the same product is not selling well in Germany, German products can be sent to France and customized in a way to fit the French market. It's also quite possible that the products be even customized for individual customers or sales channels.
Figure 4. Using postponement a product destined for both US and Europe markets is redesigned so that local content can be added to a common platform within distribution (adapted from Johnson & Anderson (2000)).
Information and electronic mediated environments
The information and electronic mediated environments category is about the effect of information technology to decrease inventory; it also speaks about the rapid growth of electronic commerce. It is often more system-oriented and examines the roles that systems science and information play within a supply chain. Integrative ERP softwares such as SAP and Oracle and also Manugistics, i2's Rhythm and Peoplesoft's Red Pepper used in supply chain are some exaples.
Metrics and incentives
Metrics and incentives are about the mensuration of both engineering and organizational processes; it also addresses the related economic motives.
Finally, global issues goes beyond the local environments, to embrace cross-border distribution and sourcing issues. For example, currency exchange rates, taxes & duties, customs, freight forwarding, country juxtapositions and government rules are all included.
The outgrowth of the Internet swayed the young field of supply chain management. Considering the fact that the management of information in and out-flows is a crucial part of supply chain management, this importance has been increases by the rapid growth of web-based information transfer between companies, their suppliers, and their customers. In fact the internet has turned out to be a very cost-effective tool in driving supply chain integration. The integration of internet into supply chain management is changing many processes within the supply chain, like procurement, customer management and the models of product design. Here we divide the various forms of e-Business applications into three categories e-Commerce, e-Procurement, and e-Collaboration, following the framework of Lee and Whang (2002c) (Figure 5). In a network of supply chain partners E-Commerce helps to pinpoint and promptly react to ever-changing demands of the customers realized through the Internet. e-Procurement is the use of Internet to procure materials and to deal with value-added services like warehousing, transportation, etc. The collaboration and coordination of various decisions and activities among the supply chain partners is facilitated by e-collaboration over the Internet.
Figure 5. e-Business forms and their impact on the supply chain.
The extensive impact of e-commerce on the supply chain process cannot be ignored. The supply chains of information goods have been changed under this effect more than any other products. Manufacturers of physical products have also come to adopt the Internet as a direct channel for the product distribution. Comparing to the present "bricks-and-mortar" retail channel, direct channel lays a different set of decisions and challenges. These two channels mentioned are different in respect of the types of customers, access to supply/demand information, logistical requirement, the structure of costs, the fulfillment of orders, the contribution of profits, the degree of market segmentation, and returns policies. Studies have shown that e-Commerce has caused changes in channels and has had a downward pressure on prices. One of those studies (Brynjolfsson and Smith (2000)) found that in the late1990s prices for homogeneous products were 9-16% lower in e-channels. Chen (2001), addressing the pricing and shipping methods, states that using varied sets of prices an e-tailer can persuade some customers to wait for their order and therefore gain some advanced demand information. In another research, Johnson and Meller (2002) use stochastic models of logistics systems to explain why some of those systems were efficient in lowering costs while others failed. Cattani and Souza (2002) address two additional advantages that e-Commerce holds in comparison to the old retail channels which are the flexibility of the delivery time and the better logistical configurations. Considering the logistical configurations, it should be mentioned that the information and material flow can be separated in the design of e-Commerce distribution system-the order flow and the delivery process may go different ways. A book order may be placed at Amazon.com, but the delivery in fact may be done by its distributor Ingram Books. Therefore, an online firm can set an online logistical network that is composed of its own logistical assets together with those of its retailers' and suppliers' (Lee and Whang 2001(
Manufacturing nowadays requires flexibility because of the rigorous competition existing in world of business; customer preferences change so fast, products' life cycle are getting shorter and shorter and products keep getting more varied everyday. Flexible manufacturing is made possible by the employment of efficient material procurement together with the dynamical capacity allocation. The Internet paves the way to the establishment of an efficient procurement; lots of buyers can find appropriate sellers and deal with them there based on some pre-defined protocols. Although e-Procurement and e-Commerce may sound to be the same, they differ in many aspects. For example, in e-Commerce are often involved a great deal of individual consumers, while e-Procurement usually deals with companies. Recent studies have been exploring the ways that on-line exchanges affect the firms' supply chain and procurement process. For example, Jap and Mohr (2002) explore the reasons that some companies are more successful in employing e-procurement strategies than others. Lee and Whang (2002a) model how secondary on-line markets impact the supply chain. Pyke and Johnson (2002) review many e-procurement strategies and copare them with the traditional ones. In the past three years, there have been several interesting cases written on e-Procurement.
