Innovative Supply Chain Technologies for Management Decisions Galia Novakova*, Kamen Spassov Faculty of Mathematics and Informatics, Sofia University 5 James Baucher Str., 1164 Sofia, Bulgaria *corresponding author:
[email protected] Shahram Taj Department of Management and Marketing, Lawrence Technological University 21000 West Ten Mile Road, Southfield, MI, 48075-1058, USA
ABSTRACT In this paper we seek to identify how to accelerate innovation in order to promptly respond to the market demand as well as how to map web generation to the Supply Chain Management (SCM) technologies. Our investigation reveals the important alignment of e-business with the SCM perspective, and the advantages that cloud computing can provide over a traditional, enterprise resource planning (ERP) systems. Furthermore, the authors link the emerging SC solutions with the continued developments in recent web generations. Finally, the paper draws conclusions about the advent of new technologies in favour of the SCM. Keywords: Supply chain management, innovative technologies, management decisions 1. INTRODUCTION Supply chain innovation and management need interdisciplinary methodologies from multiple fields including SCM, information systems, knowledge management, etc. Given the dynamism in SCM and emerging business trends and technology, it would be interesting to explore how IT has made an impact on SCM. The exponential growth in IT is creating solutions for every function of SCM and has made real time decision making possible. Today SCM requires effective use of an integrated enterprise resource planning (ERP) system. Usage of any ERP system is shaped by many design factors that make it easier (or harder) to learn and use. For example, consistency in the user interface make an ERP system easier to learn and use. System functionality and e-commerce integration also shape usage in different manufacturing and distribution environments. The reminder of this paper is organized as follows: In Section 2 we discuss the importance of innovation acceleration in order to promptly respond to the market demand. In Section 3 our investigation reveals the necessary alignment of e-business with the SCM perspective, how to map the web generation with the SCM technologies, and the advantages that cloud computing can provide over the traditional ERP systems. Subsequently, in Section 4 the authors make an overview of the emerging SC solutions and link them with the continued development in recent web generations. Finally, in Section 5 the article draws conclusions about the advent of new technologies for the SCM. 1
2. ACCELERATE INNOVATION AND RESPONSE TO MARKET DEMANDS. SCM SYSTEMS A fine-tuned SCM system delivers better communication, shorter planning times and more reliable forecasting. The amalgamation of all of these benefits is a balance between keeping costs reasonable and maintaining production levels. This is definitely worth the effort and delivers value to businesses. 2.1 SCM software Planning systems oriented toward decision making are provided by SCM software. To illustrate, we consider how ERP and SCM approach an order-processing problem. There is a fundamental difference: The question in SCM becomes “Should I take your order?” instead of the ERP approach of “How can I best take or fulfill your order?” The following example demonstrates how SCM software works. Example - IBM links its global SC with SCM software - IBM reengineered its global SC in order to achieve quick responsiveness to customers and to do so with minimal inventory. To support this effort, IBM developed a SC analysis tool called Asset Management Tool (AMT). AMT integrates analytical performance optimization, simulation, activity-based costing, graphical process modeling and enterprise database connectivity into a system that allows quantitative analysis of extended SCs. IBM has used AMT to study such issues as inventory budgets, customer-service targets, and new-product introductions. The system was implemented at a number of IBM business units and their SC partners. AMT benefits include savings of over $750 million in material costs and reductions in administrative expenses each year (Lin et al., 2000). However, SCM solutions need to be coordinated, and they sometimes require information provided by ERP software. Therefore, it makes sense to integrate ERP and SCM. Integrating ERP and SCM - One approach for ERP-SCM integration is to work with different software products from different vendors. For example, a company might use SAP R/3 as an ERP and add to it Manugistics’ manufacturing-oriented SCM software. Such an approach, which is known as the “best of breed” approach, requires fitting different software from different vendors, which may be a complex task unless special interfaces exist (Getting, 2007). The second approach is for the ERP vendors to add SCM functionalities, such as decision support and business intelligence capabilities. Business intelligence refers to analysis performed by DSS, EIS, data mining, and intelligent systems. These added capabilities solve the integration problem. But as is the case with integration of database management systems and spreadsheets in Excel, the result can be a product with some not-so-strong functionalities. However, most ERP vendors are adding such functionalities for another reason: it is cheaper for the customers. Packages with these added functionalities represent the second-generation ERP, which includes not only decision support but also customer relationship management (CRM), e-commerce, and data warehousing and mining. Some second-generation systems include a knowledge management component as well. The inclusion of business intelligence (BI) in SC software solutions is referred to as SC intelligence (SCI). SCI applications enable strategic decision making by analyzing data along the entire SC. SCM software can have tremendous financial benefits for companies. Some businesses have saved millions just by automating their SC, but those savings gain often do not come easily. When it comes to implementation, SCM software is one of the most difficult systems to effectively put in place. However, there are ways to prevent SCM implementation problems. Another problem 2
companies discover with SCM is that the software is rarely 100% compatible with their existing ERP systems. In many cases, the ERP will need to be modified in order to accommodate the new SCM system (Grant et al., 2000). These are steps that companies need to be prepared for in advance so that, they can be dealt with promptly. SCM cannot be adopted lightly. It requires careful planning and preparation. Companies must make sure that their employees, their suppliers and their existing technology is ready if they want to see a successful implementation. No manufacturer needs to put up with wasteful MRO (maintenance, repair, operations) spending. A few changes in procurement strategy can cut costs and improve profit margins significantly. Therefore, the first part of making an effective SC is understanding the different links involved. The first of these links, software, is often the one most frequently ignored by businesses since it all begins with a great deal of careful planning. Because SCs are complex and are important to the overall success of company's operations, businesses must make sure that they know what resources are involved in and know how to measure their system's effectiveness once it is in place. Part of the planning also involves selecting the individuals who will be in charge of setting up, implementing, and overseeing the SC system once it is ready. After the