Essential Elements Of A Supply Chain

Published Date: 02 Nov 2017

Meaning

Electronic business is commonly called as "ebusiness" or "e-business" or an internet business, which is considered as the application of information and communication technologies (ICT) in support of all the activities of business. Basically commerce is considered to be exchange of products and services between businesses, groups and individuals and can be seen as one of the essential activities of any business. Electronic commerce focuses on the use of ICT to enable the external activities and relationships of the business with individuals, groups and other businesses.

E-business is defined as the conduct of industry, trade and commerce using the computer networks. The term "e-business" was coined by IBM's marketing and Internet teams in 1996.

Electronic business techniques ensures companies to link their internal and external data processing systems more efficiently and flexibly, to provide working closely with suppliers and partners and to better satisfy the needs and expectations of their customers. The internet is a public through way. Firms use more private and hence more secure networks for more effective and efficient management of their internal functions.

In today’s world the terms e-business and e-commerce is used interchangeably. E-business is referred to be focused on strategy with an emphasis on the functions that occur using electronic capabilities; e-commerce is a part of an overall e-business strategy. E-commerce adds revenue streams using the World Wide Web or the Internet to build and enrich relationships with clients and partners and to improve efficiency using the Empty Vessel strategy. Often, e-commerce involves the application of knowledge management systems.

E-business is a type of business model, or part of a larger business model, that enables a firm or individual to conduct business over an electronic network, typically the internet. Electronic commerce operates in all four of the major market segments which include business to business (B2B), business to consumer (B2C), consumer to consumer (C2C) and consumer to business (C2B).

Ecommerce allows firms to establish a good market presence, or to develop an already established larger market position, and this actually done by allowing cheaper and more efficient distribution chain for their products or services.

One example of a firm having successfully used ecommerce is Borders. This book store not only has physical stores, but also has an online store where the customer can buy books, CDs and DVDs.

E-BUSINESS AND ITS IMPACT ON SUPPLY CHAIN MANAGEMENT

Supply Chain Management

Effective and optimal supply chain management initiatives use the most pertinent business community processes and organizational concepts as well as technology, information systems and communications infrastructures to establish a competitive edge and maintain staying power. Industry experts state that the key to maintaining a competitive edge is successfully evolving toward inter-enterprise, collaborative business models that operate within communities of business. Customer driven Managed Services and Business-to-Business Collaboration within Supply Chain communities have emerged as the most innovative and effective means for companies to create and sustain a strong market position. The Supply Chain Management (SCM) is the comprehensive integration of all sub-processes that enable the exchange of information and movement of goods between suppliers and end customers, including manufacturers, distributors, retailers, and any other enterprise within the extended supply chain. An extended enterprise combines the Internet’s power with new business structures and processes to eliminate old corporate boundaries and geographic restrictions. Networked supply chains create seamless paths of communication among partners, suppliers, manufacturers, retailers, and customers. By seamlessly integrating supply chain suppliers, manufacturers, distributors, and retailers into a single virtual enterprise serving the customer extended supply chains are formed. Companies such as Proctor & Gamble and Wal-Mart are achieving huge competitive advantages by using the networked supply chain.

• Goals of A Supply Chain- The objective of Supply Chain Management (SCM) is to maximize revenues, minimize expenses, and make full use of all assets, thus resulting into superior profitability, market share, and responsiveness to customer demand.

• Background of history- The need for automating the business transactions between the different organizations in the supply chain resulted in the development of Electronic Data Interchange (EDI). EDI was developed, in the early 70’s, at first as proprietary communications systems between large retail organizations and their suppliers. Although EDI allowed communication between the organization and its suppliers, it had its inherent disadvantages. EDI transactions were very complex and expensive.

• Internet Advent- the Internet, specifically the World Wide Web, changed this scenario radically. Connectivity over the Internet is cheap, increasingly secure, and built on standards which make communicating with anyone an easy task. Organizations that best harness the power of the Internet will achieve significant competitive advantage in customer satisfaction and profit margin. Using the Internet as a universal networking standard, business partners can create seamless, automated supply chain systems that function as smoothly as if the organizations operated as one entity. This results into faster order-processing, improved inventory tracking and management, more accurate order fulfillment, support for just-in-time manufacturing and improved customer service.

• Essential Elements of A Supply Chain

a) Order Fulfillment Process—activities that occur across multiple supply chain constituents and range from order entry and confirmation to scheduling and production, and include packaging, delivery, and payment.

b) Product Life Cycle Management—control of a product’s life cycle throughout the supply chain, including product prototyping, development, upgrades, and modifications, and managing the product’s end-of-life.

c) Product Service—supply chain activities related to serving customers after the initial sale, including the availability of service, spare parts, and correct product versions; incorporates the product service function directly into the supply chain and increases customer satisfaction.

