E-Commerce Supply Chain Management: Strategies and Trends

Introduction

Modern-day competition is of a supply chain-wide nature; it is not limited to individual firms. The term supply chain may be defined as a system of distribution alternatives and facilities for whole corporate networks to collaborate for the purpose of designing, producing, delivering, and servicing products. Ever since the concept was introduced, supply chain management (SCM) has been growing in significance for corporations, particularly in the current increasingly competitive international marketplace.

Supply chain development is currently driven by factors such as globalization, swift technological advancements, and highly competitive marketplaces, with a number of firms joining hands and performing tasks they are most adept at. Mining corporations concentrate on mining activities, timber firms focus on lumber making and logging, and production firms concentrate on various kinds of production, from component manufacturing to final assembly. In this way, all firms keep pace with the swift changes characterizing the current era and continuously update their skills and knowledge to remain competitive in the marketplace.

Where firms once operated independent warehouses and truck fleets, they are now weighing whether such operations represent a core organizational competency or whether outsourcing these tasks to firms whose core competency is logistics would be a better approach. For achieving high operational efficacy and remaining current with ongoing technological changes, firms must pay close attention to their core competency. Such focus is crucial to remaining ahead of the competition (Hugos, 2003).

Literature Review

Supply chains include firms and business activities necessary for designing, making, delivering, and using services and products. Companies rely on supply chains for the essential elements they need to survive and thrive. All firms fit into at least one supply chain, where they play some definite role. Uncertainties linked to market evolution and the pace of change have rendered awareness and understanding of supply chains and their operating rules increasingly vital for organizations. Organizations that can capably forge and participate in robust supply chains enjoy a substantial competitive edge (Hugos, 2003).

Integrated SCM systems form the backbone of e-business goal attainment. While "SCM" has been defined in several ways by different authors, the need for it is clear: firms have been struggling to attain efficacy in the areas of sourcing, production, and delivery. Efficiency of the supply chain — that is, having the right products at the right time and place — can bring about customer service improvements, besides facilitating cost-cutting efforts. The business domain is now moving at an unprecedented pace, rendering agility and adaptation to change highly salient for all e-businesses and their infrastructure (Shaojun & Zhang, n.d.).

Sound SCM requires concurrent customer service improvements as well as improvements to individual supply chain members' internal operational efficiencies. The most elementary level of customer service involves consistently high order-fill rates, timely delivery, and extremely low product return rates. Internal efficiency within supply chain firms means those firms enjoy a lucrative Return on Investment (ROI) in assets — including inventory — and find ways of lowering sales and operational expenses. SCM is characterized by a basic operational practice pattern. All supply chains have their own distinctive challenges and market demands; nevertheless, identical problems are evident across all cases. Firms belonging to all supply chains need to engage in both independent and collective decision-making in the domains of inventory, manufacturing, location, information, and transport (Hugos, 2003).

These decisions collectively define supply chain efficacy and capabilities. How a firm can remain competitive and the means by which it does so are highly reliant on supply chain efficacy. If an organization's strategy is to serve mass markets and compete on price, the prudent approach is to forge a supply chain optimized for cost reduction. Likewise, if the corporate strategy is to serve a particular market segment and compete on customer convenience and service, optimization for supply chain responsiveness is needed. A firm's market and supply chain together influence who the firm is and the function it performs (Hugos, 2003).

Information constitutes the basis of decision-making for all other supply chain drivers — inventory, manufacturing, location, and transport. It forms the link between all supply chain operations and activities. As long as that link is sound — meaning information is precise, complete, and delivered on time — all supply chain players can make sound decisions to support their respective operations. This facilitates the maximization of supply chain profitability overall. Supply chains put information to two uses: (1) coordination of everyday activities linked to the functioning of the other drivers, and (2) planning and forecasting for anticipating and meeting upcoming demand (Hugos, 2003).

When members of a given supply chain display readiness to collaborate and share information with each other, it becomes possible to coordinate product introduction, development, and replenishment using advanced optimization-based scientific techniques. "Intelligence" makes information powerful; the subsequent frontier is its integration into every supply chain process element. Data sharing constitutes a foundational step in supply chain integration, enabling firms to gain point-of-sales (POS) visibility in addition to information such as demand forecasts, shipment planning, inventory levels, and capacity. After achieving visibility, intelligence assists in: (1) identifying when things go beyond control and require synthesis of large volumes of information to understand trends and patterns; (2) identifying means of resolving problems; (3) creating response plans; and (4) coordinating and synchronizing plans for every supply chain entity to ensure they work harmoniously (Lee, 2002).

When cellphones and similar products become outdated faster than supply chains can transfer them from the developmental stage to store shelves, manufacturers clearly fail unless their planning and supply chain execution take place with extreme speed, flexibility, and precision. In these increasingly common instances, there is virtually no margin for large demand shifts or serious supply chain disruptions. Previous inflexible, sequential production resource planning instruments have long been failing to handle SCM of any significant complexity or scale (Chen & Hasan, 2008).

