The Role of E-Commerce in Supply Chain Management.

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The Role of E-Commerce in Supply Chain Management

Dania Ghalayini

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The emergence of E-commerce technologies has created innumerable opportunities for businesses to develop and streamline their supply chains. Electronic data interchange (EDI) has been used to facilitate business-to-business communication and coordination among supply chain partners. The key to managing a supply chain, however, is to view it as a single entity—and not simply as a series of one to one links between firms along the chain. Accordingly, there are problems with the use of EDI in supply chain management (SCM). The

benefits that E-commerce technologies have to offer towards developing and maintaining a truly holistic approach to SCM are now being realized. This paper first defines the terms e-commerce, e-business, supply chain, and Supply Chain Management, then it delves into problems with the use of EDI in SCM. The main thrust is to show how E-commerce technologies can help overcome these problems and effectively be used in SCM. It ends by identifying some managerial and technical issues corporations will face in order to e-enable their SCM, and by showing some case studies.

  1. Introduction

Electronic commerce (e-commerce) has revolutionized all facets of business and industry. E-commerce is generally understood to mean buying and selling of information, products, and services via computer networks (Kalakota and Whinston, 1996). i.e. Transaction. It is about redesigning business processes with the help of Internet based technologies.

e-Business is More Than Just e-Commerce it is the continuous optimization of an organization’s value proposition and value chain position using the digitally connected marketplace and the use of the Internet as the primary communications medium, including all business processes and e-Commerce.

Supply Chain the core business processes in an organization that create and deliver a product or service, from concept through development and manufacturing or conversion, and into a market for consumption.

Supply Chain Management is the methods, systems and leadership that continuously improve an organization’s integrated processes for product and service design, purchasing, inventory management, logistics, distribution and customer satisfaction

One of the reasons for the failure of Electronic Data Interchange (EDI) services to fulfill its earlier promise is the absence of common standards for EDI (Leebaert, 1998).

Supply chain plus e-Commerce is about taking a virtual, optimized network of response to the customers and consumers of choice.

Over the past decade, many managers have adapted their ways of operating to incorporate new technology. Dramatic as these changes have often bee, a much more profound transformation of the business landscape lies ahead. The main driver is electronic commerce. All executive are being forced to rethink the strategic fundamentals of their business. Increasingly the complete supply chain is being impacted by the technologies associated electronic connectivity, and need to be redesigned accordingly. In particular, radical change is required in response to:

  • reduce, remove and re-deploy many of the traditional approaches to sales and marketing.
  • Compress the length of the supply chain through the elimination of middle men in the sales process.
  • Create extended enterprises, link manufacturers and inter-industry groups operating within new electronic markets.
  • Real time access, capture and transfer of data between trading partners.
  • Develop new products which support, sustain and extend electronic commerce.

By truly embracing electronic commerce, a business can transform the way it creates markets and delivers products to its customers. It has strategic business development potential and, as such, needs urgent attention. In turn, it will have a considerable role in facilitating the redesign of many supply chain processes.

The concept is to Extend your supply chain and use a new e-Commerce tool to generate new revenue.

This paper is organized as follows:

First, defines Electronic Data Transition (EDI) and its problems, then presents Supply Chain Management as an organizational application of E-commerce.

Second, discusses the role of e-commerce technologies in supply chain management and how e-commerce facilitates supply chain management.

Finally, identifies some managerial and technical issues corporations will face in order to e-enable their SCM, and by showing some case studies.

  1. EDI and its Problems

A good number of firms have used Electronic Data Interchange (EDI) beginning in the 1980s. EDI is, by definition, the direct computer-to-computer exchange between two business partners (e.g., a manufacturer of finished goods and a supplier of raw materials) of standard business documents such as purchase orders and invoices.

EDI can help businesses save time and money by reducing transaction processing and data entry costs while gaining faster access to information. Studies suggest that EDI reduces the human element in communication while improving both speed and accuracy of data flow (e.g., Carter and Ragatz, 1991). Reductions in both leadtimes and inventory levels, using EDI, have been reported (e.g., Dobler and Burt, 1996; Monczka and Carter, 1988).

Unfortunately, EDI is not living up to its promise for a number of reasons. First, the participating companies must agree on the format of a standard, and it is not as easy for them to do so since many of them use different standards. Second, software is too expensive and too proprietary. Specialized software must be developed by participating businesses to convert incoming and outgoing messages in a common format that is understandable to other businesses. Traditional EDI works better between two large organizations with a high volume

of transactions (Barret and Hogenson, 1998). Third, the transaction fees are too high. Again, only large organizations can afford EDI.

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Fourth, EDI addresses one-to-one, business-to-business links between entities without holistically tackling the problem of end-to-end efficiency along the entire supply chain.

The bottom line is this: EDI will remain in SCM, at least for the time being, since it has the advantage of higher data security than the Internet and it can carry large transaction volumes. However, a growing number of experts agree that the economics of the Internet versus EDI appear overwhelming (Bartholomew, 1997).

  1. Organizational Applications Of Ecommerce

E-Commerce has influenced two important areas of organizational applications: just-in-time (JIT) purchasing, and supply chain management ...

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