Impacts of e-Business on Specialist Supply Chain Networks
Contents
I. Executive Summary
II. Introduction
III. Report Objective
IV. Subject Summary
V. Literature Review
VI. Methodology
VII. Findings
i. From Integration to Collaboration
ii. Collaboration in Supply Chains
iii. Collaboration through Advanced Technologies
iv. E-logistics Solutions
a. Collaborative Logistics
b. E-commerce and Logistics
v. The Human Dimension
VIII. Conclusion
IX. Recommendations
X. References
XI. Bibliography
I. Executive Summary
The primary function of supply chain management is to develop and enhance competitive performance by closely incorporating the internal functions within the organization and efficiently associating them with the external operations of suppliers and channel members. This research was undertaken to demonstrate the application of the theories, methods and techniques of e-logistics and supply chain management to specialist supply chain networks. A case study was conducted to know the impact of e-business on specialist supply chain networks. The findings showed that building relationships is essential to develop and implement successful e-logistics solution in order to develop and advance collaboration and integration within supply chain networks.
II. Introduction
Supply chain management has become an important part of companies, big or small, as they strive for better quality and higher customer satisfaction (., 2000; , 2001). A recent showed that 91 percent of North American manufacturers state that supply management is very important and critical to the success of their company; however, only 2 percent of the same survey says that their supply chains are world-class (, 1999; 2001).
Supply chain management is defined by (1998) as “the management of upstream and downstream relationships with suppliers and customers to deliver superior consumer value at less cost to the supply chain as a whole”. According to (2002), a supply chain will consist of three primary elements. The first element is the structures which refer to the organizational units within the supply chain that interact. Structures include the company, its customers, distribution channels, design and engineering centers, manufacturing and service centers. The second element is the processes – the operational activities that transform inputs and outputs. Processes may involve demand and supply planning, forecasting, sourcing, purchasing, manufacturing and service operations, logistics, order entry, materials management and new product or service development. The last element is the linkages which connects the processes and the structures through communication, more often than not, in the form of shared information and continuous communication.
To these three elements, (2002) also adds cross-functional teams, to coordinate the interaction between supply chain functions, and cross-enterprise teams, to coordinate the interaction the supply chain organizations. In addition, at strategic level, a supply chain operations strategy engages in making long-term decisions on some of the following elements: coordination and integration of all supply chain activities into a flawless process within and external to the organization; planning and collaboration across a distributed supply chain; and optimally delivering the right product to the right place at the right time (, 1999).
It must be noted that supply chain management initiatives are now being launched by companies to increase efficiencies and drive waste out of supply chains. These initiatives include B2B (business-to-business) integrations, e-procurement, collaborative planning and – more recently – e-logistics which presents a way of coordinating information, equipment and money flows across the supply chain, incorporating both internal and external key players into a single application environment that will enable companies to shop, commit, execute and settle their logistics service transactions electronically.
The strategic relevance of supply chain is stressed by an observation of , vice president of materials management at . states that “competition is no longer company to company, but supply chain to supply chain” (, 1999). This means that success of the company is no longer quantified by a single transaction; rather, competition is assessed as a network of cooperating companies competing with other firms along the entire supply chain (, 1994; , 1997). (2001) noted that in order for companies to be successful, firms will not seek achieving cost reductions or profit improvement at the expense of their supply chain partners but rather they will seek to make the supply chain as a whole more competitive. In addition, there have been evidences that a successful implementation of supply chain management will lead to a cutting of costs (, 1999), increasing profitability and productivity (, 2001), increasing technological innovations (., 2000), reducing risk (., 2000) and improve organizational competitiveness (, 1994; 1997; , 2000; , 2000).
This study will be exploring supply chain management in the context of e-logistics. This research will be discussing theories of collaboration and integration in supply chain management and their effects on the implementation of e-logistics. The paper will examine topical subjects and will present the findings in a form of report. The paper will paper will consider how people, leadership and culture, in addition to the supply management theory focusing on collaboration and integration issues, leadership and culture will impact the implementations of a successful e-business
III. Report Objective
The aim of this report is to show through an actual case study on electronic businesses and how they impact specialist supply chain networks.