Business-to-business intercommunication performed through the Internet is termed e-Collaboration. These intrplays are relationships which are beyond simple buy/sell transactions. Here come the activities like integration and sharing of information, decision, process and resource sharing. Most of the research in this area has been done on information sharing. For example the effect of the bullwhip (Chen et al 2000), the advantages of information sharing (like Cachon and Fisher (2000)) and the advantages of employing IT in the firms (for example, the impact of ERP). Lots of researchers have been trying to discover how the web can be a source of alteration in innovation intra-inter company (Sawhney and Prandelli (2000)).
A great number of cases can be addressed that review various dimensions of collaboration, from integration and information sharing to process and resource sharing. Lots of other cases have played up the effect of information integration on some specific aspect of the supply chain. Some have concentrated on managing supply while others are more customer-focused. The "Third-Party Logistics Services" case studies how companies that provide transportation like Flying Cargo use information to develop their service offerings. On the other hand, cases like General Motors exemplify the ways that increasing customer loyalty and managing the prices can be built upon using information. Hewlett-Packard studies the issues of reverse supply chain and the information integration of managing returns. Finally, Marks & Spencer and Zara studied function of integrated design and manufacturing in the contention between two clothe companies.
Advantages of supply chain management:
One of the advantages of supply chain management over the traditional chain management is that suppliers share valuable information throughout the chain and this information includes information on demand, forecasts on sales and demand and transportation, through sharing of information the firms in the chain will become more efficient and as a result this will reduce the cost of production rendering them to have competitive advantages over other firms.
Supply chain management will improves productivity and efficiency in a firm as compared to traditional chain management, SCM (supply chain management) improves the firm's processes whereby it improves on quality control and inventory control, this in turn improves on the productivity and efficiency of the firm. Increased efficiency can be seen in terms of the reduction in the cost of goods sold by the firm. This is achieved through reducing the cost of inputs whereby a firm will source the less costly raw materials.
Supply chain management will also reduce the transport duties of a firm and taxes, the shipment and transportation duties are shared by firms and as a result these duties are reduced and this constitutes to the reduction in the cost of production and final price of goods. When there is sharing of transport duties there is a redution in transport errors that occur between firms, this chain management ensures that the delivery of good s is streamlined and therefore the delivery time of goods is reduced, this will in turn increase consumer loyalty.
The other advantage is that firms reduce the issues of bad debts in that the payment terms across the firms is well organized and defined, this ensures that a firm does not accumulate bad debts because the payment terms between firms is well defined and followed by the firms in the supply chain.
Disadvantages of supply chain management:
Despite the advantages associated with the supply chain management there exist disadvantages which are associated with it as compared to the traditional chain management. One of this disadvantage include the issue of employment, the traditional supply chain management involved salesmen and other managers who were to ensure that the transaction is completed as required, today after the introduction of this new supply chain management there has been increased unemployment which has resulted to high unemployment levels in the economies, despite the new management system providing a faster and convenient way to improve both the firms objectives and the customer.
The other disadvantage is that initializing the supply chain management is complex and requires a firm to invest more in terms of capital. therefore this method is costly and very complex as compared to the traditional method. It is also costly in that it requires the management of various activities within the firm.
Salesperson is becoming an outdated term in today's Internet economy. Before the Internet, before Electronic Data Interchange (EDI), even before the advent of the personal computer, businesses bought and sold raw materials and finished goods through salespeople. Fifteen years ago, your chemical company purchased raw materials by calling up your sales representative of the supplier you wanted to buy from. The salesperson took your order, processed the order internally, and a week or so later your raw materials were delivered. You had a large catalog of items from each supplier and had to manually search to find the items you needed. Most of your frequently ordered items were bookmarked, but to order something new usually required more time. You also did not have a quick, easy way to compare prices and product specifications between your suppliers.
