A production supply
chain refers to the flow
of physical goods and
associated information
from the source to the
consumer. Key supply
chain activities include
production planning,
purchasing, materials
management, distribution,
customer service, and
sales forecasting. These
processes are critical
to the success of any
operation whether they’re
manufacturers, wholesalers,
or service providers.
Electronic commerce
and the Internet are
fundamentally changing
the nature of supply
chains, and redefining
how consumers learn
about, select, purchase,
and use products and
services. The result
has been the emergence
of new business-to-business
supply chains that
are consumer-focused
rather than product-focused.
They also provide customized
products and services.
Traditional Supply
Chain "Push" Model
In the traditional supply
chain model, the raw
material suppliers are
at one end of the supply
chain. They are connected
to manufacturers and
distributors, which are
in turn connected to
a retailer and the end
customer. Although the
customer is the source
of the profits, they
are only part of the
equation in this "push" model.
The order and promotion
process, which involves
customers, retailers,
distributors and manufacturers,
occurs through time-consuming
paperwork. By the time
customers' needs are
filtered through the
agendas of all the members
of the supply chain,
the production cycle
ends up serving suppliers
every bit as much as
customers.
E-Commerce Supply Chain "Pull" Model
Driven by e-commerce’s
capabilities to empower
clients, many companies
are moving from the traditional "push" business
model, where manufacturers,
suppliers, distributors
and marketers have most
of the power, to a customer-driven "pull" model.
This new business model
is less product-centric
and more directly focused
on the individual consumer.
To succeed in the business
environment, companies
have recognized that
there is an ongoing shift
in the balance of power
in the commerce model,
from suppliers to customers.
In the pull model, customers
use electronic connections
to pull whatever they
need out of the system.
The old "push" model
involves a linear flow
of commerce that keeps
many members of the supply
chain relatively isolated
from end users. With
the new customer-driven
pull model, it is no
longer a linear process.
The new supply chain
has each participant
scrambling to establish
direct electronic connections
to the end customer.
The result is that electronic
supply-chain connectivity
gives end customers the
opportunity to become
better informed through
the ability to research
and give direction to
suppliers. Ultimately,
customers have a direct
voice in the functioning
of the supply chain.
E-commerce creates a
much more efficient supply
chain that benefits both
customers and manufacturers.
Companies can better
serve customer needs,
carry less inventory,
and send products to
market more quickly.
Impact of E-Commerce
on Supply Chain Management
E-commerce impacts supply
chain management in a
variety of key ways.
These include:
-
Cost
efficiency: E-commerce
allows transportation
companies of
all sizes to
exchange cargo
documents electronically
over the Internet.
E-commerce enables
shippers, freight
forwarders and
trucking firms
to streamline
document handling
without the monetary
and time investment
required by the
traditional document
delivery systems.
By using e-commerce,
companies can
reduce costs,
improve data
accuracy, streamline
business processes,
accelerate business
cycles, and enhance
customer service.
Ocean carriers
and their trading
partners can
exchange bill
of lading instructions,
freight invoices,
container status
messages, motor
carrier shipment
instructions,
and other documents
with increased
accuracy and
efficiency by
eliminating the
need to re-key
or reformat documents.
The only tools
needed to take
advantage of
this solution
are a personal
computer and
an Internet browser.
-
Changes
in the distribution
system: E-commerce
will give businesses
more flexibility
in managing the
increasingly
complex movement
of products and
information between
businesses, their
suppliers and
customers. E-commerce
will close the
link between
customers and
distribution
centers. Customers
can manage the
increasingly
complex movement
of products and
information through
the supply chain.
-
Customer
orientation: E-commerce
is a vital link
in the support
of logistics
and transportation
services for
both internal
and external
customers. E-commerce
will help companies
deliver better
services to their
customers, accelerate
the growth of
the e-commerce
initiatives that
are critical
to their business,
and lower their
operating costs.
Using the Internet
for e-commerce will
allow customers to
access rate information,
place delivery orders,
track shipments and
pay freight bills.
E-commerce makes
it easier for customers
to do business with
companies: Anything
that simplifies the
process of arranging
transportation services
will help build companies'
business and enhance
shareholder value.
By making more information
available about the
commercial side of
companies, businesses
will make their web
site a place where
customers will not
only get detailed
information about
the services the
company offers, but
also where they can
actually conduct
business with the
company.
Ultimately, web
sites can provide
a universal, self-service
system for customers.
Shippers can order
any service and access
the information they
need to conduct business
with transportation
companies exclusively
online. E-commerce
functions are taking
companies a substantial
step forward by providing
customers with a
faster and easier
way to do business
with them.
-
Shipment
tracking: E-commerce
will allow users
to establish
an account and
obtain real-time
information about
cargo shipments.
They may also
create and submit
bills of lading,
place a cargo
order, analyze
charges, submit
a freight claim,
and carry out
many other functions.
In addition,
e-commerce allows
customers to
track shipments
down to the individual
product and perform
other supply
chain management
and decision
support functions.
The application
uses encryption
technology to
secure business
transactions.
-
Shipping
notice: E-commerce
can help automate
the receiving
process by electronically
transmitting
a packing list
ahead of the
shipment. It
also allows companies
to record the
relevant details
of each pallet,
parcel, and item
being shipped.
-
Freight
auditing: This
will ensure that
each freight
bill is efficiently
reviewed for
accuracy. The
result is a greatly
reduced risk
of overpayment,
and the elimination
of countless
hours of paperwork,
or the need for
a third-party
auditing firm.
By intercepting
duplicate billings
and incorrect
charges, a significant
percent of shipping
costs will be
recovered. In
addition, carrier
comparison and
assignment allows
for instant access
to a database
containing the
latest rates,
discounts, and
allowances for
most major carriers,
thus eliminating
the need for
unwieldy charts
and tables.
-
Shipping
Documentation
and Labeling: There
will be less
need for manual
intervention
because standard
bills of lading,
shipping labels,
and carrier manifests
will be automatically
produced; this
includes even
the specialized
export documentation
required for
overseas shipments.
Paperwork is
significantly
reduced and the
shipping department
will therefore
be more efficient.
-
Online
Shipping Inquiry: This
gives instant
shipping information
access to anyone
in the company,
from any location.
Parcel shipments
can be tracked
and proof of
delivery quickly
confirmed. A
customer's transportation
costs and performance
can be analyzed,
thus helping
the customer
negotiate rates
and improve service.