• Basic Technology Elements

a) Scalability and Reliability As use of networked supply chains increases; it places high demand on network scalability and performance. A key requirement is a 24x7 reliable operation under heavy network traffic. Network products of reputed vendors provide powerful reliability features, such as intelligently load balancing user traffic across multiple, co-located servers. Load balancing ensures all physical servers appear as one virtual server, and, if one server is overloaded or down, traffic will be quickly routed to the next available server.

b) Security is a major concern. Networked Supply Chain Management Solutions provided by reputed vendors include security protocols and products such as IPSec, firewalls, and virtual private networks (VPNs) and address all key areas of security requirements, including authentication, authorization, integrity, and active audit.

• A Supply Chain Benefits In a networked supply chain, each supplier and partner can securely access key business information and is empowered to make informed decisions to best serve customers.

The benefits of a supply chain include: a) faster inventory turns throughout the supply chain, reducing inventory carrying costs. By extending the organizational boundaries, suppliers would be able to access information on inventory and replenish them as and when necessary, thereby reducing the need to carry high inventory. b) By automating supply chain, forecasting accuracy can be drastically improved. This would result in organizations not only producing products only when they are needed but also reduce stock-outs, thereby improving customer satisfaction.

c) Dependable delivery promises and consistent execution against those promises creates customer loyalty and improved customer satisfaction.

d) Extended Enterprises are highly responsive to customers by quickly communicating customer demand and changes throughout the supply chain. Suppliers meet order demand more quickly and may ship directly to customers. Customers receive their orders on time with higher consistency and enjoy greater control by "self-serving"––ordering, configuring, checking status-online.

e) Flexibility to design, launch , and retire products rapidly in response to customer and market demand nter-process integrated workflows for product-transition planning that synchronize the product development and launch capabilities with the supply chain's ability to support the new product.

f) Shorter engineering-to-production cycle time to increase market share

g) By providing coverage against demand and supply fluctuations, an enterprise can maneuver more effectively against the competition, and thus improve agility of the entity.

h) As suppliers are able to access the inventory and procurement information automatically, the purchasing management and staff can reduce their involvement in lower value transaction functions and focus on higher value activities like vendor sourcing and managing relationships with them.

i) By extending the organizational boundaries, organizations can deliver what they have promised, which would result in increased revenues and help in maintaining/increasing market share.

j) By effectively managing constraints and response buffers to ensure maximum throughput and demand coverage, the resources of an enterprise are aligned to generate maximum revenue and eliminate unnecessary costs.

k) A single business action triggers cross-enterprise transactions. Changes in market demand are communicated directly throughout the supply chain. Suppliers can respond appropriately to minimize inventory buildup and operate profitably.

l) Extended Enterprises build scalability into their operations by offloading execution of critical but non-core functions, such as manufacturing or fulfillment, to suppliers and partners. These partners have the ability to scale their operations quickly and cost-effectively.

m) Intelligent Available To Promise (ATP) and backlog management improves reliability of the delivery commitments and maintains the targets laid down.

n) Intelligent, collaborative workflows that extend the supply chain into the customer and supplier bases improve responsiveness to supply & demand fluctuations, and minimize inventory.

Traditional Supply Chain management model – ERP

Traditional ERP systems simply lack the advanced planning tools necessary for companies to respond to an increasingly competitive business environment. There are three fundamental limitations of ERP systems in this regard:

• Operation Focus

• Poor Flexibility

• One-Dimensional Planning

Finally, vendors have observed the complementary nature of SCM and ERP and are engaged in consolidation of their product suites. Perhaps more importantly, they have observed that prospective customers appreciate the ability to obtain applications offering full functional breadth from a single vendor. Table 1 contains just a few of the major SCM-Enterprise Application vendor pairings that have occurred over the last few years. In addition to mergers, most ERP companies have entered into joint marketing arrangements with SCM vendors, embed their solutions, and/or provide standard interface certification programs. In like manner, SCM companies often partner with specialty supply chain execution software vendors in an effort to fill gaps within their functionality and industry verticals. Fundamental shortcomings of ERP revealed by the advance of technology and increasing customer demands are addressed neatly by supply chain management techniques. ERP vendors in pursuit of complete solutions will continue to seek a variety of relationships with providers of advanced planning and scheduling, logistics, forecasting, and other decision support technology. Supply chain management solutions have arrived as essential components for companies seeking to establish and maintain a successful business.