Advantages of e-supply chain management:
Generally three parties that enjoy the advantages of e-supply chain
Buyer Benefits: In general, there are three classes of benefits that a buyer can derive from e-SCM.
First, a buyer may be able to purchase both direct and indirect materials at a lower cost, primarily due to price transparency and competition. Buyers that purchase goods through an active e-marketplace populated by many suppliers hope to take advantage of competition and dynamic pricing opportunities to secure the lowest possible price for goods and services. Although larger buyers such as Wal-Mart and Ford already enjoy sufficient leverage to command price breaks and discounts, medium and smaller-sized buyers gain access to more favorable pricing when suppliers are bidding for their business via e-marketplaces and trading exchanges.
Second, a buyer is likely to achieve greater efficiency when purchasing goods and services, ultimately lowering the overall cost of conducting commerce. By automating the procurement function, offloading purchasing activities to end users, and integrating purchasing data with legacy accounting systems, companies can lower their transaction costs and overhead. For medium and smaller-sized companies, B2B marketplaces offer opportunities for price discovery that would be inefficient or prohibitively expensive to conduct through human effort alone.
Third, a buyer may be able to forge stronger ties with its suppliers, collaborating with them more closely in the design and development of goods and services, and in forecasting, scheduling and planning production activities. ERP systems have enabled many companies to share a subset of this information already. The collaborative software, middleware XML translators and more powerful customer relationship management (CRM) functionality available today promise to align buyers more closely with all participants in their supply chain.
Supplier Benefits: Supplier benefits generally fall into two classes, depending on the type of e-SCM program in which they participate. For e-SCM programs that concentrate on collaboration (sharing product data, product designs, etc. ) suppliers have the potential to strengthen their forecasting ability, meet and exceed customer demands by offering the right combination of products and services at the right time, align their production schedules and manufacturing capacity with buying patterns to improve inventory management and more. For e-SCM programs that concentrate on commerce opportunities, the supplier's greatest benefit comes from participating in large, active online marketplaces. These marketplaces, if frequented by a critical mass of buyers, extend the supplier's market reach and potentially increase its overall sales. Because this extensive market reach is achieved at a fraction of the cost associated with other sales channels -- mass mailings, telemarketing, on site sales calls -- it is a more cost-effective way to market and sell goods and services. Suppliers can also take advantage of B2B marketplaces to gauge the demand for their goods and services and, using dynamic pricing features such as auctions and bids, the price that the market is willing to bear for these items. Although the price transparency fostered by online marketplaces may deter suppliers from participating at first, once a sufficient number of buyers and competitors are using the model, every supplier must eventually join. Marketplaces can be helpful with inventory management activities, allowing suppliers to auction off excess inventory to a large group of potential bidders.
Facilitator Benefits: A facilitator of e-SCM efforts is a party that provides some component or service integral to the effort. A software or hardware vendor is a facilitator, as is an ASP providing application functionality and/or Internet connectivity. In the case of a B2B marketplace, the facilitator is the market maker that establishes, administrates and operates the electronic marketplace, perhaps including services such as financial settlement, fulfillment, logistics etc. In general, the benefits to a facilitator are strictly monetary -- the software or hardware vendor receives license fees and the ASP normally receives monthly rental or usage fees. The market maker typically receives a percentage of each transaction; the Paper Exchange marketplace charges 3% of each transaction completed by its members. If the market maker also happens to be a large purchaser, and participates in the marketplace as a buyer, then it will also enjoy all of the benefits that accrue to a buyer.
It is the best strategy to increase market share, reduce costs, adding value to the business, intensify the speed and enhance the communication and collaboration with customers and suppliers, minimize inventories and, of course, improve profits.
E-supply chain system provides the right amount of relevant information to those who need to know it and when they need to know it.
The e-Supply Chain will have customers and suppliers seamlessly linked together, throughout the world, exchanging information almost instantly.
The velocity of relevant information flow will be so fast that, as a result, responding to the inevitable changes in expected vs. actual customer demand will mandate demand-driven manufacturing and supporting processes that provide for faster changes in the actual material flow to match demand.
