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Chapter 13 Supply chain planning and control 397
The effects of e-business on supply chain management
practice 13
New information technology applications combined with internet-based e-business have
transformed supply chain management practice. Largely, this is because they provide better
and faster information to all stages in the supply chain. Information is the lifeblood of
supply chain management. Without appropriate information, supply chain managers cannot
make the decisions that coordinate activities and flows through the chain. Without appropriate
information, each stage in the supply chain has relatively few cues to tell them what
is happening elsewhere in the chain. To some extent, they are ‘driving blind’ and having to
rely on the most obvious of mismatches between the activities of different stages in the chain
(such as excess inventory) to inform their decisions. Conversely, with accurate and ‘near
real-time’ information, the disparate elements in supply chains can integrate their efforts
to the benefit of the whole chain and, eventually, the end-customer. Just as importantly, the
collection, analysis and distribution of information using e-business technologies is far less
expensive to arrange than previous, less automated methods. Table 13.5 summarizes some of
the effects of e-business on three important aspects of supply chain management – business
and market information flow, product and service flow, and the cash flow that comes as a
result of product and service flow.
Table 13.5 Some effects of e-business on supply chain management practice
Market/sales
information flow
Understanding
customers’ needs
Designing appropriate
products / services
Demand forecasting
Product/service flow
Cash flow
Supply-chainrelated
activities
Purchasing
Inventory management
Throughput / waiting
times
Distribution
Lower purchasing
administration costs
Better purchasing deals
Reduced bullwhip effect
Reduced inventory
More efficient
distribution
Supplier payments
Customer invoicing
Customer receipts
Beneficial
effects of
e-business
practices
Better customer
relationship management
Monitoring real-time
demand
On-line customization
Ability to coordinate
output with demand
Faster movement of cash
Automated cash
movement
Integration of financial
information with sales
and operations activities
Information sharing helps
improve supply chain
performance
Information-sharing
One of the reasons for the fluctuations in output described in the example earlier was that
each operation in the chain reacted to the orders placed by its immediate customer. None of
the operations had an overview of what was happening throughout the chain. If information
had been available and shared throughout the chain, it is unlikely that such wild fluctuations
would have occurred. It is sensible therefore to try to transmit information throughout the
chain so that all the operations can monitor true demand, free of these distortions. An obvious
improvement is to make information on end-customer demand available to upstream
operations. Electronic point-of-sale (EPOS) systems used by many retailers attempt to do this.
Sales data from checkouts or cash registers are consolidated and transmitted to the warehouses,
transportation companies and supplier manufacturing operations that form their supply
chain. Similarly, electronic data interchange (EDI) helps to share information (see the short
case on Seven-Eleven Japan). EDI can also affect the economic order quantities shipped
between operations in the supply chain.