E–Business and Supply Chain Management
– A New Methodological Approach


By
Dr. Vijay Pithadia
Assistant Professor & Kidevices Chair
School of Management Studies
Shri Lauva Patel Trust College For Women
Amreli-365 601 GJ
&
Dr. M. Gunasekaran
Asst. Professor in Management
Karpagam Institute Of Management
Karpagam Arts & Science College
Coimbatore–21
 


INTRODUCTION

Supply Chain Management has generated substantial interest in recent years for a number of reasons. Managers in many industries now realize that actions taken by one member of the chain can influence the profitability of all others in the chain. Many international business researchers are of the opinion that increased globalisation of markets and increasing international competition imply that firms in all nations will face similar, if not identical, competitive environments. In India due to liberalisation of economy, the companies are facing acute competition in the international markets. Many manufacturing companies are forced to improve the quality of their products and reduce their manufacturing costs.

This paper is divided into two parts. First part deals with how e- Business is changing supply chains. Second part of the paper is designed to examine the related research in this area. For the purpose of the study, the e-Business applications are divided into three categories:

* E – Commerce
* E – Procurement
* E – Collaboration

E-commerce helps a network of supply chain partners to identify and respond quickly to changing customer demand captured over the Internet. E-procurement allows companies to use the Internet for procuring direct or indirect materials as well as handling value-added services like transportation, warehousing, customs clearing, payment, quality validation and documentation. E-collaboration facilitates coordination of various decisions and activities beyond transactions among the supply chain partners, both suppliers and customers over the Internet.

The main objective of Supply Chain Management is 'Customer Satisfaction' and to achieve this, all roadblocks are eliminated in between ultimate customer and the raw material supplier.

Features of Supply Chain Management

* Customer focus
* Retaining existing customers
* Streamlining of operations
* Minimum Fixed Cost
* Elimination of paper work
* Just in time
* Transparency at all levels
* Developing multiple supply sources for a multiple components
* Customer value enhancement and cost reduction

E-COMMERCE

Buying and selling on the Internet is known by the generic term e-commerce, just like e-mail, which is the way of sending mail through the net. Business on the net is classified into B2B (Business to Business), B2C (Business to Consumer) and C2C (Consumer to Consumer).

B2B transactions are largely between industrial manufacturers, partners, and retailers or between companies.

B2C transactions take place directly between business establishments and consumers.

B2B sites are essentially the net meeting points for buyers and sellers of the industrial world. They serve a limited number of customers. The Turnover would be many times that of the most B2C sites and most importantly they make profits.

B2C sites are offering low value items CDs, Cassettes, Food, Toys, Flowers, and Cards etc because no complicated logistics are involved.

C2C sites don't form a very high portion of web-based commerce. Most visible examples are the auction sites. Basically, if some one has something to sell, then he gets it listed at an auction sites and others can bid for it.

E-PROCUREMENT

The Internet offers a natural platform to facilitate efficient procurement as numerous buyers and sellers find each other and transact according to some pre-specified protocols. The following are the procurement strategies available for a manufacturer.

* Strategic Partnership
* Online Search Strategy
* Combined Strategy

1. Strategic Partnership
Strategic partnership strategy is to develop a long-term supply relationship with a specific supplier.

2. Online Search Strategy
Online Search Strategy is to shop online for a better price.

3. Combined Strategy
The combined strategy is to combine both – sign a long-term purchase contract with a supplier upto a certain level, but if necessary additional quantity may be purchased online.

E-COLLABORATION

We define e-collaboration as business-to-business interactions facilitated by the Internet. These include information sharing and integration, decision sharing, process sharing and resource sharing. There are many new cases that examine different elements of collaboration from information sharing and integration to process and resource sharing.

Several cases have highlighted the impact of information integration on some particular aspect of the supply chain. Some of the cases are focused on managing supply while others are more focused on the customers. For example, the Solectron case focuses on how the use of information has transformed Solectron from a simple contract manufacturer into a full service supply chain integrator General Motors and Lufthansa cases illustrate how information can be used to increase customer loyalty and manage the prices.

RESEARCH IN SUPPLY CHAIN MANAGEMENT

Research in Supply chain management has identified twelve distinct management areas that are associated with the subject. Each area represents a supply chain issue facing the firm. For each area, we provide a brief description of the basin content and refer the reader to a few articles that apply. The twelve categories are,

* Location
* 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 environment
* Metrics and incentives
* Global issues

1. Location
Of the twelve categories, decisions in this area have perhaps the longest time horizon. Decisions at this level set the physical structure of the supply chain and thus create constraints for more tactical decisions such as transportation, logistics and inventory planning. Engineering tools such, as mathematical models of facility location and geographic information systems are very useful in sorting the location choices1.

2. Transportation and logistics
It includes all issues related to the physical flow of goods through the supply chain, including transportation, warehousing and material handling. This category addresses many of important choices related to transportation management including vehicle routing, dynamic fleet management with global positioning systems and merge-in-transit2.