IV. Subject Summary
The research will cover the aspects of the business such as a transaction analysis and strategic direction. In addition, collaborative and integration in supply chain management will be discussed as well as their impacts in the implementation of e-logistics.
V. Literature Review
According to authors such as (1998), (1999) and . (2000), the significant level of supply chain management programs used across several business sectors have been very well documented in literature. Prior research on supply chain management has progressed along several paths. Some researches have highlighted the partner characteristics as an explanation for supply chain management behavior and outcomes ( 1999; , 2000; 2000). In this specific perspective, supply chain management projects are undertaken by firms in order to respond to the demand of the marketplace and the intense global competition. For example, (2000) implied that the intense global market of the past decade has driven many organizations to create cooperative, mutually beneficial partnerships with suppliers, distributors, retailers and other firms within the supply chain. It is said that the objectives of those partnerships is to provide lower cost and higher quality products and services with greater design flexibility (, 2002).
Other researches, on the other hand, have highlighted on supply chain performance measurement (, 1998; , 1998; 1999). For instance, (1999) suggested that the measurements for supply chain management are customer satisfaction, return on trading assets and the flexibility of supply chain management activities. In a similar vein, (1999) recognised resource measures, output measure and flexibility measures to be the three kinds of performance measures as the required components in any supply chain performance management system. Conversely though, (2000) recommended that one of the keys to a successful supply chain management is the creation of and agile supply chain on a worldwide level. According to , agility implies rapid strategic and operational adaptation to large-scale, unpredictable changes in the business environment centering on destroying the bafflers to quick response.
Other academics have recognised various supply change management issues, practices and various strategies that companies undertake in establishing and effectively implementing their supply chain (., 2000; 2001; , 2001; , 2001). . (2000) state that particular enablers should be in place in order to supply chain to function efficiently. These enablers are said to apply to all parties involved and include a similar interest, openness about their practices and processes, transparency in what was expected of them and others. Other studies have highlighted manufacturers attempt in to incorporate processes and form alliances with suppliers in order for a better and efficient management of the purchasing and supply function ( 1997; ., 2000; , 2001). (2001) highlighted the drivers and hindrances that affect how supply chains flow and perform. According to them, as the factors which drive a supply chain are essential, the hindrances necessitate more attention. (2001) also suggested that supplier relations is a major issue in global supply chain management and accordingly, the key phrase in supplier relations is a partnership alliance, meaning, closely working together for the mutual benefits of all parties. In addition, (2000) noted four elements as the requirements in the effectiveness in any supply chain namely planning, sourcing making and delivering. On a different perspective though, (2001) suggested that during this era of information technology, the internet offers the opportunity for demand data and capacity data to be transparent and visible to all companies within a manufacturing supply chain; hence, companies are in the position to anticipate demand fluctuations and respond accordingly.
Despite the importance of supply chain management along with its theoretical development and popularity in the business and academic press, there is still little empirical research as to the impact of e-business in supply chain networks. Consequently, more information is needed in order to understand and have a deeper comprehension in this specific area of research.
In order to guide this research, at the end of the paper, this particular question will be answered:
Is building relationships essential in developing and implementing successful e-logistics solutions in order to foster collaboration and integration within the supply chain networks?
VI. Methodology
In order to answer the above question, the researcher will undertake a case study on how information technology will affect logistics and supply chain management. Various literatures will be examined to support the conclusion of this research.
VII. Findings
i. From Integration to Collaboration
Internet technology is said to have forced companies to change the main drive of their business system architectures and organizational dynamics. Before, enterprise integration was considered to be the key to success. Then, companies started to shift to striving for achieving am extended-enterprise cooperation. At present, as web-based technologies continue to flourish and take hold, associations between members of an extended enterprise will become even tighter. As a result, businesses must now be based their models on collaboration rather than cooperation. This shift from integration to cooperation to collaboration is mirrored in the development of the several empowering technologies that successful companies have embraced. Enterprise resource planning technologies integrate all the information within the single enterprise, whereas supply chain management, enhanced by internet-based communications, foster communications. Workplaces on the other hand have allowed companies to collaborate in “value webs” which provide better products and services to their customers along the product chain and to consumers.
