11.1 Electronic supply chain management (eSCM)
The relationship between e-commerce and the supply chain is not a totally new component in this course although it has previously been dealt with in a somewhat oblique manner. Nor is the deployment of technology to improve supply chain management something new to industry. Nevertheless, the profound influence e-commerce and emerging e-business models are having on supply chain management is only just becoming apparent.
The importance of ICTs in enabling real-time or electronic supply chain management is likely to be one of the most enduring and profound changes e-commerce will have on modern business practices.
In the first five years of the twenty first century it is possible to trace a number of ongoing changes that all related to deployment of what has been classified as an eSCM strategy. Such strategies centre on minimising total cost of a transaction through the direct ordering and delivery process whilst also reinforcing processes that stimulate supply efficiencies and ultimately result in customer satisfaction.
To assist progress towards more fully understanding the role of e-commerce on the supply chain, we need to develop some conceptual frameworks with defined parameters. Without these parameters the role of e-commerce may become blurred with other business processes.
To understand e-commerce in the supply chain context we need to model e-commerce from both a customer’s and a supplier’s point of view. The customer’s viewpoint can be represented simply, as in Figure 11.1.
Figure 11. 1 Customer view of e-commerce supply chain
In the settlement stage the most important consideration for the customer will be how the order is to be fulfilled (shipped) and how financial settlement is to be processes (purchase and procurement).
An additional concern to the supplier (e-business) will be the physical management of the fulfilment process. As depicted in Figure 11.2, this means the supplier’s view of the stages in an e-commerce transaction differs from the customer’s.
Figure 11. 2 Supplier’s view of e-commerce supply chain
A more complex representation of the above exchanges may be depicted where an e-commerce transaction process involves more than one business. The acronyms used in Figure 11.3 should be familiar to the reader at this stage of the course. However, S2S refers to the exchange between different suppliers and the L2L to the interface of one logistics service provider with another. Both L2L and S2S occur when a supplier outsources some or all of its activities to a shipping and/or logistics company (i.e. a 3LP – third-party logistics provider) or where a supplier, shipper or logistics company works with another company to source an ‘integrator’ of supply chain services.
Figure 11. 3 The e-commerce supply chain – a systems transaction view
The above view of the e-commerce-enabled supply chain assumes what appears to be at an even greater level of complexity when we acknowledge not only supply-driven exchanges but also demand-driven exchanges. As depicted below in Figure 11.4, all transactions can be two way and involve multiple players at any stage.
Figure 11. 4 Demand and supply network
The deployment of e-commerce not only has the potential to make demand and supply transactions more complex, it also offers the ability to manage more complex transactions. The deployment of ICT in supply chain management is most often driven by cost imperative to fix failed manual systems or replace redundant work processes.
Figure 11.5 depicts how ICTs are enabling not only the process of buying and receiving goods but also the electronic management of the supply of goods and services. This is complex, but the key point to note is how e-commerce technologies can affect both the customer and the business side of e-commerce processes.
Figure 11. 5 Impact of e-commerce on the supply chain
The major drivers for deployment of electronic and related ICT to effect an eSCM strategy include:
- reliability and visibility
- track and trace inventory at product/unit level
- real time reports
- control and report on quality of service (QoS)
- security (especially with data and service related products)
- speed
- accelerate process time from order to fulfilment
- reduce lags and process delays
- improve collection and payment processes
- cross-company collaboration and alignment
- co-ordinate workflows/ business processes
- sharing data in real time
- sharing of infrastructure
- synchronise operations and planning
- real time data synchronisation/sharing
- alignment of processes between people and organisations
- standardise processes and practices
- improve market reach
- eliminate waste and inefficiencies
- optimise shipping (load, route, etc) and inventory management
- integrated reporting
- identify and meet customer personal preferences (personalisation of service)
- improve customer control
- improve data sharing
- real time reports
- share channels of communication
- standardised performance measures
- connectivity
- improve inter-operability
- standardise platforms, data and applications
- real time access to data anywhere and at any time in the supply chain
(ALPHA 2003:12-13; Hultkrantz & Lumsden, 2001:6-9)
Activity 1
It has been suggested that in many ways it is the need for businesses to collaborate and cooperate, rather than the enablement of direct sales to customers, that is driving eSCM.
- Read the following article by Kearney and develop your own hierarchy of factors may truly be driving eSCM implementation.
- Why is value so important to supply chain management?
- Do you think it is an over-simplification to suggest that many businesses are embracing eSCM simply to avoid being worse off as business partners shift costs, or do they fear being left out of the supply chain because they do not have advanced e-commerce capabilities?
Reading 1
Kearney , AT (Third Quarter, 2003) ‘Unlocking value from e-supply management’, Technology Watch, Executive Agenda, pp. 65-74, Accessed September 2004, from http://www.atkearney.com/shared_res/pdf/EA63_unlocking_S.pdf
For an overview diagram of the supply chain see Figure 11.6, an illustration from www.line56.com, which has been accessed by this link
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