ELECTRONIC SUPPLY CHAIN MANAGEMENT: SOME LATEST

ISSUES AND PRACTICES

Nizar Hussain M1 and Dr. Suresh Subramoniam2

1 2
Lecturer Assistant professor
Riyadh Community College College of Business Administration
King Saud University Prince Sultan University
Saudi Arabia Saudi Arabia
E-mail: nizarhussainm@yahoo.co.in E-mail: sureshsubramoniam@gmail.com

Abstract:

Supply chain management (S CM), a management method to optimize internal costs and
productivities, has evolved as an application of e-business technologies. SCM is a powerful
strategic function capable of radically improving customer value propositions by the reengineering of
intranet and internet-enabled collaborative channel partnerships. Latest developments in
information technology have propelled the e-Supply Chain Management (e-SCM) concept to newer
dimensions. In the past, neither markets nor products changed much over time, enterprises
that gained initial superiority could leverage on, considerable resources and process knowledge,
mature distribution channels, advertising and marketing clout, and the newest technologies, to
maintain that lead. Today, it is evident that there is no such thing as sustainable competitive
advantage and also that all advantages are temporary. The cause for the rapid acceleration in the
erosion of competitive advantage in almost all the businesses can be traced back to the rapidly
developing newer technologies. Still more deadly is the sudden growth of newer business models
that have been quick in challenging the present leaders by leveraging on special competencies
which permit them to invade the market and conquer the targeted customer segments better. This
paper conducts an extensive literature review to identify the latest trends in e-SCM. It also attempts
to study some of the issues associated with e-SCM along with their solutions and practices.

Keywords: e-Supply Chain Management, Reengineering, Intranet, Internet, Information technology.

