ESCM - Advantages
The advantages of ESCM are many, and include timely order-processing, improved inventory tracking and management, improved accuracy in order fulfillment, support for JIT manufacturing, etc.
Cost saving
By integrating different supply chain levels, organizations can realize huge cost reductions.
As the ESCM integrates supply chain partners with the help of the Internet, the cost and time involved in communicating with them is reduced significantly.
Reduction in inventory levels
ESCM results in an "extended organization" that encapsulates the activities of the suppliers. The extended organization structure provides instant information about the status of inventory levels to the suppliers. As a result, inventory levels are replenished as and when required. In today's business arena, suppliers are electronically connected and get real time information about the inventory level. Therefore, there is no need to carry high inventory.
Exhibit
Electronic Supply Chain Management in Retailing
In the competitive retail market of today, organizations have to satisfy constantly changing customer needs and wants, and reduce operating costs. In order to achieve this, retailers focus on improving relationships and coordination with business partners. This ensures the timely delivery of goods without straining resources. Organizations are adopting e-business technologies to improve the performance of the supply chain network.
The electronic supply chain provides retailers and their suppliers a medium for instant communication. An electronic supply chain can help an organization in areas like advanced planning and replenishment systems (APS) and supply chain execution (SCE) systems. Through APS, retailers and suppliers can forecast their sales and inventory requirements. Such forecasts help in planning and scheduling orders. Through the SCE system, organizations can maintain better control over distribution centers, warehouses/ stores, transportation and other logistics operations. Electronic supply chain management can bring benifits in the following areas:
Business integration
Electronic supply chain management integrates various aspect of the supply chain such as forecasting, distribution, merchandising, production, transportation, etc. Business process and information integration allows retailers to reduce inventory costs, cycle time, transportation costs, etc. thus improving customer service and inventory management.
Business-to-Business collaboration
Coordination and information flow between the different channel partners is critical for the optimal performance of the supply chain. Retailers can improve forecasts, replenishment plans, and management of suppliers by collaborating with other supply chain partners.
Electronic commerce
In order to take full advantge of the opportunities provided by e-commerce, retailers should have an effective electronic supply chain management system that can handle customer requests promptly. The Internet, apart from providing a sales channel, can also be used to handle customer complaints, provide assistance, collect customer data that can be used in forecasts, etc.
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Reduction in procurement costs
An organization can reduce its procurement costs significantly by providing its suppliers instant access to information. Since the supplier can access the information regarding inventory and procurement automatically, the purchasing department can reduce its involvement in minor transactions. Their focus can now be on higher value activities like vendor selection, sourcing, and managing relationships with vendors/suppliers.
Reduction in cycle time
ESCM ensures that the organizations get timely and accurate forecasts with regard to product or service demand. This allows proper production planning based on actual requirements, resulting in reduced cycle time for production activities and reduction in stock-out costs.
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