Supply chain is the term used to define the system of organizations, assets and activities involved in the conversion of raw materials into finished products and moving the product or service from the supplier to the customer. Supply Chain Management (SCM) is defined as the efficient integration of warehousing, manufacturing, logistics and distribution. In lay mans’ terms, SCM is ensuring that materials are available at the correct point in the correct amount at the correct time.
The primary objective of SCM is to minimize the costs involved the sourcing, warehousing, logistics and distribution.
The major obstacles in SCM are:
- Purchasing
- Unstable volume requirements.
- Delivery schedule.
- Large volumes.
- Manufacturing
- Production cost.
- Quality requirements.
- High productivity.
- Warehousing
- Optimized inventory management.
- Transportation management.
- Quick replenishment capability.
- Customer delivery
- Diverse product portfolio.
- Reduced backorders and lead time.
- Bullwhip effect.
As understandable, traditional methods of demand forecasting, vendor rating, procurement ordering takes a lot of time and effort. In today’s proactive and competitive world and delay in demand orders are inventory management can add to the bullwhip effect resulting in loss of money and efficiency. In a cost sensitive market this difference can result in the final product cost thus making the product dearer to the customer and can therefore influence the profit margins.
One of the major advancements in terms of SCM is Enterprise Resource Planning (ERP). This automated software which helps in streamlining the supply chain operations and also holds the records and data at a central repository so as to ease retrieving the data. The limitation of ERP is the requirement of the software and the compatibility and hence it is used largely within an organization and does not link suppliers to the customers.
E-Commerce:
Electronic-commerce or e-commerce is the practice of conducting business over electronic platforms like the internet. This involves buying or selling of commodities or services without having a retail outlet for the same as transactions are carried over the electronic platform.
The economic impact of electronic commerce in the business-to-business sector has been estimated to be approximately six times larger than the business-to-consumer sector, and to reach US$1.3 trillion by 2003 (BusinessWeek,2000). The total market size of the Internet’s commercial potential in business-to-business markets is expected to grow and rival well-established sectors such as energy, car manufacturing, and telecommunications (Internet Indicators, 1999).
E-Marketplace:
An e-marketplace is an internet location owned by a company or consortium which allows other companies or individuals to get new suppliers or buyers for their products as well as develop trading networks which makes the process of negotiating, settlement and delivery easier and efficient. A site is termed as an e-marketplace when it caters to multiple buyers and sellers by providing commerce related functionalities like auctioning (forward or reverse), catalogues, ordering, wanted-advertisement, trading exchange functionality and capabilities like RFQ, RFI or RFP.
Conceptually, the e-marketplace concept offers many advantages compared to traditional supply chain processes with real-time access to data. With the growth and popularity of e-commerce, attention has been devoted to understand the role of such IT marketplaces on strategic SCM like collaborative forecasting & planning. These e-marketplaces offer a much larger vendor vase to select form and there by enables the consumer to purchase the most optimum product form the most economical vendor.
The advancement of technology and the advent of platforms like World Wide Retail Exchange (WWER) and GlobalNetXchange (GNX), it is now possible to link the ERP of customers with that of the vendors. For ex – Traditional methods of procurement require an enterprise to request quotations from vendors analyze the prices and then place an order. E-marketplaces help reduce the time and effort taken to obtain quotations and also offer a much larger supplier base for the consumer to choose from.
E-marketplaces also reduce the resources needed by a company. As most of the customer, retailer & vendor interfaces are taken care online, and logistics and distribution operations can be outsourced to specialized companies, the physical presence of an enterprise can be greatly reduced thus freeing up resources to concentrate on business plans and market penetration.
This article is written by Bhatath Arava who is a PGDM student of the 2013-15 batch of IIM Raipur. He holds a bachelors degree in Mechanical Engineering and has 3 years of work experience in IBM and MRF Tyres. He is very much interested in Automobiles and Motorsports. He can be reached at pgp13010.bharath@iimraipur.ac.in
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