ii. Collaboration in Supply Chains
Organizations have long known the advantages and the benefits that better relationships with customers and suppliers bring. It is said that better inter-organizational relationships both necessitate and follow from increased information sharing. In addition, information technology has long been perceived as a way of promoting better information sharing and better relationships with customers and suppliers. For instance, the electronic data interchange, an inter-organizational system, have enabled companies to exchange information and data in a more timely and frequent basis. Recently, attempts to develop information sharing with customers and suppliers have stresses on pairs of business partners. Despite the standardized efforts, electronic data interchange is usually customized and implemented on a pair-wise basis, gaining significant set up and maintenance costs. As closer coordination is sought, efforts necessitated to achieve electronic integration increase.
There are three things in organizations that have change in the recent years. First, there is a rising recognition of organizations that their performance depends upon the competitiveness of their extended supply chains. Extended supply chains constitute of at least three members; they are usually a manufacturer and its suppliers and customers or a manufacturer and its first and second level suppliers. The significance of an extended supply chain relationship is illustrated by the huge inventory loss that incurred as a result of lack of visibility into the ordering behavior of its first level suppliers.
Second, organizations are starting to realize that better supply chain management necessitates information sharing that is beyond the limitations or boundaries of both the organization and their pair-wise relationships. Information sharing is very important in supply chain management and it is not being well understood by organizations. Information sharing has been found to enhance chain profits in game theoretical models. In addition, information sharing throughout the supply chain can considerably decrease inventory levels and other asymmetry costs as well. It is also reported that exchange of information in a timely and efficient way is the key driver of supply chain performance.
Finally, organizations are also recognizing the new approaches to using information technology for inter-organizational information sharing. Even though information technology has been recognized as a known factor in enhanced supply chain performance since the 1980s, it only recently that organizations began to experiment on a moderate scale with “network” type information technology arrangements for business-to-business (B2B) buying and selling; for instance, to respond to ’s problems cited earlier and be able to avoid visibility problems on future supply information, have developed an “eHub” in order to automate the flow of information between the member of its extended supply chain, that is, the company between its contract manufacturers and its component suppliers.
Arrangements such as the eHub of engage unprecedented levels of information openness. However there are a number of inhibitors to information exchange in collaborative efforts. Capturing the advantages of tighter coordination necessitates highlighting and focusing on a bigger portion of the supply chain than familiar buyer-supplier dyads. As (1994) have said, “If businesses networks are to possess advantages beyond the sum of the involved dyadic relations, this must be due to considerations that take place within dyadic business relationships about their connectedness with other relationships”. Optimizing the performance of the chain overall, an important feature of an extended supply chain, may result in what one partner views as a suboptimal relationship with an adjoining party. This actually means that the real advantages and benefits of improved supply chain integration may only be attained by creating a trusting environment wherein companies will not only look toward their own outcomes, but rather also toward joint outcomes. As a result, it must be noted that high quality relationships among the members of the supply chain are definitely a principal or major determinant of success of the information technology based collaborative agreements.
iii. Collaboration through Advanced Technologies
the very apparent difference between collaboration and cooperation is that as both can occur in near real time, collaboration mainly involves improvised, multi-directional flows of information rather than the sequential, linear flow. Collaborative technology permits an open and flexible integration within the business community. Collaborative tools are flexible and based on workflows instead of a rigid and based on processes. Collaborative technology is the next step in the e-business technology revolution as it allows human spontaneity and unpredictability that occur within disorganized business processes – those that are based on individual and community based relationships. Somehow, it imposes a kind of centralized control over the data transmitted among the value chain. In addition, it increases revenue generation as it fosters close relationships among customers, enduse customers, as well as other members of the value web who work together in order to give the best possible products and services.
iv. E-Logistics Solutions
In efforts to respond to the need for increased performance, both shippers and carriers are turning towards e-logistics solutions hoping that efficiencies be attained through the simplification of the logistics process.
