E-Business and the Internet- Enabled Supply Chain
The advent of the Internet, XML, and online mechanisms have provided solutions to some of the problems of EDI. The low cost of Internet systems has spurred many compa-nies to look at the technology as a means to lower the bar of entry into dynamic supply chain trading for small- and medium-sized companies. The net effect is to change the lin-ear, somewhat-rigid supply chain into a flexible, Internet-based web of trading partners. In an e-business system, the center of operations is an informational hub that serves as a central point where multiple organizations can interact to pursue supply chain interac-tions. Transactional information is received, processed, and then forwarded to other nodes in the supply chain web.
Before we can talk about these solutions, we should first define what we mean by e-busi-ness. The basic definition of e-business is the marriage of traditional supply chain man-agement techniques with Internet and Web technologies. E-business applications make extensive use of Internet technologies throughout all nodes in a supply chain operation. However, e-business is not a monolithic block of technology. In fact, it is comprised of three major components:
The Internet has changed all the rules, from servicing customers to licensing and installing applications.
E-Commerce is not a concept that was invented with the Web. Rather, it has been around as long as there have been electronic means for exchanging commercial transactions. Electronic Data Interchange (EDI) has been around since the late 1960s and has been in use to exchange supply, shipping, and purchase information. However, in the context in which we are using the term here, e-commerce is just a piece of the overall e-business puzzle. It encapsulates the actual electronic transactions that take place within an organi-zation without touching on relating processes that must occur around the transaction. Typically, e-commerce relates to individual transactions and not overall processes that are more general in nature.
The definition of e-commerce has been somewhat of a moving target, and at one point it encapsulated all forms of electronic business and commerce. However, as the term e-business emerged, e-commerce as a term was relegated to the point-of-sale and direct transactions that occur in an overall e-business environment. A typical e-commerce sce-nario is a customer placing an order for a product, which results in a series of transac-tions that occur to fill the product order and ship the product to the end-user destination. Therefore, e-commerce encapsulates the following concepts:
Executing transaction requests and orders by customers
Tying customer orders to business processes within an organization
Order error tracking and management
Logging and auditing of commerce data
The e in e-commerce obviously stands for electronic, which necessarily means that commerce is transacted over networks and through computer and digital systems. The term e-commerce also applies to all intercompany and intracompany functions, including finance, sales, marketing, and manufacturing. E-Commerce can therefore cover transac-tions that occur via the Web, e-mail, EDI, file transfer, fax, teleconferencing, or interac-tion with a remote computer, and it can cover all forms of electronic business, including transferring electronic funds, using smart cards and digital cash, and doing business over digital networks.
The need for an organization to fill customer service and support requirements is also handled by e-commerce. Servicing customers by means of help desks, self-guiding sup-port centers, knowledge databases, and interactive technical support with live agents is a key component of any e-commerce system. Companies that aim to directly serve their customers should also aim to satisfy their customer-support needs through these same systems.
Whereas e-commerce usually refers to point transactions and purchases by individuals or organizations, e-procurement refers to processes by which a manufacturer obtains prod-ucts from suppliers for its daily operations. By necessity, e-procurement transactions are enormous in quantity and value and therefore require a greater level of process control, workflow, and documentation. Typical procurement solutions cover all steps of the pro-curement process, ranging from supply order to acquisition and payment.
Due to its enormous volume and value, e-procurement is a sweet spot for many online B2B systems. E-Procurement has also been a target for aggregations of buyers and sell-ers—known as a marketplace—to achieve great economies of scale. These marketplaces allow industries to make large-scale purchasing and selling decisions across all partici-pants in a given supply chain. Instead of working solely with local and large parts deal-ers, manufacturers and suppliers potentially can access a competitive, global market through electronically enabled marketplace e-procurement systems.
The final aspect of e-business systems is the ability to share information among supply chain participants in a process known as e-collaboration. E-Collaboration enables infor-mation sharing, collaborative planning, and collaborative product development. These systems store qualitative and quantitative information regarding supply chain processes and serve as a means to share critical supply and process information with other partici-pants in a supply chain. These systems allow purchase orders, sales orders, invoices, checks, and other business documents to be shared within a well-defined community access area.
As mentioned earlier, a key area of e-collaboration is collaborative planning, which assists in group decision making in a cost-effective manner by considering different participants in the supply chain. Collaborative planning shares sales forecasts, production quotas, and replenishment plans that allow all parts of the extended organization to jointly reduce inventory costs and raise customer service levels. This collaborative decision-making process therefore leverages all available knowledge to make intelligent decisions on behalf of the whole chain.
E-collaboration also enables new product development by squeezing product delivery cycles and increasing development efficiency. By providing a common community for information exchange, these solutions enable real-time communication among engineers, product developers, and customer service representatives to provide feedback on the cre-ation of new products. This process also allows users to make quick decisions on changes to suppliers and manufacturers.