1. Introduction to information sharing, how the Internet can be

As energy costs continue to rise, manufacturing
and service companies have looked to their supply
chains as important areas for strategic cost
reduction and competitive advantage. The problem
is that most companies have already picked the
low-hanging fruit in supply chain savings through
economies of scale, consolidating source materials
and other measures. As businesses search for
other efficiencies, one opportunity is streamlining
supply chain management. The internet is playing
an increasing role in the search for efficient supply
chain management (SCM), but the novelty of both
the concept of SCM and the internet has placed the
combination of the two in the position of finding the
right balance of both [1]. The Internet has many
impacts on the supply chain. One of the most
covered topics in the literature is the impact of e-
business, which refers to the ability of a firm to
electronically connect, in multiple ways, many
organizations, both internally and externally, for
many different purposes [2]. Another impact refers
used as a medium to access and transmit
information among supply chain partners [3].
However, the Internet not only enables supply
chain partners to access and share information, but
also to create, storage, dissemination and
application of organizational knowledge. This third
type of impact of the Internet on SCM is called
knowledge management (KM). There is no
universal definition of KM. KM refers to the set of
processes or practice of developing in an
organization the ability to create, acquire, capture
store, maintain and disseminate the organization's
knowledge [4]. This paper examines the following
areas in detail.
• E-business and supply chain management
• Information sharing and supply chain
management
• Knowledge Management and supply chain
management
2. E-business and supply chain independent panels of expert judges until tentative
management reliability and validity is established; and (c) further
refine and validate the multi-item scales using
To achieve joint optimization of key SCM decisions, survey data from 79 North American manufacturing
it is preferable that there be a free flow of all users of ERP systems. The scales developed in this
relevant information across the entire chain leading paper should be valuable tools for researchers and
to a comprehensive analysis. An overview of practitioners interested in assessing the
information flows facilitated through e-business success/failure of ERP system implementations.
technologies in a supply chain are shown in Figure
1. As can be seen in this figure e-business ERP
technologies facilitate information sharing either in
supply chains using a number of technologies like
enterprise resource planning (ERP), point of sale Raw Manuf- Who-
(POS), and /or vendor managed inventory (VMI). mate- acturing lesa- R- C-
rials / ler et- us-
Further, the focus of information sharing is to and Delivery and/ ai- to-
facilitate integrated and/or coordinated decision parts opera- Dist- ler m-
making in supply chains. This leads to several supp- tions ribut- er
liers or
potential research issues in this interdisciplinary
area, and this paper address some of them. In
general, we can classify these research B2B Actions POS / VMI B2C Actions
contributions as adopting either a strategic or
tactical focus.
Materials Flow Information Flow
2.1 Strategic Focus ?????? ¶
In e-business and SCM, there are several issues of Figure 1: Information flows using e-business
strategic importance. To start with, Sahin and technologies in a supply chain.
Robinson [5] present a comprehensive literature
review of the value of information sharing and Supplier performance is another area of
physical flow coordination in SCM. Based on their interest in the context of e-business technologies.
review, they highlight gaps in the current body of This focus is motivated by the fact that
knowledge and identify areas for future research. manufacturing firms typically spend 55% of earned
For any researcher wishing to continue or initiate revenue on purchased products and services.
research in exploring coordination issues in supply Guimaraes, Cook, and Natarajan [8] empirically
chains, this paper is a valuable starting point. In the examine the critical factors that account for the
next paper, Frohlich [6] focuses attention on performance of supplier networks. Their theoretical
Internet-based linkages to suppliers and customers framework links supplier network performance with
(conceptualized as e-integration). A conceptual the effectiveness of Information technology use and
model relating three sets of strategic barriers the depth in supplier relationships. A unique aspect
(internal, customer, and supplier) to e-integration of this research is the incorporation of industry clock
and the potential impact on performance is speed as a moderator variable in their framework.
proposed and empirically validated. Based on this, Their empirical results support their hypothesis, and
he proposes that in implementing technology-based this is the first study integrating industry clock
changes in the supply chain, managers should first speed measures in assessing supplier network
concentrate on removing the internal barriers to performance.
such changes and thus, adopt an inside-out
implementation perspective. 2.2 Tactical Focus
Enterprise Resource Planning (ERP) There are several tactical issues of interest in e-
systems are used to coordinate decision making in business and SCM. To start with, Business-to-
supply chains. However, there is a lack of rigorous Business (B2B) and Business-to-Consumer (B2C)
strategic research examining whether these system exchanges are dramatically changing the manner in
implementations are successful in achieving this which supply chain activities must be structured.
objective. A first attempt at addressing this issue is Bapna and Goes [9] study B2C online auctions over
the paper by Stratman and Roth [7]. The authors an open-source, ubiquitous Internet protocol
follow a rigorous methodological process to: (a) computer network. They develop an analytical
identify a portfolio of eight generic constructs that model that characterizes the revenue generation
are hypothesized to be associated with successful process for Yankee auctions used to sell multiple
ERP adoption; (b) operationalize each construct as identical units of a good to multiple buyers. The
a multi-item measurement scale by applying a model is validated using empirical and simulated
manual item sorting technique iteratively to
data. From a theoretical perspective, their
contribution is the design of a partitioning scheme
of the discrete valuation space of the bidders such
that equilibrium points with higher revenue
structures become identifiable and feasible. From a
practical perspective, they find that auctioneers are,
most of the time, far away from the optimal choice
of key control factors such as the bid increment,
resulting in substantial losses in a market with
already tight margins. To address this shortcoming,
they propose a set of tools, varying in their level of
abstraction and information intensity requirements,
which could be used by auctioneers to maximize
their revenues.
Webster [10] studies approaches
used by make-to-order firms for managing their lead
times and prices in the face of changing market
conditions. Given an expanding e-business
infrastructure, the issue of jointly managing the
marketing mix of price and lead-time is critical. A
structurally simple model to examine policies for
adjusting price and capacity in response to periodic
changes in how the market values price and lead-
time is proposed. The key results are: (a) when
throughput stability is highly valued, firms should
maintain a constant capacity and absorb changes in
the market by manipulating lead time and/or prices;
and (b) from a profit maximizing perspective, stable
lead times with adjustments to prices and/or
capacity are optimal.
Arcelus, Pakkala, and Srinivasan [11]
present a common model for studying pricing
decisions in the presence of either global risk-
sharing agreements among supply-chain partners,
or integrated brick and click environments in B2B
markets. The problem of price uncertainty in both
environments is modeled as a stochastic repetitive-
sales problem. The model identifies sufficient
conditions for regenerative ordering cycles resulting
in a simple optimal two-price purchasing policy.
From an implementation perspective, the simple
result should be useful for purchasing managers
worldwide and across B2B markets. As is obvious,
the papers published in this issue cover a wide
spectrum of strategic and tactical research issues in
e-business and SCM. However, it is safe to say that
we have only scratched the surface. This
