ICT and e-Business Impact in the Retail Industry - empirica

e-Business in the Retail Sector3.3 The upstream supply chain: e-procurement3.3.1 Introduction to upstream supply chain issuesUpstream SCM functionsThe function of upstream supply chain management (SCM) is to design and manage theprocesses, information and material flows between retailers and their suppliers. SCM is ofutmost importance to retailers. According to Accenture (2004), the supply chain canrepresent 40% to 70% of a retailer's operating costs, and may comprise half of all thecompany’s assets. Thus, it is one of the main cost drivers in this sector. Technologyenabledimprovements in SCM promise a high potential not only to cut costs, but also toimprove service levels for customers. Therefore, particularly for large retail chains, supplychain management is a highly strategic issue and can be a critical factor for theircompetitiveness.In retail, suppliers can be grouped into three main categories:the manufacturers of those goods which are sold by retail companies (whether instores, through mail order or e-commerce)wholesalers, who resell new and used goods to retailersand providers of goods or services which retailers need to run their business, suchas store equipment, office supplies and ICT hardware and services.The particular role of ICTICTs are critical for efficient SCM, notably for larger retailers that have to managecomplex supply chains. The use of ICT-based systems for upstream supply chainmanagement enables retail firms to increase the transparency of processes andinformation flows. This is key to optimising supply chain processes by, for example,reducing the quantity of goods that need to be in stock under the same sales condition,and thus to reduce costs and increase profitability. This section of the study explores towhat extent European retailers make use of ICT for managing their upstream supplychain, and if the use of ICT in exchanges with suppliers has increased in the past 4-5years. The section will then assess what kind of benefits retailers experience from SCM.These benefits need to be weighed against risks associated with integrated supplychains. To make SCM work, firms need to share at least some data with their supplychain partners to various degrees. This data sharing bears risks for the partners involved.Although the section looks at ICT usage in upstream supply chain management, it isimportant to understand that this activity is closely linked with "downstream" activities inmarketing and sales (see Section 3.7). For example, analytical sales data collected at thestore level are an important input for planning the supply chain. Vice versa, an optimisedsupply chain (e.g. with reduced out of stocks) enables a company to provide bettercustomer service.41