Internet E-Systems to Support Purchasing Supply Chain Essay

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  • Subject: Business
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  • Paper: #56702213

Excerpt from Essay :

Internet e-Systems to Support Purchasing Supply Chain Management Activities

Although the fundamental goals of effective supply chain management have not changed in recent years, companies of all types and sizes now have the ability to streamline their supply chain management activities in general and their purchasing function in particular through the use of Internet-based e-systems. Such e-systems include corporate intranets and business-to-business exchanges that can satisfy the entire spectrum of supply chain management needs in more efficient and cost-effective ways. To gain some further insights into recent and current trends in the use of Internet e-systems to support purchasing supply chain management activities, this paper provides a review of the relevant literature, followed by a summary of the research and important findings in the conclusion.

Review and Discussion

Innovations in telecommunications and transportation have profoundly affected the manner in which companies go about achieving their organizational goals. For instance, according to Fayard and Desanctis (2008), "Advances in communication and information technology have dramatically reduced the geographic and temporal constraints organizations have traditionally faced, and have led to the emergence of new forms of organizing, often referred to as 'virtual forms of organizing'" (p. 677). These virtual forms of organizing can be used to improve knowledge-sharing activities within and without the company in ways that can improve the supply chain management function if they are carefully implemented and administered. Moreover, an increasing number of Internet-based e-systems are allowing users to interact with each other in virtual environments (Huxor, Schroeder & Smith 2001). In this regard, Chapman and Ellinger (2009) report that in recent years, "The potential for creating customer value and sustainable competitive advantage through supply chain management is now widely acknowledged within industry. Similarly, the strategic significance of the logistics processes that enable the efficient and effective management of supply chains has also increased" (p. 197). The strategic significance of the logistics processes that support the supply chain are also cited by Camm (2001) who reports:

Logisticians have created the concept of an integrated supply chain that links all the relevant processes, from the production of the raw materials that an organization uses to create a product to the ways its customers use the product it provides. They often speak of 'walking the box,' by which they mean tracing a physical part, or 'box,' from its point of origin to its final destination and analyzing each process, 'end to end,' that affects the box on its journey. (p. 9)

Although every organization is unique, the overarching goal of supply chain management in any setting is to streamline the material flows (the "box on its journey" and associated information flows with an organization's operations (Griffiths & Payab 2010). For instance, according to Griffiths and Payab, "In order to manage these materials and information flows, e-systems are today essential to synchronize demand and supply and manage procurement, warehouse inventory and product distribution" (p. 30). The addition of e-systems to traditional supply chain management practices has accelerated these processes as well. For instance, so-called business-to-business exchanges provide a collective e-systems venue for companies of all types and sizes to coordinate their supply chain management in general and purchasing function in particular. As Agrawal and Pak (2001) point out though, "B2B exchanges can't improve the efficiency of every element of the supply chain. An improved information flow is what they really have to offer" (p. 22).

This improved information flow can facilitate the purchasing function in several ways, including providing reliable inventory forecast data, more efficient transactions, and eliminate excessive inventory levels (Agrawal & Pak 2001). The quality and effectiveness of business-to-business exchanges, though, varies dramatically from venue to venue and managers should perform due diligence in their selection of an appropriate B2B exchange (Agrawal & Pak 2001). In addition, depending on a company's unique needs, some elements of the purchasing function may be more suitable for use with a B2B exchange than others, but the fundamental tenets of supply chain management apply to their e-systems deployments as well. In this regard, Agrawal and Pak emphasize that, "Companies should decide which elements of the chain could produce the greatest efficiencies and then choose the exchange most likely to promote them. Identifying ways to capture true supply chain benefits from exchanges thus comes down to basic supply chain management" (2001, p. 22).