Fast access to relevant supply chain information can pay-off handsomely in lower costs, less inventory, higher quality decision-making, shorter cycle times and better customer service.
The result in cycle time compression, lower inventories, decision-making quality, reduced overhead costs, among other benefits makes e-Supply Chain Management a highly desirable strategy.
Disadvantages of e-supply chain management:
Just throwing more software at the problem is not the answer to the core issues of Supply Chain Management. Although software is needed, it is very necessary to define the process of information flow that will activate material flow at the right time. Lessons learned by early adopters of new technologies is that overzealous adoption of those technologies without a carefully planned strategy can prove very costly, especially when the target is missed, or worse, not defined in the first place.
Internet has still not touched the lives of a great number of people, either due to the lack of knowledge or trust. A large number of people do not use the Internet for any kind of financial transaction. Some people simply refuse to trust the authenticity of completely impersonal business transactions.
One of the major problems that occurs relates to problems with integrating the technology used by the various parties in the supply chain. Quite often, one company uses a software system that will not integrate easily with supplier technologies. This creates a problem that requires one of the suppliers to change their system to allow integration. In the case where a supplier has one major customer, this may not be so problematic. However, many manufacturers supply to various clients, and some even to hundreds or thousands of clients. The same applies with the company receiving goods from suppliers, where most companies have various suppliers and not just one. This creates a problem as to how companies can adapt to ensure integration with a range of suppliers and retailers. Another concern relates to issues of safety and privacy. Sharing of information and systems between companies often create issues with management in regards to securing company information and ensuring safety. This can be a substantial problem for companies who consider themselves at high risk of terrorism, corporate sabotage, or companies who have substantial business secrets. This problem associated with sharing of information means that e-SCM systems often have to be created with protection systems built in. The final problem is that few e-SCM systems can be created to work effectively initially. The development and the implementation is not generally a quick and simple process, but a long one based on developing and then assessing the system. This means that the development of e- SCM system often involves a large input of time and money, while not necessarily providing initial benefits.
The importance of e-commerce to manufacturing and distribution is undoubtedly in supply chain management. If high-speed, low-cost communication and collaboration with your customers and suppliers are critical success factors for effective supply chain management, then the e-chain is in your future. The very essence of supply chain management is effective collaboration throughout a network of customers and suppliers. The potentials for improved productivity, cost reduction and customer service are enormous. Of course, the benefits are based on effectively employing ecommerce, which makes information quality an even higher priority than before. Providing the right amount of relevant information to those who need to know it, when they need to know it, is in fact effective supply chain management from an information point of view.
Good supply chain practitioners know that information should be passed on only to those who need to know it, in the form they need to have it. Demand information, inventory positions, order fulfillment, supply management and a whole host of other information exchange activities will change how we sell products, supply products and make and receive payments for goods and services. The esupply esupply chain will have customers and suppliers seamlessly linked together, throughout the world, exchanging information almost instantly. The velocity of relevant information flow will be so fast that responding to the inevitable changes in expected vs. actual customer demand will allow for faster changes in the actual material flow.
Fast access to relevant supply chain information can pay off handsomely in lower costs, less inventory, higherquality decision making, shorter cycle times and better customer service. One of the biggest cost savings is in the overhead activity associated with lots of paperwork, and its inherent redundancies. The non-value-added time of manual transaction processing can instead be focused on higher revenue creation without proportional increases in expense. The result in cycle time compression, lower inventories, decision-making quality and reduced overhead costs, among other benefits, makes e-chain processing a highly desirable Web application. Supply chain processes can be more streamlined and efficient than could have been imagined just a few years ago. For many companies, more effective supply chain management is where the profit and competitive advantages will emerge.
Some of the most influential business leaders have made some very bold statements about the Internet and ecommerce. For example, General Electric has launched very aggressive e-commerce initiatives-so aggressive, in fact, that Jack Welch, wellknown CEO of GE, was quoted in Fortune Magazine as saying, "within 18 months, all of our suppliers will supply us on the Internet or they won't do business with us." Now that is a statement that will give many a GE supplier heartburn, and many will be hoping that Jack Welch's successor is a little more flexible on the timetable. General Motors is putting more emphasis on e-commerce with the creation of e-GM, a group that will have oversight responsibilities for all of GM's Internet-based activities.
