Supply Chain Management involves the process of managing, monitoring, controlling and constantly coordinating supply related activities among manufacturers, suppliers, wholesalers, retailer and the consumers. All this is done while integrating supply management with demand management, not only within but also across companies. A Supply Chain Management system provides real-time visibility into operations, and integrates activities through improved supply chain relationships, to achieve a sustainable competitive advantage (CompuData Inc. 2014). Since all the processes involved in managing supply chain activities require a robust system in place, every company turns to technology for efficient and effective synchronization and smooth deployment of processes along with careful alignment of resources for timely completion of supply related activities.
One such system that allows firms to manage business and operations and automate time-consuming manual tasks is Enterprise resource planning system, which now is being integrated with supply chain management by companies worldwide so that they can enjoy access to all streamlined information related to various functions in the organization on one platform, thereby saving time and cost. An ERP system outlines a smart process for the company to use technology to automate manual or mundane work processes therefore, making it easier to streamline supply chain management practices, ERP systems help to define roles and responsibilities of different users and ensure that ownership is assigned at various levels and ERP implementations also help users to gain familiarity with technology systems, terms and sets expectations making transitions to supply chain management applications smoother (CompuData Inc. 2014). When it comes to Supply Chain Management (SCM), businesses need to interact with numerous suppliers and partners in order to obtain the raw materials and resources needed to bring finished goods to market. ERP plays a vital role in combating inefficiency; reducing waste and ensuring that workers are better able direct their efforts (CompuData Inc. 2015).
There are various other advantages associated with best practice supply chain management integrated with streamlined ERP system, such as:
1. Increased efficiency amongst various business units and departments involved in the supply chain management process.
2. Increased customer satisfaction and hence retention due to better customer service offered
3. Reduction in manual work, hence less fixed and variable costs associated with overhead expenses, operational expenditures etc
4. Greater chances of business growth and expansion due to increased flexibility in meeting the ever changing market and customer needs.
Now that the firms are aware of the advantages of having a one-stop solution in the face of ERP system, they want the process of ordering and procurement to be somehow streamlined so that everything can be handled by technology alone and there is no room for manual processes and human errors. Hence, web-based supply chain system has come into play to help firms enjoy seamless, effortless, cost-effective and time-saving supply chain management, with all activities and all stakeholders integrated on the web. Web-based supply chain management help firms attain three major advantages as follows:
1. Affordability: The web-based system helps to expand the customer base while continuously reducing cost of doing business with them, without bringing about any change in the demand and supply principles.
2. Efficiency: Since all activities are integrated online, the web-based system offers efficient and accurate analysis of business needs on an on-going basis, thereby allowing informed decision making by the firm. Automation of activities reduces time needed to put together information and analyze modifications in business demand, without putting extra strain on the employees and resources.
3. Scalability: Web-based supply chain management allows firms to easily accommodate changes in the market demand and supply, which otherwise is a troublesome task and leads to changes in multitude of processes. Manual management can lead to a stress attack in the firm, with extra pressure on the employees and long working hours so as to come in line with the market trend again. This pressure is greatly reduced with online management system, thereby increasing flexibility and increasing tolerance to risk and change.
White (1996) pointed out that the combined use of the Internet with SCM allows customers and suppliers to share mission-critical information on a timely basis to enable effective, real-time decision-making. Kalakota and Whinston (1996) viewed Web-based SCM applications as mission-critical business applications that are used by companies to run their businesses, such as taking customer orders and order management; planning the distribution of inventory and forecasting demand; accounting; and managing the flow of materials (Ngai, Cheng, and Ho, 2004). There are several factors that work in favor of web and SCM integrated together, but some of the most critical success factors include:
ï€ Access to globally diverse business cultures
ï€ Ease in changing internal processes as per the needs of the market
ï€ Increased data security
ï€ Increased internal and external coordination
ï€ Less human workforce
ï€ Quick inventory management
ï€ Reduced purchase cost
ï€ Reduced purchase order time (Time taken for the order purchased to be delivered)
ï€ Bargaining, negotiations, agreements, re-negotiations etc can all be done online, hence saving time
ï€ Improved customer service – customers have 24/7 access to the firm’s customer service associates, making it easier for them to voice their concerns and have someone respond to their complaints as soon as possible. Hence, the communication flow, not only between the businesses and customers but also with vendors and other stakeholders, has improved.