Other e-systems that have been used to improve the supply chain management functionin general and the purchasing function in particular include so-called "e-business portals." According to Thierauf and Hoctor (2008), "Currently, businesses are rapidly adopting E-business portals that utilize various strategies and portal tools as a way to provide a single access point and information interface to the company both inside and outside" (p. 68). One of the constraints to the deployment of these e-systems, though, is the vast amount of data they tend to generate, making the process akin to trying to drink from a fire hose. Indeed, Thierauf and Hoctor stress that, "Connecting to customers through Web storefronts and to suppliers through supply chain management systems has generated much more information to be included in day-to-day decisions" (p. 68).

Refining e-business portals to provide organizational decision-makers with the real-time information they need has improved the efficiency of these e-systems in recent years. In this regard, Thierauf and Hoctor point out that, "Faced with the same problem that has plagued the Web (i.e., voluminous and disparate information), E-commerce turned to the same solution, enterprise portals. Since then, enterprise portals have become a permanent fixture in the E-business world" (2008, p. 68). The ability of enterprise portals to sort the supply chain management wheat from the chaff is also cited by Duray and Vering who emphasize, "Enterprise portals are the business-to-business (B2B) equivalent of the consumer-oriented portals after which they are modeled. But rather than offering access to consumer goods, services, and information, enterprise portals are designed to give each individual using them -- executives, employees, suppliers, customers, third-party service providers -- a unique view of the company providing the portal" (2001, p. 3).

This improved capability has been a driving force in identifying new approaches to integrating supply chain partners in ways that improve the purchasing function (Duray & Vering 2001). Despite the advantages that can accrue to the use of enterprise portals and other Internet-based e-systems, integrating these technologies with an organization's supply chain management practices across the board represents a challenge enterprise. In this regard, Griffiths and Payab emphasize that, "It is very difficult to collect data from e-commerce-driven transactions and link the gathered data to the rest of the accumulated data through other procurement systems" (2010, p. 30). These authorities attribute this difficulty to the rapid proliferation of increasingly sophisticated technologies as well as an increasingly globalized marketplace (Griffiths & Payab 2010). As these authorities conclude, "Therefore, it is quite challenging for firms to choose a sustainable B2B marketplace related to their businesses for gaining a larger supplier choice and stable links with their suppliers" (Griffiths & Payab 2010, p. 31).

Further refinements of enterprise portals, though, have taken place recently through the addition of wireless technologies, making the communication process even more accessible and providing the ability to overcome many of these constraints. In this regard, Thierauf and Hoctor report that, "Many enterprise portals are acting as the interface to business applications. Wireless access capabilities are being integrated with general portal access capabilities rather than directly into data warehouses or business applications. Overall, an important thrust of future enterprise portals will be on using smart technology that is tied in with wireless access capabilities" (2008, p. 68).

An important point made by Manyika and Nevens (2002) concerns the need for organizations to integrate e-systems such as enterprise portals in a comprehensive, holistic fashion rather than as a piece-meal addition to the organization's existing supply chain management framework. In the past, some organizations failed to achieve optimal returns on their investments in e-systems because they did not alter their underlying business processes to reflect this new addition to their supply chain management. According to Manyika and Nevens, "This is [a] rather serious mistake, for to realize the full value of enterprise applications (such as supply-chain-management and enterprise-resource-planning systems) companies must change their business processes significantly" (2002, p. 18).

A fully integrated purchasing system that uses such e-systems for support can help eliminate so-called "maverick purchasing" practices that can be highly costly. For example, Griffiths and Payab report that, "Maverick purchase refers to buying of goods or services without considering the firm's formally established processes and authorized vendors. . . . Maverick or off-contract purchasing often happens when items that are ordered are essential, very expensive or complex to purchase" (2010, p. 30). To the extent that the integration of e-systems can eliminate maverick purchasing, improve standardization of supply chain processes, integrate e-commerce transactions and other systems, and facilitate the flow of information between supply chain partners is likely the extent to which supply chain managers will achieve their goal of adding value (Griffiths & Payab 2010).

Conclusion…

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