Over the last few decades, web-based shopping has been capturing a continuously growing share of American retail sales — a trend that has made it critical to develop SCM approaches devised and executed with the needs of internet shoppers in mind. To keep pace with e-commerce's growing retail sales share in America, SCM professionals have been pivoting to secure and maintain limited essential warehouse space, meet customer service needs, and employ emerging technology to increase overall efficacy. Buyers' growing preference for internet shopping has shifted the customer service delivery burden away from physical stores to SCM professionals and their practices. Both non-commercial and commercial buyers expect internet purchases to arrive accurately, speedily, and at economical prices. Hence, logistics professionals have been shouldering increasing responsibility to ensure the right product reaches its destination with optimal efficiency.

Implementation: E-Commerce SCM in Practice

Within the New Retail age, buyers enjoy more choices in products available and where those products can be purchased. Hence, the shopping medium is as significant as product choice and brand, and retailers ought to decide on their approach with a focus on optimizing customer experience and client interactions.

Amazon is the world's largest internet shopping company. Initially only a web-based bookstore, it now encompasses a wide range of products including DVDs, Blu-ray discs, video games, CDs, electronics, toys, furniture, jewelry, food, and more. It saves considerably on storage expenses through the integration of partner warehouses and distribution center inventories. Hence, Amazon does not need to maintain high inventory levels like other physical stores. With regard to intercity transportation, the company has established a number of transport hubs or injection points situated in districts with high client concentrations for saving costs. Orders are first consolidated in distribution centers, followed by long-haul shipment via truckload (TL) or less-than-truckload (LTL) shippers carrying products between distribution centers and injection points. Given the relatively low per-mile cost for TL and LTL shippers, overall transport expenses may be substantially reduced (Yu, Wang, Zhong & Huang, 2016; Amazon.com Investor Relations, 2018).

According to analysts, the year 2012 marked when warehousing finally gained recognition as a tool for competitiveness among multichannel e-businesses. Amazon most notably embodied this milestone, achieving dramatic expansion of its distribution center and warehouse network to better compete against physical stores. The company even manages same-day delivery in certain areas. Its strategy and goal has always remained clear: to become the e-business equivalent of Walmart. By at least one key measure, the company has effectively executed that strategy. At first, it lost considerable sums of money owing to its investment in developing the supply chain needed to support the biggest internet retailer. Walmart's best practices did not translate well, as they entailed pallet-based, large-scale pick-pack-ship operations. Products enter Walmart warehouses, are stored, and are eventually picked, packed, and transported by truck — all on pallets. Amazon, by contrast, needed to excel at piece picking, packing, and parcel shipping. While products may enter warehouses and be stored on Walmart-style pallets, their picking, packing, and shipping had to be executed one unit at a time. Over time, Amazon developed a large share of its own related technology, facilitating its evolution from selling only products stocked in its own warehouses to merchandising products drop-shipped directly between supplier and customer. This required the development of advanced distributed order management systems capable of sourcing orders from company warehouses as well as numerous other warehouses and supplier manufacturing facilities (Lapide, 2013).

Conclusion

With e-commerce's constant development, businesses' supply chains have undergone dramatic changes, reflected increasingly in e-commerce-based SCM. Sound e-commerce SCM is gaining increasing significance as customer expectations grow and production lines expand globally. SCM systems are aiding e-businesses in rising to these challenges by linking them to suppliers and customers worldwide and offering IT infrastructure that enables seamless digital communication between commercial partners.

References

Amazon.com Investor Relations (2018). Investor Relations. Retrieved May 19, 2018, from Amazon.com Investor Relations and Filings with the SEC:

Balocco, R., Miragliotta, G., Perego, A., & Tumino, A. (2011). RFID adoption in the FMCG supply chain: An interpretative framework. Supply Chain Management, 16(5), 299–315.

Chen, C., & Hasan, N. (2008). How to succeed with supply chain planning. Supply Chain Management Review, 30–36.

Chopra, S., & Meindl, P. (2010). Supply chain management: Strategy, planning and operation (4th ed.). Upper Saddle River, NJ: Prentice Hall.

Duke, M. (2010). Next generation Wal-Mart. Vital Speeches of the Day, 76(9), 425.

Hugos, M. (2003). Essentials of supply chain management. Hoboken, NJ: John Wiley & Sons.

Lapide, L. (2013). A tribute to the ever-evolving warehouse. Supply Chain Management Review, 17(2), 4–5.

Lee, H. L. (2002). Unleashing the power of intelligence. International Commerce Review: ECR Journal, 2(1), 61–73.

Shaojun, X. I. A. O., & Zhang, S. (n.d.). The role of supply-chain management in e-commerce.

Yu, Y., Wang, X., Zhong, R. Y., & Huang, G. Q. (2016). E-commerce logistics in supply chain management: Practice perspective. Procedia CIRP, 52, 179–185.