ADVANCED E-BUISNESS & SUPPLY CHAIN MANAGMENT ENTERPRISE

Ford Motor

Ford’s Tier 1 steel supply chain is a complex, multi-tier network comprised of Ford’s in-house procurement group, steel producers, and large and small contract manufacturer stampers. There are more than 1,200 participants across hundreds of companies in this network throughout North America and Europe. Ford depends on these companies to coordinate their activities to ensure that the carmaker’s assembly plants receive exact specified materials on precise schedules. • Ford's Business Challenge To gain maximum control and cost savings in buying steel, Ford launched a centralized demand aggregation and remarketing program across its North American Tier 1 steel supply chain in 1995. Through this program, Ford combines the individual steel buys from its stampers and then negotiates larger orders with its steel suppliers. This gives Ford advantageous volume discounts. Ford then remarkets the steel to its stampers and manages all of the material, information and financial flows. Ford has significantly grown the size and scope of this program each year. It currently procures more than $1 billion in steel annually, accounting for 2.5 million tons of steel and 2,600 unique parts and components. However, administrative inefficiencies have slowed critical information flows, such as financial dispute resolution. The program’s burgeoning administration was highly inefficient for Ford’s in-house team and its supply network, limiting Ford’s future growth plans. The complex program involved more than 170 unique business processes administered via manual, paper-intensive workflows. Real-time data access and end-to-end visibility of key information was not available. These factors also limited Ford’s ability to easily review history and identify trends to make better strategic sourcing and material quality decisions. Ford identified early in the development of e-Commerce that new, web-native technologies could provide a wide range of strategic advantages to an entire supply chain. The automaker viewed such a system as a critical component to streamlining and accelerating its steel procurement growth plans around the world, with other Ford Motor Company brands, and across other direct material supply networks. In May 2000, Ford Motor Company selected NewView to design and implement an NewView SupplyNetwork to provide secure, efficient, multi-enterprise connectivity and real time data visibility for Ford and its steel supply chain. The NewView SupplyNetwork features a single, integrated, hosted application that crosses the boundaries of enterprise and provides all participants of the supply chain with enhanced: • Visibility Via a secure, web-based system, participants gain self-service, real-time data access and end-to-end visibility of the status of any business activity - anytime, from anywhere, with no costly IT requirements. • Collaboration The SupplyNetwork automates and integrates multi-enterprise workflow management for hundreds of business processes. Key e-enabled functions include demand aggregation, material specification communications, pricing management, and critical financial controls such as contract management and claims processing. • Control The SupplyNetwork also optimizes decision-making through information analytics, performance reports and data mining capabilities. Based on a comprehensive set of common standards and protocols in a single database, the NewView SupplyNetwork solution provides a strategic platform to rationalize material specifications and assess partner performance. • Ford's Successful Results The first-ever system of its kind in the automotive industry, the NewView SupplyNetwork is a cornerstone of Ford's B-2-B strategy, enabling the automaker to lead important business process change throughout the steel industry. Immediately following the system implementation in March 2001, Ford and its steel supply partners experienced significant efficiency benefits from the elimination of old, manual, paper-based systems, and the automation of more than 170 business processes. By the end of 2001, Ford anticipates that its European and entire North American supply chain will be using the new NewView SupplyNetwork daily, processing more than 1000 shipments a day. Ford plans to direct more than $1 billion of steel procurement through the system in its first year of use and to significantly grow volume the following year through program and geographic expansion. While automating its steel procurement system yields important material and processing cost efficiencies, Ford recognizes that the NewView SupplyNetwork solution also gives the automaker an adaptable, web-based infrastructure to expand its demand aggregation/remarketing programs globally, to other brands, and to other direct materials.

