Internet Procurement and Fulfillment Strategies. John Browning

¶ … Internet Procurement and Fulfillment Strategies.

John Browning wrote: "Information technology is no longer a business resource; it is the business environment"(Browning, p. 5). Business is moving at a rate which was not possible only a decade ago. The opportunities which have been made possible by using the internet for integration of procurement, fulfillment, customer's service and sales throughout an entire company have enabled the digitally enhanced company to access accurate information faster than ever before. With information in hand, businesses are equipped to made better decision, capture more sales opportunities and run a tighter inventory management system. However, just putting a company presence on the internet in the way of a corporate electronic information brochure is not what id meant by a digitally enhanced company. The power to run faster, leaner and more accurately is harnessed by integrating sectors of the business.

According to Muffatto and Payaro, companies which have moved their operations to the internet during the past decade have done so by way of taking full advantage of the technology which is available at any given time. When the industrial revolution occurred, businesses which still manufactured products by hand were at a competitive disadvantage to those who made the investment in assembly line machinery. A shop which manufactured automobiles one or two at a time had no means by which to stay competitive with the Henry ford company which was able to produce dozens of completed vehicles each day. Undoubtedly many qualified and quality automobile companies ceased to operate soon after assembly line technology came to the auto industry.

In the same way, today a company or organization which has to look through files for company sales information, put customers on hold while they look up inventory levels, etc. has no opportunity to compete with the digital company. Companies which have leverages their information management needs into company intranets can access total CRM information at the touch of a button from any sales office, at any time, as can their sales staff operating on the road. Customers who receive this kind of accurate service will soon leave the non-digital vendors, if for no other reason because of the level of sales and service accuracy they receive. Information systems play a dynamic role in today's business organization and in order to become a profitable player in a worldwide market, firms need powerful information and communication systems (Laudon, p.5).

For most organizations, the backbone of their information management structure is the internet. The Internet has become the number one tool for collecting and disseminating sales and marketing date. Information availability via the internet is instantaneous, making it more important than ever for businesses to be able to operate without duplicating efforts, or working with outdated information.

Organizations have moved through a step-by-step process in order to bring their business operation to this level of operations. Muffatto and Payaro identify this process in order to make a road map for companies which are just making the commitment to a digital transformation. The four steps are:

The company begins with traditional communications tools in their dealings with customers and vendors.

The company begins to use internet-based communications tools, such as static websites and email to communicate with customers and vendors. In doing so, they begin to reap the benefits of using the internet for convenience and speed.

The company begins to integrate internal information management within the company with the internet. Steps can include making sales history and sales and ordering system available on the internet to customers and sales staff. This step is enabled by creating a XML-based platform for real-time and dynamic operations between inside the company and outside the company operations which encompass more than just communication.

The company makes a final step to an integrated operation when dealers, suppliers and the company are all tied into the same communications platform. Internal management functions are enabled by the internet integration, as well as sales, accounting, and total client relationship management functions. (Adapted from Muffato and Payaro, 2002)

The integration occurs when the company can begin to act as a seamless broker of goods and services, which they either manufacture of provide, between suppliers and customers. The procurement process in the non-digital company entailed a complicated collection process which was shaped like a huge hour glass. The company sales information was collected at the top of the hour glass and preceded through a bottleneck which was limited by the process which required communication, and interpreting the data prior to ordering and manufacturing the products. The process was further limited by the rate at which a company could purchase and receive the raw good needed for manufacture.

Once the sales and order information trickled through the information management and decision making process, and the materials were received through procurement, the goods could then be manufactured. AT the time, the same sales information was retrieved from sales records, and applied to outbound shipments through the fulfillment process. At this point, the products were allowed out the bottom of the glass and shipped to customers.

The digital company allows the sale information to be collected and immediately integrated into supply chain management functions. The narrow orifice is no longer a collection and interpretation function. The information is immediately interpreted and disseminated to the other stakeholders in the chain. In an integrated company, the bottleneck is virtually eliminated as information to flows immediately to other stake holders. The stakeholders can include raw material suppliers, manufacturing and warehousing facilities, shipping and distribution channels, as well as order entry and order management personnel.

Regarding the examples of the motorcycle companies in Moffatto and Parayo's article, Aprilia has taken a much more aggressive approach to digital integration. Their products are sold to a wider variety of customers, and by digitizing the procurement and fulgent procedures, the company are leveraging the internet to its full advantage. Overall, "the significant results are that the time needed to carry out the various activities in the procurement state are reduced, the process is simplifies and there is greater control of the products needed for production which leads to a reduction of work-in-progress" (Moffatto and Parayo, 2002) The company has created an integral flow between procurement, fulfillment and supply chain management, enabling the company to focus more of its energy on that which creates profit, which is sales and marketing.