The Supply Chain Concept

Supply Chain Concept

Introduction

In today's competitive business environment many firms face the arduous mission of managing their supply chain. In an effort to gain competitive advantage, firms must make key decision involving logistics and operations management to move products and service across the supply chain. The materialization and attractiveness of the Internet has made supply chain management more attainable for business enterprises. Research shows that Internet-derived technology has enabled companies to build and deploy supply chain management systems to perform key business decisions involving product flow and scheduling, process design and selection, product sourcing, layout, job design, and technology management. Implementation of supply chain management system gives firms the ability to publish information on a platform that can be accessed by the entire enterprise, suppliers, distributors, and customers all around the world. According to Gary Schneider (2004, p. 228, para. 1), author of E-Commerce the Second Wave, the ultimate goal of supply chain management is to achieve a higher-quality or lower-cost product at the end of the chain. This document gives a description of the supply chain concept and how it applies in eBusiness. Additionally, the benefits of the supply chain concept and the differences in the supply chain between a Business-to-Consumer (B2C) site compare to a Business-to-Business (B2B) site are explored.

The concept of the Supply Chain

The interaction between suppliers, manufacturers, distributors and consumers is important to understanding the supply chain concept. Schneider (2004, p. 544) defines the supply chain as "the part of an industry value chain that precedes a particular strategic business unit. It includes the network of suppliers, transportation firms, and brokers that combine to provide a material or service to the strategic business unit". A simple example of the supply chain concept explained by Wu and O'Grady (2001) states,

"Material flow is from the suppliers, who provide materials and subassemblies, to the manufacturers, who build, assemble, convert, or furnish a product or service. The finished products then pass to distributors, who transport and deliver the finished product to the customers. While material flows from left to right, which is from suppliers to manufacturers, distributors and customers, information flow in a conventional supply chain can be considered to flow in the opposite direction. The customers order from the distributors, who then order from the manufacturers and so on down through the supply chain, from right to left, as shown in Figure 1."

An understanding of the flow of the supply chain aids in exploring the activities of the manufacturing, planning, distribution, marketing, and purchasing operations within an organization to manage the supply chain in an eBusiness environment.

How the supply chain applies in eBusiness

There are many new opportunities presented to a firm's supply chain in an E Business environment. Research shows that the most common use of E Business is to improve supply chain processes within the firm and across the supply chain. This activity is referred to as supply chain management. Schneider (2004, p. 544) defines supply chain management as "the process of taking an active role in working with suppliers and other participants in the supply chain to improve products and processes (Schneider, 2004, p. 544)." One example to manage supply chain processes is the development of a distribution strategy for online firms. Organizations need to understand consumer's buying behaviors to develop a distribution strategy. This activity requires firms to capture primary data to conduct internal market research. Online retailer, U.S. Cavalry, captures information about its customers via online orders to develop its distribution strategy. Young (2001) states that "research for U.S. Cavalry customers' buying patterns showed that a significant number brought from their Website more frequently than their catalog call centers or brick and mortar stores." Using this internal research proves very beneficial in placing the right products where consumers want to buy them. In fact, Young (2001) also states, "particular product categories may work better in certain channels than in others. Clothing sells better for us online, while boot wear works best in the catalog. So we would tailor our promotions accordingly."

The use of internal market research does not only facilitate in developing a distribution strategy, but also assists the procurement, logistics, marketing, and inventory departments to order, distribute, promote, and maintain the right products to meet consumer demand.

EBusiness plays a key role in gathering information to allow firms to improve supply chain processes that increases productivity and distribution of the right products to the right place to meet the customer's needs.

The benefits of the Supply Chain to eBusiness

EBusiness is very beneficial in improving and maintaining product quality and reducing cost. By using Internet technologies across the supply chain a firm can determine the best ways to implement eBusiness strategies by analyzing business processes throughout the entire organization. Schneider (2004, p. 230) illustrates that Internet technologies provide suppliers with the following advantages in an eBusiness environment:

* Share information about customer demand fluctuations.

* Receive rapid notification of product design changes and adjustments.

* Provide specifications and drawings more efficiently.

* Increase the speed of processing transactions.

* Reduce the cost of handling transactions.

* Reduce errors in entering transaction data.

* Share information about defect rates and types.

For example, as managers review information and payment flows from the consumer to the retailer, from the retailer to the distributor, from the distributor to the manufacturer, and from the manufacturer to the supplier they can develop a supply chain management plan to operate more efficiently and reduce costs. Also the execution of the supply chain management plan can include information to forecast and adjust product flows to increase revenues. These activities will produce many opportunities to improve products more efficiently while reducing costs.