NATURE OF SUPPLY CHAIN MANAGEMENT AND ITS ONLINE EQUIVALENT

By | February 9, 2018

Online supply chain management (SCM) has evolved into an important tool for creating efficien- cies in business operations. It is the natural evolution of traditional supply chain management that manages supply channels as well as distribution channels in order to reduce inventory and lead times and improve customer service as well as product quality. More formally, supply chain management is defined by the Council of Logistics Management Council (www.clm.org) as the systematic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company for the purposes of improving long-term perfor- mance of the supply chain as whole.

The functions most frequently involved in supply chain management are purchasing, opera- tions, logistics, and transportation. For the telecom manufacturer involved in segmenting its cus- tomers into logistically distinct businesses, the functions would include transportation and warehousing. Online SCM extends the implementation of traditional supply chain management

 

 

through the integration of business-to-business (B2B) electronic commerce to achieve the im- proved performance sought within the supply chain.

The SCM literature addresses two general categories of B2B online applications: market me- diation and collaboration (Keskinocak and Tayur 2001). Market mediation mechanisms are those used either to generate new channels of distribution through e-marketplaces or to support existing channels with company Web sites. For example, Internet-based auctions for acquiring goods and services in the B2B environment improve supply chain performance by matching orders for goods and services with available capacity. Webster (2002) proposed that the expansion of real-time enterprisewide information systems and Internet-based markets portends a shift in the role that dynamic lead time, pricing, and capacity may play in the future economy.

Market mediation may be implemented on the Web with procurement-related applications. Chaudhury, Mallick, and Rao (2001) discuss the uses of the World Wide Web in the context of activity theory and the variety of business roles it supports: as an advertising channel, an ordering channel, a procurement channel, and a customer support channel. On one hand, buyers involved in procurement search out new suppliers or special deals with existing ones on the Internet, then execute the purchase via Internet-enabled ordering processes. The notion that the Web is a tool to carry out a plan seems to fit well with the goals of online SCM, although many authors admit “the Web has a long way to go before it becomes a full-fledged ordering channel” (Chaudhury et. al. 2001). eCRM may indeed support market mediation in SCM, as the buying firm may look toward its own selling organization to acquire knowledge concerning demand that will enable more effi- cient procurement of goods and services. Gebert et al. (2003) identify these as goals in their knowledge management model, relative to dissemination of knowledge to process owners, in- cluding supply and distribution planners. Thus, the market mediation process is inextricably re- lated to eCRM.

The second category is Internet-based collaboration in the supply chain. This provides the mechanism to improve efficiency and responsiveness through enhanced information exchange between partners in the supply chain. Again, the use of Internet technology in this type of appli- cation improves transaction efficiency; but more importantly, it also improves supply chain per- formance by increasing visibility and enabling the supply chain to be managed as an integrated system rather than a set of individual production processes (Rayport and Sviokla 1995). An ex- ample of Internet-based collaboration between parties in a supply chain is Collaborative Plan- ning, Forecasting, and Replenishment (CPFR) and its supporting technologies, which were developed under the auspices of a Voluntary Interindustry Commerce Standards committee (McKaige 2001; White 1999). Retailers and their suppliers have benefited by using this form of Internet-based collaboration that coordinates product planning and forecasting. Case studies reported on Internet-based collaboration (http://www.cpfr.org/) describe the benefits in terms of reduced inventory and increased sales due to improved in-stock rates. Another form of collaboration

—e-planning in the supply chain—may include a notification system for sudden, unanticipated changes that are likely to affect partners (Czupryna 2000). Plakoyiannaki and Tzokas (2002) identify the use of CRM data in this way to aid in operational decision making. eCRM is valuable in collaboration processes as well, especially in demand planning and in the use of forecast infor- mation in the design of the production processes that enable efficient production of tailored prod- ucts and services in a supply chain.

These applications of SCM continue to hold great promise, yet a shortfall exists between the opportunity and the actualization (Greengard 2001; Pyke et al. 2001). eCRM has its share of failures as well. The success or failure of both eCRM and SCM depends upon several related factors. We now outline these factors, as identified in previous research on their impact.

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