3.2 Dell Computer

The world’s No.1 computer systems company, Dell, delivers desktops, notebooks, workstations, servers and storage products for virtually any computing need. Dell’s competitive advantage is its direct customer focus. Interacting with customers by telephone or via the Internet, Dell custom-builds each system and delivers it faster than the competition can match. Dell uses supply chain management software to reduce inventories, improve material management and enhance relationships with suppliers. With manufacturing facilities and sales offices throughout North America, Europe, Asia and South America, Dell keeps its 34,400 employees close to the customer, meeting their unique needs one at a time. Dell’s new OptiPlex manufacturing facility is so efficient that it can produce more than 20,000 custom-built computers per day-at prices that beat many of its competitors’ off-the-shelf models. Dell’s customer-centered business model generated US $31.8 billion in revenues over the last four quarters of 2001, with about half of its sales generated online at www.dell.com Today, Dell purchases almost 90 percent of its direct material supplies online. When the company builds a computer, components that are only a few hours old are delivered from supplier hubs co-located near manufacturing plants. Dell's online supply management has also allowed the company to increase its collaboration with suppliers and customers. "Because we work directly with customers, we have the ability to connect and understand what products will be required and when," says Chong. "We can start the development cycle much more quickly with our partners. Whether it's a new midnight grey flat panel LCD because customers do not like the old beige or whatever colour scheme, we can start to plan those components and share information with our suppliers many months in advance of the product actually coming to market." The new system has also led to changes in the workplace. For example, former administrative and purchasing staff now fill new roles as supplier relationship managers. They can step in if a human touch is needed to resolve invoice discrepancies, ordering delays, or quality concerns. Dell’s new Supply Chain system connects suppliers with Dell’s Supply Logistic Centers, providing a global view of the long and short term materials needs in each Dell factory. Every link in the chain is connected, so every participant is working with accurate, timely information. That means supply chain operations are based on facts rather than forecasts, reducing waste, improving efficiency and responding immediately to customer needs.

CHALLANGES TO E-SUPPLY CHAIN

Security Problems

When a company considers starting or joining an electronic supply chain, one of its first concerns would be the security over the Internet. Most organizations are addressing this issue by using the security measures like encryption to protect its data so that members of the supply chain can only see information that is relevant to them.

The Changes of Business Process

While the electronic supply chain presents its share of technical challenges, including change, the real challenge is the impact automation will have on the ideal business process. An electronic supply chain brings major changes in the way companies communicate with each other, from planning to purchase to ordering. For the success of an electronic supply chain, organizations must be willing to collaborate data with its suppliers and customers over the Internet, dynamically exchanging information regarding inventory, production schedules, forecasts and promotion plans. Most organizations are still reluctant to share information like production schedules, fearing that they will somehow fall into the hands of their competitors. Companies fear that sharing too much information will harm their businesses.

Weaker Supply chain links

Smaller companies may not like being forced to join an electronic supply chain. The smaller companies are pressurized to automate or lose their businesses by big customers. The decision to take on the costs and headaches of automation is not their own, and the benefits of automation may accrue largely to their business partners and not to the smaller companies. Since supply chain is a coordinated activity, the whole chain would suffer if one link were slow to provide the right information at the right time. A supply chain is only as strong as its weakest link, and there will inevitably be smaller, weaker members of any such chain.

Sharing benefits

Sharing financial benefits is an important success factor for many companies. For example, Bergen Brunswig, a pharmaceutical and medical surgical supply distributor in California, signs performance-based contracts with its supply chain partners. If Bergen Brunswig manages to reduce supply chain costs by, say, 10 percent, Bergen splits the cost savings with the partners. According to Donald R. Roden, CEO of Bergen Brunswig Corp. "It helps companies work on a team more because they benefit as much as do we. If we kept it all, the partners have no incentive to contribute". Although there are a lot of challenges to the implementation of a e-supply chain, the gains to be realized with the e-supply chain outweigh the concerns and hence more and more organizations are moving towards automating their supply chain.

CONCULSION

To survive in the present global competitive environment, organizations need to show an increased awareness to customers' needs. Hence, there is an increased focus on a customer-centric business models and integration of supply chains to enable collaboration between the supply chain partners. The future of e-business in the process industries is coming into focus. Most people working in the process industries are already feeling the ripple effects described above at some level, but want more specifics. They want to know more precisely what e-business means for them and how they can prepare for it. In short, the future of e-business in the process industries is coming into focus and it looks, in many ways, like e-business in any other industry. Information is created and distributed in real time. The e-business future for the process industries suggests that leading e-business manufacturers will know the true capabilities of their manufacturing enterprises. They will have consistent and interoperable business processes and use software and Web-based services to support those improved internal business processes. Leading manufacturers will answer their customers’ demands for improved customer service by providing windows into their operations. These windows will help integrate shared business processes such as improved product planning and collaborative forecasting. Finally, Internet-based exchanges will streamline pricing and distribution. Commodity products will move more quickly and efficiently through the distribution network while specialized, value-added products command premium prices and become increasingly customized to end-user needs. As in other industries, e-business in the process industries entail a transfer of power from vendor to their customer. Vendors who understand and embrace this shift stand to reap significant benefits.