Information technology and e-commerce transformation of supply chain management

SCM & Ecommerce

For the last fifty years, the information technology was limited to data collection, storage, transmission, analysis and presentation. The shift in the last couple of years was towards information and its value rather than data. As we know that a half-century ago experts considered that the scope of computers would be restricted to its specialized use in science and military. Today computer has all sorts of applications in business and the whole it revolution has changed the way business is conducted and supply chain management an important aspect of business is also affected tremendously by the it and ecommerce revolution.

Telecommunication had its scope only in conveying messages from one place to another. Now, the telecom revolution has brought changes in the supply chain aspect of the business world. These changes are for the betterment of the overall business process. Now, people don't have to travel all over the world to conduct a business meeting or co-ordinate with suppliers or vendors because with the help of telecommunication tools they can do it without wasting much time and in the process they save costs as well.

Supply Chain Management a Strategic Tool

The functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers make a network and chain for a company called supply chain. Supply chains exist in both service and manufacturing organizations have to mange their supply chains to deliver a final product or service to the consumer. Some organizations have complex supply chain and some have simple and linear chains and the level of complexity of the chain may vary from industry to industry and firm to firm.

Supply Chain Management is a top strategic objective for many companies. The interrelationship with other businesses needed to build and sell a product make up a network of business relationships that is called supply chain. Supple supply chain management is flexible enough to cater to the demands of customer as and when there is a demand. Supple supply chain fulfills the requirement of what the customer wants, when and where it's wanted and at the lowest possible cost. The supple SCM is only possible when management practices are integrated with information technology to optimize information and product flows among the processes and business partners.

In the current scenario of it, organizations now can use intranets, extranets and e-commerce Web portals to help them reengineer their relationships with suppliers, distributors, and retailers with the objective of significantly reducing cost, increasing efficiency and improving supply chain cycle times in mind. Management can use software to improve inter-enterprise coordination among supply chain process players resulting in much more effective distribution and channel networks among business partners. In such a scenario close coordination with suppliers and other business partners is required so that the whole system can be beneficial for each partner.

Example: The process of changes due to fast changes in the technology has not come to a halt rather it's a fast paced process that will further enhance the business capabilities in the future. Here we can cite the example of companies like FedEx & at&T where business partners, suppliers and vendors are urged to adopt telecommunicating. Now they have virtual offices as employees or representatives use their laptops, cell phones from anywhere to communicate with other employees. "Dennice a Wilson, vice president of supply chain solutions for FedEx Express in Asia Pacific, says the two major reasons for embracing a "supply chain solution" for most companies is to achieve a reduction in cycle time and a reduction in costs across the chain. She says that the supply chain management costs of best-in-class companies (top 20 per cent performers) as a percentage of revenue ranges from three to five per cent, versus median companies' eight to 11 per cent" (Smith 2003).

Internet, E-Commerce & SCM

Previously, marketing, distribution, planning, manufacturing, and the purchasing in the supply chain operations were considered independent functions because of which many problems were encountered. Many a times goals of manufacturing and distribution functions conflict with marketing and sales department. There was no alignment or interaction among these departments. As the idea of project management took base in business organizations then it, internet technology and ecommerce helped in bringing different functions closer to each other. The modern computer networks have the ability to rapidly distribute information to all concerned entities of an enterprise. The networks also present an infrastructure for coordination of planning and operational processes, not only within organizations, but also among them. The increasingly complex movement of products and information between businesses, their suppliers and customers can now be managed in a better manner owing to e-commerce. The link between customers and distribution centers is now stronger because of e-commerce. "In a survey assessing Internet usage, Lancioni, Smith, and Oliva (2000) found that over 90% of the respondents used the Internet in some part of their supply chain management program. Kennedy and Deeter-Schmelz (2001) investigated Internet usage as a tool for industrial purchasing, finding that most buyers were using the Internet for gathering information and placing routine orders. The Internet seemed to be more useful as an information-gathering tool than as an online transactional tool" (Zank & Vokurka 2003).

Shipments & Documentations: The Internet has facilitated companies that use transportation and logistics to exchange cargo documents electronically. Document handling, an important element in the whole supply chain process has now been streamlined for shippers, freight forwarders and trucking firms in particular resulting in the savings in terms of monetary and time investment required by the traditional document delivery systems. Exchange bill of lading instructions, freight invoices, container status messages, motor carrier shipment instructions, and other documents can now be exchanged with increased precision and effectiveness by the ocean carriers and their trading partners. Cutback in costs, perfection in e data accuracy, streamlining of business processes, speeding up of business cycles, and enrichment in customer services are some of the key benefits that companies today get as a result of e-commerce. Just the simple use of a personal computer and an Internet browser can give companies an edge in their basic supply chain management functions eliminating the need for excess documentation.