Managing logistics is a very complex operation. One shipper depends on many suppliers. Service agreements are based on elements or attributes, not part numbers, which makes contracts difficult to manage. Transactions have a tendency to be long and complicated and unexpected service exemptions are the norm. for the shipper, the value in computerizing a manual business process is lessening errors and streamlining processing cycle times. As contract compliance is maximized, the shipper can reduce leakage. Optimizing service demand can facilitate in maximizing efficiency in load and truck routing. In addition, an automated process also improves the ability to track activity-based costs that can reduce billing and payment orders.
However, it must be noted that most of these automated features have been commercially traditional transportation management systems. Up to this day, the market for these systems which was first introduced in the early 1990s continues to grow. Many of these systems provide features such as optimization, contract management and automated freight payment. Yet, advantages for e-logistics solutions can be attributed to its capability to provide benefits related mainly to communication and visibility. Through the internet – cheap and easily obtainable communications tool -, shippers will be able to avoid the –the expense and intricacy of electronic data interchange. Furthermore, using the internet will allow firms to reduce considerably time-extensive fax or phone communications with logistics service providers. The ubiquity of the internet maximizes visibility as all parties are allowed to post or access updates on the logistics transaction. The real opportunity for both shippers and carriers depends on the leveraging the power of the internet as a common computing platform that will enable a completely new process: Collaborative Logistics.
a. Collaborative Logistics
In understanding collaborative logistics, one must identify how costs are allocated in a logistics network. Both shippers and carriers stress a lot of attention on the controlling costs in order to improve profitability. Following the conventional approach, each firm has the capability to increase its efficiencies and lessen the “individual costs” of only those business processes that are independently controlled by the firm. This means that the company does not have any control and visibility on the “hidden costs”. The challenge then for firms is to reduce hidden costs through collaborative logistics.
An example of a hidden cost wherein all members of a logistics transaction pay, but no one individually controls, is asset repositioning. Here, shipper 1 necessitates goods to be delivered at a certain time and place. Shipper 2 necessitates good to be picked up at a certain time and place. The carrier must decide how to optimally apply their asset to this situation. In addition, shipper 1 and 2 do not really understand how their relationships affect asset repositioning costs. It must be noted that no single player controls asset repositioning costs. They are hidden costs that are paid by all. By maintaining as isolated approach, members of a logistics transaction are restricted in their ability to reduce overall costs. Through collaboration, all parties can recognize hidden costs and then implement a business operation particularly designed to lessen or totally eliminate them. Firms are accountable for controlling their individual costs. Total costs comprise both individual and hidden costs. The principal aim of collaborative logistics is to reduce total costs by offering a possibility for controlling these hidden costs.
A good example that shows the advantages of collaboration can be seen in the scheduling of truckload movements between multiple shippers for. Considering a tour that is set up between two of a company’s members, through collaboration, they will create and will use a dedicated 2,500 mile continuous route encompassing different distribution centers, production facilities and retail outlets for both companies. Through the collaborative logistics network, the two member companies recognized these synergistic moves and developed a weekly route which lessens asset repositioning costs and provides the carrier drivers a repeatable schedule. This kind of route was said to result in a 19 percent savings over their company-centric model. Moreover, the carrier is said to experience higher margins through better asset utilization and lower driver turnover through more regular driver schedules. Indeed, collaborative logistics provides a win-win scenario which allows all parties of the logistics community to reduce hidden cists and share savings.
Collaborative logistics networks allow the logistics community to collaborate in a mutually beneficial environment. Characteristics of a collaborative logistics network include: (1) a single place where all parties will be able to partake in this new business, (2) must not disturb current relationships, (3) must not sacrifice privacy, and (4) must allow flexibility. The internet has made the collaborative logistics network possible. The key to unlocking breakthrough efficiencies with collaborative logistics depends in leveraging the internet to its full capacity. In addition, a collaborative logistics network uses the internet as a distributed computing environment similar to al network parties. The internet is very well appropriate to deliver the capabilities featured in the collaborative logistics network such as allowing a single scheduling system and incorporating with enterprise systems to handle transaction volume at the same time, living outside the walls of organization to maximize collaborative opportunities.
b. E-commerce and Logistics
Supply chain management and customer channel enhancement have dramatically impact organizations in their global logistics operations. As a whole, these two have redefined the roles and responsibilities of suppliers, buyers and third party logistics providers. Suppliers have extended there roles far beyond just shipping boxes out the door and third party logistics providers are taking on higher value-added activities including warehousing, final assembly and even PC installation at customer sites.
