ONLINE SUPPLY CHAIN MANAGEMENT AND E-CRM THE VALUE OF INFORMATION

By | February 9, 2018

The success of a SCM or CRM initiative, whether online or not, is determined to some extent by the degree to which the correct use of information drives an overall improvement in supply chain efficiency or marketing efforts. This is measurable using the evaluation attributes previously men- tioned. In the case of SCM, research on the impact of improved demand information and the impact of reduced uncertainty on inventory systems addresses the value of information in the supply chain. A number of studies, both empirical and analytical, have investigated the relation- ship between providing information to suppliers and the benefits that can be attributed to the improved communication environment. For instance, Salmen and Muir (2003) reinforce the no- tion of “value-creating information” and its availability to customers in eCRM. Such information empowers customers and allows them to absorb what they want when they want it. Their work identifies two fundamental approaches for information dispersal (Salmen and Muir 2003):

 

  1. Providing personalized purchasing and related information upon a customer’s request
  2. Retaining more general information about a customer that may be useful and providing it via a list or similar format

 

SCM has the same basic approaches for information dispersal, be it the ability to review agreed- upon lead times for individual raw components when dealing with a supplier, or to provide list- ings of ship dates for a customer’s review.

One way that information in the supply chain improves performance is by making daily trans- actions more efficient. Sriram and Banerjee (1994) illustrate this with their work on the effects of electronic data interchange (EDI) implementations on purchasing policies. The authors surveyed the National Association of Purchasing Management and found that companies who placed rou- tine orders electronically without approvals were more efficient, in part because they reduced supplier monitoring accordingly. This resulted in a reduction in the number of buyers needed and tended to promote a longer-term buyer–seller relationship between the companies. This study illustrates that providing information to suppliers may indeed reduce costs. It also revealed that suppliers often tend to encourage buyers to use EDI and not the other way around. There was also no significant difference in the impact of EDI between buyers who were encouraged by their suppliers and those who were not and adopted it on their own.

In addition to costs, responsiveness in supply chains can be improved when suppliers share information with suppliers. Richeson et al. (1995) illustrate this with an investigation into the correlation between manufacturer–supplier communication and overall improvement in just-in- time delivery performance. These authors find that when more information is provided to suppli- ers in an IT arrangement, communication enhances manufacturing performance. This study also finds that both routine and nonroutine communications are essential to a successful manufac- turer-supplier relationship.

Tailored logistics also improves customer responsiveness in a supply chain, although the con- cept is limited, as described in Fuller et al. (1993). Without the information afforded by the Internet, and in particular the knowledge concerning specific customer needs for transportation and ware- housing, suppliers place customers in relatively few categories. Such is the case of the telecom manufacturer previously mentioned, which used 384 market buckets to describe the needs of its customers. Suppliers can be most responsive to customer needs when the service level is defined on an individual basis. This level of customization is possible only through the customer knowl- edge gained via eCRM. In this case, eCRM is required for SCM to succeed. Other examples of

 

 

eCRM as a foundation to SCM can be cited, such as the use of customer characteristics in supple- menting demand information for a product in Internet-based collaboration.

The information acquired through eCRM applications may also aid in structuring the supply chain to meet each customer’s individual need. Traditionally, logistics systems are built to be cost efficient through scale economies. At one point, for example, railroad companies were offering unit train service that transported goods for a single shipper on a specific origin–destination lane and thus offered the lowest possible freight rates.

Thus, the value of the information shared in the supply chain is a factor that influences suc- cess. Those applications with insufficient value will tend to fail, and those with significant value will be more often favored with success. Walton and Marucheck (1997) report that three limiting factors emerge from the analysis as important to supplier reliability: length of time the buying company has been using EDI with any supplier, type of data shared with suppliers (planned production or capacity information is useful), and EDI acquisition investment.

The literature also brings to light the importance of the interaction between parties in the information exchange to the success of both eCRM and SCM. The CPFR case studies address this issue relative to cross-enterprise forecast collaboration for SCM (VICS 1999). A partner who disagrees with a posted forecast proposes a change, which may be followed by a counterproposal from another partner. This proposal and counterproposal process may iterate numerous times. An online environment is especially well suited for this type of interactive task.

Obviously, this kind of interaction is neither easily accomplished, nor necessitated, in eCRM, but the intensity of the data gathering is important. eCRM tends to use unidirectional communica- tion between parties for data collection purposes. Trust and/or some form of fulfillment should accompany this one-way communication. In other words, customers, or potential ones, must have a reason to trust the company or expect something in return and therefore to provide the desired information. In the case of SCM, there is a “collaboration effect,” in direct contrast to the situa- tion where data exchange is unidirectional. When a customer shares information with the supplier and receives feedback on the accuracy of the data, as in the case of forecast collaboration, we can say that a collaboration effect exists and is an important contributor to the performance improve- ment in a supply chain. The effective use of underlying technologies represents another success factor for both eCRM and SCM. We address technological aspects of success in the next section.

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