observation is based on not only the explosion in
academic research in this area but also on the
continual development and diffusion of
technological developments. Hence, there are
several opportunities for future research in this
area.
3. Information sharing and supply chain
management
One of the most recent applications of computer
technology involves the Internet in the area of
information sharing and supply chain
management. Like many changes experienced in
other areas of business, the introduction of
computer technology brought unprecedented
changes in the way organizations manage their
information sharing processes. From their use in
product development to surveys of after-sales
customer satisfaction, computers have been
playing pivotal roles in the flow of information, not
only within individual organizations but also
between organizations.
B2B exchanges have been
significantly affected by the transformation in
information sharing processes. Starting with the
automated order entry system in the mid 1970s,
computer technology has facilitated information
sharing between organizations involved in inter-
organizational transactions. B2B exchanges using
Internet-based communication systems have
attracted special attention because of their market
growth potential and impact on business structures
throughout the world. Even after the demise of the
dot.com boom at the turn of the century, this
particular sector has experienced a steady growth.
The revenue from Internet-based B-to-B exchange
was $43 billion in 1998 (E-procurement, November
20, 2000). In the year 2002, the market size grew
to $870 billion. After another four years, the
number is expected to reach $5.8 trillion [12].
Adoption of Internet-based information sharing
systems in industrial purchasing is not limited to
particular industry types or certain firm sizes. It is
happening in the high-tech, aerospace industry as
well as in agricultural and dairy industries. Also,
companies of various sizes, from industrial giants
such as GE to small start-ups, are conducting
Internet-based B-to-B exchanges.
Even before the Internet became
available for commerce, business managers were
thrilled by the prospect of its efficiency,
effectiveness and innovation, which they believed
would overcome barriers in time and geography
and improve inter-organizational relationship [13].
The core of its benefits is cost reduction, which
results from timely and speedy transactions,
inventory reduction, easy access to new markets
and suppliers, and efficient management of the
whole supply chain process, to name a few. In the
1980s and early 1990s, many American
companies introduced inter organization networks
in their supply chain management which enabled
them just- in-time procurement.
The immediate connection between a buyer
and a supplier increases cooperation and efficiency
between firms. The success of worldwide retail
chain Wal-Mart frequently has been attributed to the
electronic data interchange (EDI) system installed
among its pool of suppliers. Also, the ubiquity of the
Internet allows more companies to operate on a
common platform without heavy investment in
closed information networks such as EDI. And the
more those companies conduct trades online, the
more profitable Internet-based supply chain
management will become.
McFarlan [14] emphasized that executives
should understand if communication technology can
be the core of their competitive strength or if it will
simply play a supporting role. Wigand [15] also
emphasized the importance of optimal
organizational fit and alignment in the deployment
of information technology. He made it clear that
what brings added value to a firm is not information
technology itself, but well-tuned coordination
between business strategies and technology. A
recent issue of the McKinsey Quarterly reported
that some companies that made heavy investments
in supply chain management information systems
performed worse than companies that did not,
although technological investment in supply chain
management increased the efficiency of firms on
average [16]. These findings clearly demonstrate
what managers have been told repeatedly. To
adopt this new communication technology
successfully, firms must have a working supply
chain and know how the technology can improve
their existing supply chain.
While these lessons are invaluable to
managers, there has been little research on how to
integrate Internet-based information sharing
systems in order to conduct successful supply chain
management. Although intensive research has
improved our understanding of the new
communication technology as a tool of supply chain
management, the efforts seem to be lacking two
attributes that can be crucial for marketing research
as a discipline striving to solve managerial
problems and as a research tradition based on
cumulative knowledge.
First of all, many of previous studies
focused on either the overall picture of Internet-
based B-to-B e-commerce or technical details of
how the transactions will be executed. Whereas
such information is essential for understanding the
status of B-to-B e-commerce, its applicability to
individual firms. Supply chain management
decisions are often too remote. In addition,
overwhelming interest in market transformation has
accompanied relative ignorance of hierarchical
governance mechanisms. In previous studies on B-
to-B e-commerce, the market system is offered as a
governance mechanism of supply chain
management. However, the market is only one of
the two classical forms of governance mechanisms.
The other governance mechanism, hierarchy,
deserves equal attention in the context of B-to-B e-
commerce. Additionally, there exist many variations
of the market depending on the relationship
between transacting partners. Scrutiny of the
overall geography of supply chain management,
which includes the markets and hierarchy and
various hybrids in-between, may broaden our
perspective on the role of new communication
technology.
Second, few previous studies consider
Internet-based communication systems on a
continuum of supply chain management problems
that have existed long before the Internet. Although
the use of the Internet is new, the problems
accompanied by its use are not. In discussions
about B-to-B e-commerce, Internet-enabled
markets are often described as entirely novel
phenomena. But, in reality, except for some purely
online market makers that account for only a
fraction of B-to-B e-commerce, it is extremely
difficult to separate traditional markets from
Internet-based markets. By failing to recognize the
evolutionary rather than revolutionary nature of
market transformation, some of the research adds
confusion to the understanding of the current
marketplace.
4. Knowledge Management and supply
chain management
Knowledge Management (KM) is concerned with
the creation, storage, dissemination, and
application of organizational knowledge. Knowledge
is usually defined [17] as information in context, or
actionable information. Successful KM rests upon
an organization possessing a supportive culture
characterized by high trust and the ready sharing of
needed information [17, 18], sufficient technological
sophistication [19], and appropriate attitudes and
motivation towards organizational success [20].
To achieve success at SCM, an
organization must possess–and share–knowledge
about many different facets of this process. The
knowledge sources are both internal to the
organization (e.g., knowledge of the whereabouts of
subassemblies, knowledge of sources of
manufacturing delays) and external to the
organization (e.g., knowledge of the final customer's
expectations, knowledge of where en-route
components are and when they are expected to
arrive at their destinations).
Lack of knowledge sharing between
members of the supply chain has been shown to
significantly affect overall performance [21, 22, 23].
As such, we argue that KM can enhance the degree
of success of existing SCM efforts as well as
increase the likelihood of success of new SCM
undertakings. While many SCM projects have
resulted in improved performance [24, 25, 26], we
believe that higher levels of performance
improvement are possible by coupling KM initiatives
with SCM programs.
5. Conclusion
The Internet provides a tool that allows supply chain
activities to be carried out in a synchronized,
instantaneous manner, facilitating maximum supply
chain performance. The positive benefits of
integrating the Internet into management of the
supply chain generally outweigh the risks and
associated costs, and firms who have completed
such integration hold a current competitive
advantage over those that have not. Internet is a
supply chain management tool that can be used to
improve customer satisfaction, reduce costs,
smooth production flows and shorten cycle times.
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