Using e-commerce advancements real-time information about cargo shipments can be obtained and an account can be established. Bills of lading can be created and submitted, a cargo order can be paced, charges can be analyzed, a freight claim can be submitted, and many other functions can be carried out with the optimal use of e-commerce. Transmitting a packing list ahead of the shipment can also be electronically transmitted as a result of automation in the receiving process. With the help of e-commerce no information can be missed as companies can record the relevant details of each pallet, parcel, and item being shipped. As more and more because standard bills of lading, shipping labels, carrier manifests and even the specialized export documentation required for overseas shipments are automatically produced, there will be less need for manual intervention. Efficiency in the shipping department can simply be achieved due to significant reductions in paperwork.

Customer Orientation: previously customers were not considered an important link in the supply chain. Today, however, things are different and web sites can provide a universal, self-service system for customers. For example, shippers can order any service and log on the information they require to do business with transportation companies entirely online. Now trends are changing and companies are opening up making more information available about their commercial side. Many businesses have set up their business portals and web site s a place where customers get to see detailed information about the services the company offers and at the same time using e-commerce technologies they can actually conduct business with the company. Hence, e-commerce has made positive strides and has put customers ahead by providing them with a faster and easier method to do business with them. So, customers by tracking shipments down to the individual product and performing other supply chain management and decision support functions.

Inventory Management

Inventory management is the crucial component of SCM. Inventory cost is one of the major components of a product's cost and so managing the cost of inventory is a major management task. Previously companies used to adopt the strategy of storing products irrespective of customer demands but now the trend is shifting towards maintaining inventory according to customer needs. This change has not only resulted in better manangement of invrntory but also huige reduction incosts. This change and shift has also been a result of developments in information technology. As companies strive to maintain minimal inventories they need all the support from the efficient it infrastructures. It helps by integrating data flows and work processes across entire enterprises and even industries. Also, mastering Internet commerce requires new skills and a fresh mindset. E-commerce forces a business to operate in real time and personnel involved in supply chain operations such as inventory don't have to punch in figures and can obtain information through ecommerce.

Areas of Concern

Companies today are trying to reap more and more benefits from e-commerce particularly with reference to their supply chain management function. There are different questions and concerns that these companies should try to address if they want to get an edge in this changing and dynamic environment. Companies should look at both the long and short-term impacts of information exchanges and see what parts of the chain are most affected and what parts are most relevant. Also the companies should try to look for further improvements in the use of e-commerce in the supply chain management. For example, we can consider the case of inventories regarding which companies are making efforts. They would like to cut their inventories by improving forecasts, but even today no statistical model can forecast the day-to-day demand for a product with a three-month life cycle and thus what levels of safety stock to maintain. The industries that have product requiring shorter lead times and response cycles will have a different outlook to supply chain management than those companies with longer lead times and response cycles. So, the decisions vary and its is up to the companies to decide which elements of the chain are moire important for the company and could benefit more from ecommerce resulting in greater efficiencies. "To date, e-marketplaces have focused mainly on procurement -- and dealt with it reasonably well. But they have encountered problems in seeking to streamline tasks (such as production planning, inventory control, and scheduling) that lie closer to the heart of supply chain management. To devise solutions, it will be necessary to analyze what exchanges can and can't do. They will never reduce the time it takes to deliver goods physically, for example. But since the information flow in supply chains is typically linear, fragmented, and inaccurate, they can make a vast difference in this area" (Agrawal & Pak 2001).

Impact of Globalization

IT revolution also brought in its wake the phenomenon of globalization as result of which products are no longer produced and consumed within the same geographical area. These chabges definitely involve important supply chain elements. As opposed to previous practices when all elements of a product were produced under a roof or within easy to reach geogriaphical boundaries, now even the different parts of a product may, and often do, come from all over the world. This international supply chains mean that it would be diffcult to reduce the lead time after certain limits. When international boundaries are involved in the supply change then the role e-commerce technologies become more important.

Conclusion

It is astounding that technology that in the past was capable of processing orders and computing payrolls, has today changed the structures of organizations and the way their supply chains function. The search for improving organizations with the help of telecommunications is still going on and it or an information system has embraced the technological changes in its folds. Today the role of it in improving SCM is of utmost importance. Rather it won't be wrong to say that both of them complement each other to enable organizations with new ways of doing business.