Issues in E-Supply Chain Management:
Except for a few organizations like Wal-Mart, P&G and Dell, the understanding of SCM challenges in most firms is still at a primitive level. Nevertheless, organizations are now learning fast the importance of managing and integrating product flows through SCM. SCM also plays a role in product design. It is not confined to procurement and distribution. There are many strategic decisions involved in developing an integrated system of SCM. Four major elements that help in effective SCM design are discussed below.
Appropriate Supply Chain Structure
It may not be a bad idea to stock goods to meet future customer demands. But, what about the risk of products becoming obsolete? Excess stock is always a direct monetary loss. SCM helps companies make proactive decisions.
For example, there are millions of configurations possible for a computer, and a customer may select any one of them. There are two types that a company may meet the customer demand. It may invest a huge sum of money and manufacture all kinds of models. Major companies like IBM, Compaq and Acer do this in the manufacture of PCs. Another strategy could be to prepared a responsive and integrated supply chain. As soon as a customer gives an order and specifies the configuration, all the needs of processors, hard disks and other peripherals are called to the suppliers and the schedule is also available to them, they supply the materials on the needed dates. This strategy is known as build-to-order and is taken by companies such as Dell Computers.
Differentiation
Differentiation is an effective strategy for companies to derive competitive advantage. Companies usually try product or service differentiation. They usually forget that there is another avenue for differentiation through supply chain management.
- For example, the built-to-order business model triggers procurement, manufacturing and shipment only when customer demand is certain. Using build-to-order model, businesses can achieve differentiation by allowing customers to choose the type of components to be included in their products and the date of product delivery.
- Controlling the speed of movement of goods passing through the supply chain.
- Controlling the amount of inventory held by suppliers and consequently the inventory carrying costs and depreciation costs in the supply chain.
- Adjusting the product cycle times.
Order Fulfillment Capabilities
Order fulfillment is a costly process; hence there is scope for cost reduction and improvement in service. Most often, different functional units of a company have different requirements and sometimes even conflicting objectives. For example, the sales department needs to maintain stock to meet customer demands. But the inventory management department may be against this since it wants to reduce inventory carrying costs. Unless the internal conflicts are resolved, successful supply chain management becomes difficult.
Adequate Infrastructure
Supply chain solutions typically integrate planning and execution capabilities. But creating infrastructure for a real-time supply chain has become increasingly difficult because of continuous improvements in technology and increase in the number of partners for any given firm. Supply chain applications should be designed in such a way that they are compatible with the existing ERP and other legacy systems existing in a firm. ERP systems are deployed in the production, scheduling and finance functions of organizations. The supply chain solutions need to use the ERP system to integrate the functions and information in multiple organizations. An important decision in SCM is the choice of new technologies by predicting the capabilities that are likely to be required to service customers in the future.
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