Initially, the group will have a staff of 200 with the objective of making GM a major force in e-commerce. The scope of their activities will include everything from product development, supply chain management, car sales, marketing and even the on-board communication and information system in automobiles. GM suppliers, regardless of tier, should have received the signal loud and clear: the e-supply chain is coming, and fast. Even more intriguing is the rapid evolution of the digital marketplace.
Recently, i2 Technologies announced TradeMatrix.com, which will eventually allow buyers and sellers to transact in a single intelligent, multidimensional marketplace that connects multiple trading exchanges. This will let buyers consolidate orders from multiple vendors and subsequently provide for the effective integration of the final logistical activities. The key is putting intelligence into the super portal so customers can get their information their way. How fast this vision will become reality we don't know, but the potential is exciting. These are companies that certainly would not be considered midrange, but as we can see, the larger company adopters will force huge ripple effects into their smaller company supply bases. Your best choice: be prepared.
The excitement over the possibilities that e-commerce may bring has significantly, and forever, changed the way management must view and serve its markets. Every executive team which works on it is at some stage of developing an approach to e-commerce. It has become an area of fascination, although a bit surrounded in mystique that compels management to take action in search of a big win, as well as not to risk being left behind. Motivated by the concerns raised by the many pundits saying things such as, "Without e-commerce you are dead," management becomes enthralled with the risk and potential of e-commerce. And, as a result, management gets eager to become an early adopter to establish its claim, stature and market presence using Web-based business and operating strategies. Supply chain management systems will be substantially altered in terms of strategy, process, and system. Mistakes here could prove very costly in the near and longer terms. E-commerce has redefined and will continue to redefine how companies will compete for customers. While e-commerce offers some exciting opportunities to improve supply chain management effectiveness by lowering costs and increasing the speed of order-to-delivery, it is by no means the first stop on the path to having highly competitive e-supply chain capabilities. Just throwing more software at the problem is not the answer to the core issues of supply chain management. Although software is needed, it is very necessary to define the process of information flow that will activate material flow at the right time. Lessons learned by early adopters of new technologies is that overzealous adoption of those technologies without a carefully planned strategy can prove very costly, especially when the target is missed, or worse, not defined
In the first place certainly, before taking a big leap into the e-supply chain, companies need to know why they are taking the leap. By no means should any company make the all-to-common mistake of applying the latest technology without getting thorough and appropriate answers to questions such as:
â€¢ What business opportunities are available for us to improve market presence, sales, cost of operation, service, communication, cycle time, supply-base management, etc.?
â€¢ Do we know and understand our supply chain priorities?
â€¢ How should we structure Webenabled linkages with our customers and suppliers for preeminent supply chain performance?
â€¢ What e-supply chain approaches can we appropriately invest in for near- and longer-term business performance performance gains?
â€¢ Do we have an executive-level champion providing the necessary linkage to top management for effective implementation of e-supply chain management?
â€¢ Have we carefully defined an action plan for pre-implementation preparation activities?
â€¢ What are the missing technical links in our current system or our software of choice?
â€¢ What planning and implementation tasks will be accomplished and when?
â€¢ Do we understand the real benefits of an e-supply chain versus the cost to develop?
â€¢ What e-supply chain strategy will give us the leverage to transform ourselves into marketplace leaders?
Spending time on up-front strategy development for improving the orderto-delivery cycle and supply chain management will pay big dividends. The hard part is discovering and thinking through supply chain opportunities and then developing a strategy and plan for an e-supply chain that will improve your performance more than that of your competitors. But without an e-supply chain roadmap, the direction you take may not get you to the desired destination. The biggest loss from missing the target can never be regained-time. It is essential to do it right the first time. For all the promise of the e-supply chain, there will be many problems to solve. Remember, however, that the business use of the Internet is still in its infancy, and that means many opportunities will be coming in the years ahead. Your supply chain strategy will need to evolve and improve constantly to take advantage of these opportunities. The big risk is in standing still.