Summary of Chapter 6

“Supply Chain and Demand”

by: M. Aziz Putra Akbar (425436)

There are 2 main ideas addressed in this chapter -- entitled “Supply Chain and
Demand” -- which is supply chain management and e-procurement. At the beginning of the
chapter, it clearly states the learning outcomes. First, to discover the main components of
supply chain management as well as e-procurement. Second, in regards to digital business,
then a digital information system is also being developed in order to aid the implementation
and utilization of supply chain management and e-procurement. Last, to outline and perform
analysis of the various procurement methods.
First thing first, supply chain management (SCM) can be defined as how the flow of
goods and services is managed. This flow of goods is related to all the supply activities
starting from the supplier until it is hand to the customers. However, there are several
problems in regards to traditional SCM such as the unpredictable demand forecasting, failure
to deliver correct product, high inventory costs, predicting the right timing for new product
introduction, and so on. Therefore, by adopting digital technology, these problems of SCM
can be reduced or eliminated such as minimizing the risk of human error to tackle failure of
product delivery, etc.
SCM can be distinguished as an upstream supply chain (commonly seen as the buy-
side e-commerce) and downstream supply chain (seen as the sell-side e-commerce). Both
may be simplified or including intermediaries in it. Regardless of the differences, there are 4
keys to a successful SCM. The SCM should be customer centric, powered by people,
transformed by technology, and resilient and responsive.
An example of a simple SCM in the B2B model is as follows:
Upstream Supply Chain
Manufact
Supplie Wareho Wholesa Distribu
Retailer urer
rs use ler tor Company

Supplier
Agent

Downstream Supply Chain

Manufact
Wareho Wholesa Distribu
urer Retailer Customer
Company use ler tor

Supplier
Agent

Talking about supply chain, then it is closely related with logistics. Logistics are the
goods being transferred within the process of supply chain. Inbound logistics are the
resources from suppliers to the organization, while outbound logistics are the material
resources being transported from the organization to its customers. Those materials should be

Reference: Dave Chaffey; Tanya Hempfill; David Edmundson-Bird, 2019, Digital Business and E-
Commerce Management, 7th Edition.
transported based on ‘5 rights’: in the right place, at the right time, in the right quantity, at the
right quality, and at the right price.
The chapter discusses many aspects about SCM. This include the differentiation
between push and pull supply chain models, opting internal control (vertical integration) or
external control (horizontal integration) when restructuring supply chain, adopting digital
technology one of which is to minimize information asymmetry for implementing SCM, and
last but not least formulate strategy to implement the SCM by using SOSTAC approach.
The following part of the chapter then addresses procurement. E-procurement can be
done either through a systematic sourcing method (negotiation with regular suppliers), or spot
sourcing method (immediate procurement without adhering the track record of the suppliers).
All business players in the form of traditional manufacturers, direct sales manufacturers,
value-added procurement partners, online hubs, knowledge experts, online information
services, online retailers and portal communities can take part on the e-procurement process
through various types of applications like e-sourcing, e-tendering, e-informing, e-reverse
auctions, and eMRO and web-based ERP.
E-procurement has been adopted for quite a while because of the possibility to
improve 5 areas: control, cost, process, individual performance, and supplier management.
The quality assurance can be measured in three values (efficiency, effectiveness, and
strategic) based on 5 dimensions: planning, development, inbound, production, and outbound.
These spectrums can also be utilized when analyzing supply chain management. When a
business entity tries to estimate the cost for procurement process, they can use the formula:
Savings=no . of requisition×(Original cost −new cost ).

It is obvious that implementing e-procurement is not risk-free. There are several

barriers as mentioned by CIPS (2008), including:
- Competition issues
- Negative perception from suppliers
- Data breach possibilities to competitors regarding procurement benefits
- Long process of catalogue creation
- Organizations culture
Overall, electronic SCM and electronic procurement does have some risks and barriers, but it
also carries ease to businesses so that they could benefit from competitive advantage.
Towards the end of the chapter, a particular section also discusses the future of e-
procurement where it is said that in the upcoming future, such tasks will be replaced by
‘software (intelligence) agents’.

Reference: Dave Chaffey; Tanya Hempfill; David Edmundson-Bird, 2019, Digital Business and E-
Commerce Management, 7th Edition.