3. Outsourcing and logistics alliances
It examines the supply chain impact of outsourcing logistics services. With the rapid growth in third party logistics providers, there is a large and expanding group of technologies and services to be examined. These include fascinating initiatives such as supplier hubs managed by third parties 3.

4. Sourcing and Supplier management
This category addresses the issue of outsourcing components and the management of the suppliers who provide them. Make/buy decisions fall into this category 4. These decisions should involve top managers and strategic thinkers because they can literally define the future of the firm. For example, IBM to outsource its PC operating software to Microsoft and its central processing unit to Intel.

5. Marketing and Channel restructuring
It includes critical decisions related to getting the products from a firm's factories all the way into the customer's hands. As with facility location, these decisions impact the supply chain structure as well as define an interface with marketing 5.

6. Inventory and forecasting
It includes techniques for ongoing inventory management and demand forecasting. Industrial engineers and operation managers have employed statistical models for forecasting and inventory planning 6. Stochastic inventory models can identify the potential cost savings from sharing information with supply chain partners, but more complex models are required to coordinate multiple locations.

7. Service and after sales support
This category covers the important issue of providing service and service parts. Some leading firms, such as Saturn and Caterpillar, build their reputations in this area, and this area and this capability generates significant sales 7.

8. Reverse logistics and green issues
This area examines both reverse logistics issues of product returns and environmental impact issues 8. Growing regulatory pressures in many countries are forcing managers to consider the most efficient and environment friendly way to deal with product recovery. Product recovery includes the handling of all used and discarded products, components and materials.

9. Product design and new product introduction
It deals with design issues for mass customisation, delayed differentiation, modularity and other issues for new product introduction 9. Traditionally, products destined for world markets would be customized at the factory to suit local market tastes. The customized product is desirable and managing worldwide. Thus if the French version selling well, but the German version is not, German products can be quickly shipped to France and customized for the French market.

10. Information and electronic mediated environments
This category addresses the impact of information technology to reduce inventory and the rapidly expanding area of electronic commerce 10. It focuses attention on integrative ERP software such as SAP and Oracle as well as supply chain offerings such as Manugistics, i2's Rhythm and Peoplesoft's Red pepper.

11. Metrics and Incentives
It refers to the measurement of both engineering and organisational processes and the related economic motivations. Several recent articles concentrate on the link between performance management and supply chain management 11.

12. Global issues
It considers the issues beyond local country specific operating environments to encompass issues related to cross-border distribution and sourcing 12. For example, currency exchange rates, duties and taxes, freight forwarding, customs issues, government regulation and country comparisons are all included.

Conclusion
Supply chain management is indeed a large and growing field for both engineers and managers. Nearly all major manufacturing consulting firms have developed large practices in the supply chain field and the number of books and academic research papers in the field is growing rapidly. In fact, each of the twelve areas covered in our treatment of supply chains are important in themselves. Finally, the Internet continues to change many fundamental assumptions about business, pushing managers to continue to evolve their supply chain practices or find themselves driven out of the market.

References

1. Hammond, J.H. and M.Kelly, 1990, "Note on Facility location",  Harvard Business  School, Harvard University, Cambridge.

2. Kopczak, L., H.Lee, and S.Whang, 1995, "Note on Logistics" Graduate School of Business, Stanford University, Stanford.

3. Bowersox, D.J., 1990, "The Strategic Benefits of Logistics alliances, Harvard Business Review, 36-45.

4. Venkatesan, R., 1992, "Strategic Sourcing: To make or Not to Make" Harvard Business Review, 98-107.

5. Fisher, M.L., 1997, "What is the Right Supply Chain for your product?" Harvard Business Review 105-120.

6. Lee, H.L. and S. Nahmias, 1993, "Single-Product, Single-Location models in Logistics of productions and inventory" Handbooks in Operations Research and Management Science, Amsterdam

7. Cohen, M.A., Y.S. Zheng, and V. Agrawal, 1997, "Service Parts Logistics: A Benchmark Analysis", Supply Chain Management Review, 627-639

8. Herzliner, 1994, "The Challenges of Going Green", Harvard Business Review, 37-50.

9. Gilmore, J.H. and B.J. Pine, 1997, "The Four Faces of Mass Customisation", Harvard Business Review, 91-101.

10. Woolley, 1997, "Replacing inventory with information", Forbes, 48-54.

11. Laughlin, K.A., 1997, "Five steps to improved performance measurement", Supply Chain Management Review, 52-58.

12. Arntzen, B.C., and G.G. Brown, 1995, "Global Supply Chain Management at Digital Equipment Corporation", Interfaces, 69-93.
 


Dr. Vijay Pithadia
Assistant Professor & Kidevices Chair
School of Management Studies
Shri Lauva Patel Trust College For Women
Amreli-365 601 GJ
&
Dr. M. Gunasekaran
Asst. Professor in Management
Karpagam Institute Of Management
Karpagam Arts & Science College
Coimbatore–21
 

Source: E-mail June 22, 2005

 

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