As much as it is true that web-based supply chain management is offering benefits that traditional supply chain management process wouldn’t, it is worth noticing that internet is making supply chain process a lot of more complex and demanding. Gone are the days when the suppliers would stock up inventory in order to reduce of purchasing raw materials on real-time basis; the markets and the consumers are now much more demanding and the firms lose out on the profits if they forecast demand and supply for a long period of time from beforehand due to the concept called bull-whip effect. Demand variability increases as one moves up the supply chain away from the retail customer, and small changes in consumer demand can result in large variations in orders placed upstream. Eventually, the network can oscillate in very large swings as each organization in the supply chain seeks to solve the problem from its own perspective. This phenomenon is known as the bullwhip effect and has been observed across most industries, resulting in increased cost and poorer service (QuickMBA).
It was more than often noticed that all firms would focus upon was the information regarding orders and they would send it up the supply chain, without taking into consideration the ever changing markets and consumer demands. This would result in information varying at each stage of the chain and hence, lost of trust among all parties involved in the process, thereby resulting in unhappy customers. This lack of information was one of the reasons contributing to bullwhip effect in the traditional supply chain methodologies and management. Another reason was the traditional supply chain structure which resulted in information reaching all the relevant parties late, thereby increasing the order lead time. This would further aggravate the bullwhip effect. Another traditional supply chain management methodology contributing to bullwhip effect was the process of ordering in huge batches so as to receive discounts; this would result in certain players in the market to only order in bulk, without giving market demand the attention it requires, thereby inflating orders, increasing stocks of inventory, obsolescence and increased warehousing costs. All these issues have been resolved with the firms shifting to ERP systems and web-based SCM. In today’s model many retailers never physically touch the products they sell online. Instead, online orders for these products are routed to a third party for fulfillment. Both third-party logistics providers and niche e-commerce fulfillment houses offer services in which they will pack and ship items on behalf of retailers (Keifer, 2013). But outsourcing the responsibility to third party logistics providers does not in any mean that the retailers are free from the process of tracking all the deliveries. Retailers need to make sure they are aware of the orders that are delayed or not fully shipped as per the demand of the customers since they do not want their relationship with the final consumers to be deteriorated in any way, hence they are always on their toes despite everything being integrated on the internet. Everything has its pros and cons; hence firms are not free from facing and dealing with the disadvantages that come with shifting to ERP and web-based supply chain systems. Some of the disadvantages of ERP systems are:
1. High cost of planning, configuration and implementing the system in the organization.
2. Time-consuming process of getting the system installed and having all employees getting trained prior to use.
3. Constant customization may be required to be in line with the changes in the market and to be in the game with the competitors.
4. A lot of indirect costs build up while and after implanting the system such as new and improved IT system
5. Initial transfer of all information to the system should be thoroughly and carefully done t avoid any issues in the future
6. This system may be difficult to implement in organizations with a decentralized structure since all business units and departments have their own systems in place
Some disadvantages and challenges associated with web-based SCM are:
1. Shift of power from seller to buyer: Since the internet gives customers the power of choice of seller, the shift from traditional to web-based supply chain management has evidently and inevitably shifted the power to the customers, and this seems to be an irreversible phenomenon.
2. Increased global competition: The firms are now no longer competing with other firms within the vicinity of their own country since internet has lead global connectivity. This means that the firms have no choice but to deal with this global interconnectivity and keep up with the changes in the markets and consumer behavior all around the world to avoid losing consumers and getting lost in the game. The world is now a global village and the players are no longer confined to a single country or continent.
3. More complex integration of information and management of partners: Since the stakeholders are no longer in the same region, web-based SCM requires constantly being in touch with the partners globally and the information needs to be integrated on a real-time basis so that everyone is on the same page and the work is done with as much efficiency and effectiveness as possible.
Overall, firms realize the importance of putting SCM at the heart of business structure since they know how essential it is to have a good supply chain system in place for the firm to prosper and to have satisfied customer base. Moreover, in this ever changing world of business, there is no way that firms can miss out on any opportunity to compete with other firms globally and the rise in global competitiveness means that traditional supply chain methods will not suffice. That is why the web has taken over the world and internet is helping firms deal with the challenges previously left unresolved. The firms must take advantage of the Internet and Web technology to achieve higher-quality and lower-cost collaboration with trading partners (Chou, Tan, Yen, 2004)