People Innovation Excellence

ELECTRONIC SUPPLY CHAIN MANAGEMENT (E-SCM)

by : Darjat Sudrajat, SE., MM.

Supply chain management is coordination of all supply activities of an organization from its suppliers and partners to its customers efficiently and effectively (Chaffey, 2015; Turban et al., 2012). Electronic supply chain management (e-SCM) is a collaborative use of technology to improve the operations of supply chain activities as well as the management of supply chains (Turban et al., 2012). The main factors that contributed to the transition from SCM to e-SCM are as follows:

  • The need for additional reduction in the costs as well as improvements in the processes through the expansion of the tools for modern management in the organizations from the supplier channels to the customer channels.
  • The introduction of computerization and digitalization of the internal functions of the organizations with new techniques, tools, and management methods.
  • The need for efficiency and agility of the organizations in order that they can respond to the higher demands of the customers whose growing demands and bargaining power continually increases.
  • The effort to optimize the organization by having lower inventory levels both in manufacture and distribution by, in parallel, offering supreme quality and service.
  • The deserting of vertical integration and functional oriented organizations.
  • The tendency for outsourcing of some operational functions that are not the core of the business to other organizations specialized in that field.
  • The explosive expansion of global commerce and the opening of new markets that only few years ago were closed.
  • The e-business technologies, particularly the internet, have enabled organizations of all sizes to have a network and be closely connected with their partners and conquer and compete for market share which was only possible before for the large corporations.

The success of an e-SCM depends on the ability of all supply chain partners to view partner collaboration as a strategic asset; a well-defined supply chain strategy; information visibility along the entire supply chain; speed, cost, quality, and customer service; integrating the supply chain more tightly. Application of e-SCM can reduce some problems in SCM through sharing of demand by customers with suppliers as part of efficient consumer response (ECR), suppliers become responsible for item availability through vendor-managed inventory, human error reduced (checks and balances can be built into system), inventory reduced throughout the supply chain through better demand forecasting and more rapid replenishment of inventory, improved availability of information about potential suppliers and components (for example through online marketplaces). The activities of E-SCM include the following:

  • Supply Chain Replenishment. Supply chain replenishment encompasses the integrated production and distribution processes. Companies can use replenishment information to reduce inventories, eliminate stocking points, and increase the velocity of replenishment by synchronizing supply and demand information across the extended enterprise.
  • E-Procurement. It is the use of web-based technology to support the key procurement processes, including requisitioning, sourcing, contracting, ordering, and payment. E-procurement supports the purchase of both direct and indirect materials and employs several web-based functions, such as online catalogs, contracts, purchase orders, and shipping notices.
  • Supply Chain Monitoring and Control Using RFID. This is one of the most promising applications of RFID (Radio-Frequency Identification).
  • Inventory Management Using Wireless Devices. Many organizations are now achieving improvements in inventory management by using combinations of bar-coding technologies (or RFID) and wireless devices.
  • Collaborative Planning. It is a business practice that combines the business knowledge and forecasts of multiple players along a supply chain to improve the planning and fulfillment of customer demand. Collaborative planning requires buyers and sellers to develop shared demand forecasts and supply plans for how to support demand.
  • Collaborative Design and Product Development. It involves the use of product design and development techniques across multiple companies to improve product launch success and reduce time to market. During product development, engineering and design drawings can be shared over a secure network among the contracting firm, testing facility, marketing firm, and downstream manufacturing and service companies.
  • E-Logistics. It is the use of web-based technologies to support the material acquisition, warehousing, and transportation processes. E-logistics enables distribution to couple routing optimization with inventory-tracking information. For example, Internet-based freight auctions enable spot buying of trucking capacity.

The key activities of e-SCM use a variety of infrastructure and tools. The following are the major infrastructure elements and tools of e-SCM:

  • Electronic data interchange (EDI). It is the major tool used by large corporations to facilitate supply chain relationships. Many companies are shifting from traditional EDI to Internet-based EDI.
  • Its major purpose is to support inter-organizational communication and collaboration.
  • These are the corporate internal networks for communication and collaboration.
  • Corporate portals. These provide a gateway for external and internal collaboration, communication, and information search.
  • Workflow systems and tools. These are systems that manage the flow of information in organizations.
  • Groupware and other collaborative tools. Many tools facilitate collaboration and communication between two parties and among members of small as well as large groups. Various tools, some of which are collectively known as groupware, enable such collaboration. Blogs and wikis are beginning to play an important role. A major purpose of these tools is to provide visibility to all, namely, let people know where items are and when they arrive at certain locations.
  • Identification and tracking tools. These tools are designed to identify items and their location along the supply chain.

References:

Chaffey, D., 2015, Digital Business and E-Commerce Management: Strategy, Implementation, and Practice, Sixth Edition, Pearson Education Limited, United Kingdom.

Pulevska-Ivanovska, L., Kaleshovska, N., 2013, Implementation of e-Supply Chain Management, TEM Journal, 2 (4), pp. 314-322

Strauss, J., Frost, R., 2014, E-Marketing, Seventh Edition, Pearson Education, Inc., New Jersey

Turban, E. et al., 2012, Electronic Commerce 2012: A Managerial and Social Networks Perspective, Seventh Edition, Pearson Education, London.


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