MM ELEC 3
E-COMMERCE
MODULE 16
SUPPLY CHAIN MANAGEMENT
Supply chain management (SCM) involves the coordination of all supply activities
of an organization from its suppliers and delivery of products to its customers.
o It is Supply chain management is essentially the optimization of material
flows and associated information flows involved with an organization’s
operations.
To manage these flows, digital business applications are today essential.
o For Nike and other companies which constantly innovate to renew
products, selecting the right technology is important to “orchestrate the
constant collaboration between supply, demand, and product
management groups that brings profi table new products to market.”
Problems of supply chain How digital technology can reduce the
management (SCM) problem
Pressure to reduce costs of Reduction in paperwork through electronic transmission of
manufacturing and distributing orders invoices and delivery notes
products in order to remain Reduced inventory holdings needed through better
competitive understanding of demand
Reduced time for information and component supply across
the supply chain
Lower SCM system purchase and management costs
through use of online services (SaaS)
Demand forecasting Sharing of demand by customers with suppliers as part
of efficient consumer response (ECR)
Failure to deliver products on time Supplier becomes responsible for item availability through
consistently or lack of items on shelf vendor- managed inventory
in retailer
Failure to deliver or ship correct Human error reduced
product Checks and balances can be built into system
High inventory costs Inventory reduced throughout the supply chain through
better demand forecasting and more rapid replenishment
of inventory
Time for new product development Improved availability of information about potential
suppliers and components, for example through online
marketplaces
Source: Chaffey, David. 2015. Digital Business and E-Commerce Management: Strategy, Implementation
and Practice, 6th Edition. Pearson
Supply chain activities
Upstream supply chain activities
o Transactions between an organization and its suppliers and
intermediaries, equivalent to buyside e-commerce.
Downstream supply chain
o Transactions between an organization and its customers and
intermediaries, equivalent to sellside e-commerce.
Supply chain management includes:
Supplier
o First-tier suppliers
o Second-tier suppliers
o Third-tier suppliers
Buyer
o First-tier customers
o Second-tier customers
o Third-tier customers
Intermediaries
o Supplier’s suppliers
o Customer’s customers
Supply chain network
The accurate reflection of the links between organization and its partners is
called supply chain network.
o Supply chain network is the links between an organization and all partners
involved in multiple supply chains.
Technology is vital to supply chain management since managing relationships
with customers, suppliers and intermediaries is based on the flow of information
and the transactions between these parties.
o The main strategic thrust of enhancing the supply chain is to provide a
superior value proposition to the customer, of which efficient consumer
response (ECR) is important within the retail and packaged consumer
goods market.
Efficient consumer response (ECR) is creating and satisfying
customer demand by optimizing product assortment strategies,
promotions and new product introductions.
Improving customer value involves improving product quality, customer service
quality and/or reducing price and fulfilment times.
o Increasing efficiency in obtaining resources from a supplier organization or
distributing products to customers reduces operational costs and so
increases profitability.
Source: Chaffey, David. 2015. Digital Business and E-Commerce Management: Strategy, Implementation
and Practice, 6th Edition. Pearson
Objectives and strategies for effective consumer response (ECR)
Objective Strategy
Timely, accurate, paperless information Revision of organization processes
flow supported by information systems
Optimize productivity of retail space and Efficient store assortments
Inventory
Optimize for time and cost in the ordering Efficient replacement
process
Maximize efficiency of promotions Promotions are integrated into the entire
supply chain planning
Maximize effectiveness of new product
development (NPD) NPD process improved and better
forward planning with other partners
The strategy divided transactions into three types:
(1) Strategic (high volume, high value, high risk) – a dedicated EDI line was
considered most appropriate
(2) Tactical (medium volume, value and risk) – EDI or Internet EDI was used
(3) Consumer transactions (low volume, value and risk) – a range of lower-cost
Internet-based technologies could be used.
Simple model of supply chain
Source: Chaffey, David. 2015. Digital Business and E-Commerce Management: Strategy, Implementation
and Practice, 6th Edition. Pearson
Logistics
Logistics is the time-related positioning of resource, or the strategic management
of the total supply chain.
o The supply chain is a sequence of events intended to satisfy a customer.
It can include procurement, manufacture, distribution, and waste
disposal, together with associated transport, storage and
information technology.
Logistics is used to refer not to all supply chain activities but specifically to the
management of logistics or inbound and outbound logistics.
o Inbound logistics
The management of material resources entering an organization
from its suppliers and other partners.
o Outbound logistics
The management of resources supplied from an organization to its
customers and intermediaries.
Push and pull supply chain models
A change in supply chain thinking, and also in marketing communications
thinking, is the move from push models of selling to pull models or to combined
push–pull approaches.
o The push model is illustrated by a manufacturer who perhaps develops an
innovative product, identifies a suitable target market and creates a
distribution channel to push the product to the market – Figure 6.7(a).
The typical motivation for a push approach is to optimize the
production process for cost and efficiency.
Push supply chain
o A supply chain that emphasizes distribution of a product to passive
customers.
Source: Chaffey, David. 2015. Digital Business and E-Commerce Management: Strategy, Implementation
and Practice, 6th Edition. Pearson
Pull supply chain
o An emphasis on using the supply chain to deliver value to customers who
are actively involved in product and service specification.
Source: Chaffey, David. 2015. Digital Business and E-Commerce Management: Strategy, Implementation
and Practice, 6th Edition. Pearson
