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IMCS
12,4 Web technology and supply chain
management
David C. Chou
338 Department of Computer Information Systems, Eastern Michigan University,
Ypsilanti, Michigan, USA
Xin Tan
Department of Management, University of Nebraska-Lincoln, Lincoln,
Nebraska, USA, and
David C. Yen
Department of Decision Sciences and MIS, Miami University, Oxford,
Ohio, USA
Keywords Manufacturing resource planning, Supply chain management, Internet,
Worldwide web, Telecommunication services
Abstract Supply chain management is critical since firms always confront the competition on
their supply chain efficiency. This article discusses the trend in supply chain management by
examining Web technologies that transform and streamline the supply chain management.
Introduction
Companies strive to improve market share, grow corporate profit, and gain strategic
advantage. In order to achieve these goals, supply chain competency must be placed at
the heart of a company’s business model. Firms realize that the competition is driven
by customer demand. Effective supply chain management can offer customers high
quality products and services with low prices.
Just like enterprise resource planning (ERP) and customer relationship management
(CRM), supply chain management (SCM) is also an important component of extended
enterprise applications. SCM serves as the back-end application by linking suppliers,
manufacturers, distributors, and resellers in a cohesive production and distribution
network. Beyond the pervasive adoption of ERP systems, which aim to facilitate
internal operations and to increase productivity, firms are generating explosive
demand for SCM applications.
The network economy combines enhanced, transformed, and new economic
relationships that are based on computer networks and human knowledge. Its
connectivity is mainly realized through the intranet and extranet that exist within and
across firms. SCM applications utilize these networks aiming to control costs, reduce
paperwork, lower inventory, and shorten product cycles. Electronic data interchange
(EDI) has been heavily used in industries. Nowadays, the Internet and the World Wide
Web are widely accepted since they broaden the scope of connectivity among
individuals and businesses. Web technologies allow firms to collaborate with business
partners to gain the benefits of reducing costs, enhancing customer satisfaction, and
Information Management & retaining competitive advantages.
Computer Security
Vol. 12 No. 4, 2004
The power of SCM is well exemplified by Dell Computers. Started in 1984 in Austin,
pp. 338-349 Dell Computers was ranked the No. 1 PC maker in the US market in 1999 (Shah, 2001).
q Emerald Group Publishing Limited
0968-5227
Dell’s direct-sales model is well known to the business community. Dell’s PCs are made
DOI 10.1108/09685220410553550 by electronic order and are delivered directly to its customers. They have eliminated
the middleman within their supply chain and have also exemplified an innovative Web technology
business model through their effective SCM. Dell Computers continues to enhance and
broaden its competitive advantage by integrating the Internet into its entire business
and supply chain
process, including online sales, procurement, customer support and relationship management
management.
This paper first discusses the implications of SCM and its evolution. Next, the
impacts of the Internet and Web technology on SCM and the major concerns on 339
managing Web supply chain are discussed. Later, Dell Computers’ successful SCM
implementation is illustrated and discussed. Next, key steps to implement SCM are
addressed and its future development is discussed.
Implications of SCM
Defining SCM
Although SCM has gained in popularity, there remains confusion about its meaning
and definition. Some field experts regard SCM as an operational process that involves
the flow of materials and products. Other experts define SCM as a managerial
philosophy or the implementation of a managerial philosophy. These deviations can be
found in the following definitions (McKeown, 2000):
SCM as a managerial philosophy:
Supply chain management is an integrative philosophy to manage the total flow of a
distribution channel from supplier to the ultimate user.
SCM as the implementation of a managerial philosophy:
The extension of integrated behavior to incorporate customers and suppliers through
external integration is called supply chain management.
The last definition implies that SCM involves multiple firms, multiple business
activities, and the coordination of those activities across functions and/or firms in their
supply chain process.
Effective SCM can help lower production and distribution costs through seamless
cooperation between business partners in their supply chain. In the meantime, the
performance of supply chains can affect customers’ satisfaction. Therefore, SCM can be
seen as a source of competitive advantage and a lever for profit margin. Specifically,
the goals of SCM can be categorized as the following:
.
decrease inventory costs by matching production to demand. This goal is
consistent with the concept of just-in-time (JIT) inventory management;
IMCS .
reduce overall production costs by streamlining the products flow within the
production process and improving information flow between business partners;
12,4 and
.
improve customer satisfaction by offering increased delivery speed and
flexibility through the seamless cooperation with the distributors and vendors.
The outcome
Dell surpassed Compaq to become the No. 1 PC maker in the world in 2001. Dell’s
success should be attributed to its direct-sales model and the utilization of effective
SCM. The resulting efficiency ratios such as inventory turnover and plant utilization
placed Dell in an advantageous position, which encouraged consolidation among
competitors to achieve the same level of efficiency. Although the slow PC market
forced Dell’s revenue to drop, its core competency in SCM helped Dell manage 15
percent increase in product shipments as industry volume dropped 5 percent in 2001
(Serwer, 2002).
IMCS SCM implementation and development
In order to enhance competitive advantage through effective SCM, more companies
12,4 intend to invest in better technological solutions. Nowadays, an effective SCM program
confronts two major challenges:
(1) Integrating Web-based SCM applications with legacy enterprise applications,
which are based on mainframe or client/server systems.
346 (2) Linking systems with their supply chain partners to enable seamless supply
chain integration.
Switching from traditional business operations to a new system empowered by SCM is
not an easy task. For example, when announcing an unexpected shortfall in third
quarter earnings, Nike, a famous sports apparel maker, attempted to blame the results
on a new SCM system from i2 Technologies (Farmer, 2001).
Conclusion
In today’s market situation, most firms cannot operate as autonomous entities but as
348 participants in integrated supply chains. In order to meet customers’ expectations,
firms try their best to shorten product development, reduce costs and prices, improve
quality, and expedite distribution. SCM utilizes a growing body of tools and techniques
for coordinating and optimizing these key processes. Additionally, SCM facilitates
coordination among trading partners, which enables opportunities for synergy. A
firm’s competitive advantage, in turn, is highly dependent on the efficiency of its
supply chain. Dell Computers, through its efficient SCM and built-to-order business
model, gained a great success in 1990s.
The business environment changes rapidly. Therefore, the focus of SCM must
evolve accordingly. The change in corporate strategy increases their dependency on
suppliers. A wide range of products and services provided by the suppliers makes SCM
increasingly complex. Under this situation, the collaborative relationship between
trading partners in the supply chain becomes critical. Effective SCM must be
responsive to this challenge. Fortunately, the Internet is able to facilitate this challenge.
The Internet offers the supply chain enormous potential and entirely new methods
for streamlining coordination between business partners and customers. The Internet
enhances SCM’s performance and it is an essential part of e-Commerce. As the SCM
evolves in the information age, the network supports coordination between business
partners to make all the information, transactions, and decisions flow through the
network. As a successful SCM model, Dell Computers has established competitive
advantages with the advancement of the networked economy.
Generally speaking, in an environment where the competition is increasingly based
on supply chain efficiency, firms need to put SCM at the heart of their business model
to be successful. They must take advantage of the Internet and Web technology to
achieve higher-quality and lower-cost collaboration with trading partners.
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