E-commerce has specifically accelerated the way logistics are managed by companies across the entire value chain. The size of shipments are shrinking, at the same time, shipment frequencies are increasing and the ubiquity of the internet is offering new opportunities and challenges for the companies serving customers who are geographically dispersed, difficult to predict and sensitive to price or service levels.
E-commerce has a ripple effect up the supply chain that impacts companies and their suppliers as foreign buyers work to coordinate their operations with actual customer demand. In the past, supply chains have been prepared to “push” products from suppliers to customers with limited demand. This “push” approach typically results in supply chain distortions marked by the excess inventories, unsatisfied consumer demand and an inability to forecast accurately. However, the “pulling products” across the supply chain helps to make sure that supply and demand are coordinated by feeding information about actual orders to the enterprise, suppliers and third party logistics provides. The advantages of the pull system is very apparent, however, realizing them necessitates basically rethinking how logistics should be managed throughout the entire order to delivery process.
v. The Human Dimension
The underlying principle behind logistics is that the people are the key to business success. In the world of e-business, individuals are increasing accountable for maintaining relationships with people at companies that collaborate with their employer. It must be noted that computers in businesses has growingly allowed companies to integrate functions, activities and processes which gives each employee within the company a personal perception of the enterprise, the extended enterprise of associated business partners and the relationships among those entities.
VIII. Conclusions
There is so much more to supply management than a materials movement or transportation initiative. It is also a new approach and a new thinking about business relationships. Supply chain management is more than a simple tool in evaluating and optimizing a supply chain. It must be noted that supply chain management is a rather complicated, structured business relationship model as it takes into account all aspects of the events necessitated to produce a company’s product or service in the most efficient and cost-effective manner possible.
The rapid introduction of e-business and supply chain management has indeed become an industrial trend in the global marketplace. The vast logistical issues that surround e-commerce and logistics support provide both a challenge and an opportunity to organizations. It must be noted that the key to implementing an efficient supply chain and to comprehend e-business excellence is the ability to control the flow of information, to integrate varied business functions and to collaborate activities across different organizations. By taking advantage on the advanced information technologies, e-logistics will be able to provide an internet-based solution for the integration of automated logistics execution, e-commerce and supply chain management. E-logistics services are primarily concerned on collaboration and online managing of the entire back-end process of logistics from the time an order is made on the web site which includes warehousing, order fulfillment, transactions, shipping and delivery and customer care. E-logistics offers a way for collaborating information, equipment and money flows across the supply chain, integrating both internal and external parties into a single application environment which will enable companies to shop, commit, execute and settle their logistics transactions electronically.
The researcher has concluded that building relationships are essential to the development and implementation of successful e-logistics solutions. It must be very well noted that to attain a more efficient e-logistics and e-fulfillment, it is advantageous to have a trading environment that has appropriate and enough information about the goods with regards to their description and origins as well as their destinations. The sellers and the buyers must be able to supervise and track goods at every point along the way from the supplier to the consumer. Also, all stakeholders must be able to check on the internet the availability and the status of the orders.
All this can only be attained if trade information is simplified, automated and fully harmonized. It also necessitates a sophisticated supply chain management system for bringing together and enabling global end to end monitoring of trade information. All this can only be attained through the help of information technology and the internet as it has been shown by other research that the implementation of e-logistics have significant changes in the attitudes of clients of customers as clients expect their logistics partners to provide them and their logistics partners to provide them and their customers accurate orders and inventory status.
IX. Recommendations
The researcher would like to recommend that more studies should be made with regards to the importance of building relationships for the development and implementation of a successful e-logistics solution. As mentioned earlier, the findings of this study reveal that the former statement is true in fostering collaboration and integration within the supply chain networks; however, little supporting literature has been found on this specific area of study. Hence, more research is definitely needed.
X. References
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