planning stage, companies must choose the vendors and suppliers they want to work with on a continuing basis. These decisions cannot be taken lightly because these businesses serve an important role in the chain. Once these vendors are selected, the next step is the actual manufacturing of the goods. SCs come into play here as well, because they help monitor the quality of the goods and overall productivity. Next, the finished materials must be delivered. Within the logistics link of the SC, warehouses are networked, transportation is coordinated and invoices are created. Finally, businesses must ensure that their SC also includes a method for taking back goods that do not meet the expectations of buyers or that are defective. Without this step, customers may be unsatisfied and the overall SC simply isn't complete. While all of these different elements may make it seem that SCs are too complex to ever be effective, the reality is that managing them can be made easier with the right tools. Different software is available to help with each link of the SC, such as tracking inventory or managing logistics. This software not only makes it easier for businesses to put all of the pieces together and to keep the SC connected, it can also minimize problems because it reduces the risks of human error. Additionally, the software helps businesses communicate with their vendors and suppliers around the world more easily and more quickly. As well, with the right amount of training, employees will find that the SCM software simplifies their jobs. For all these reasons, more companies than ever have begun to adopt SCM software to help them manage the links in their SCs. Several software companies offer a number of software modules that can assist businesses with their specific SCM needs. Each module is designed to help with one particular link in the chain, such as warehouse management or SC event monitoring. While all of the modules are available individually, they can also be combined in many ways to help a company run their SC more efficiently. In addition, all of the modules can even be grouped together into one single, SCM program in order to automate and streamline the entire production process. Solutions, such as those offered by Epiq, can dramatically improve the way businesses handle procurement, production, distribution and even some aspects of customer service. Since in SC software most of the parts are designed to work together, businesses don't have to worry about overlapping features or about software conflicts, which can sometimes hamper SCs which are managed by a number of separate software applications. In the end, companies who want to 3
improve their SCs should start by adopting software that makes it easier for them to manage all of the elements conveniently and effectively. Since the late 1990's SC software has been available to companies, but until recently most firms steered clear because of the costs of implementation and the past disappointments in deploying other, so-called revolutionary technological advances. When the economy started to take a downturn, however, many organizations recognized the need to do something drastic to turn the tide in their favor or at least to minimize the negative impact the economic changes brought about. SC software was one of the answers many companies chose. The majority of all large businesses are currently using SC software and most of them are seeing positive results. One company was able to cut several million off its inventory expenses while another has been able to extract over $15 million in value from its SC software implementation. SC software can deliver these results, because it allows companies to streamline communication between the company and its vendors. For example, SC software allows vendors to be automatically notified when the company's inventory of a specific product needs to be replenished. The vendor can prepare the order, get it filled, and send it to the company in considerably less time than it would take the old-fashioned way. With this approach, the business no longer has to keep a large inventory on hand, because it can be refilled on as needed basis. Another cost saving feature of the SC software is that it lowers the time required between purchase and delivery. The software allows vendors and businesses to deliver quotes in real-time and to acknowledge order receipts instantly instead of in the 1-2 days it would normally take. Placing orders, making transportation arrangements, and dealing with returned merchandise can all be done faster and with fewer hassles thanks to modern SC software. Additionally, many organizations are recognizing that SC software can be an asset to their customer service. Because SC software allows companies to check in real-time the status of their orders, their inventory and their deliveries, they can give exact and up-to-date information to customers who inquire about the status of their orders. This more exact system is a vast improvement from the mostly guesswork companies used to have to do in order to answer customer questions. SC software can also be an asset in the logistics field. Not only can the software help coordinate transportation for goods and finished products, but it can also help manage warehouse inventory and distribution centers. This benefit can not only save the businesses and the vendor’s money on shipping, but can also shave the time off of delivery. To take advantage of those and the other benefits of SC software, companies must be willing to foot the costly bill that goes with implementing the technology. The combined costs of the software, hardware, consultations and training for some companies could cost millions to put in place. Even though that amount of expenditure may seem high when the economy is in uncertain waters, companies who have completed the implementation successfully are generally pleased with the effects it has had on their bottom lines. Essentially, SC software works because it tightens the connections between the business and the vendors. This relationship is one of the most important a company can foster, because both parties are interdependent. When the company begins to suffer, the vendor can expect a loss of business and revenue, as well. Likewise, when the company is running smoothly and doing well, the vendor will benefit from more orders and more profit.
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Despite the high price tag of implementation, SC software has the potential to bring numerous cost-saving benefits to almost any large company. These benefits will definitely outweigh the initial expense in the long run. 2.2 Electronic Procurement (e-Procurement) The main components of e-procurement include e-tendering, e-auctioning, vendor management, catalogue management, purchase order integration, order status, ship notice, e-invoicing, epayment and contract management. Based on the number of components involved, it is clear that a very efficient information system should be in place for this level of integration. e-Procurement is a way of using the Internet to make it easier, faster and less expensive for businesses to purchase the goods and services they require. While e-procurement is a general term that covers a wide assortment of techniques, such as reverse auctions, its overall goal is to streamline the purchasing process so businesses can focus more management time on earning revenue and serving customers. Implementing an e-procurement system offers a company many benefits. e-Procurement is more than just a system for making purchases online. A properly implemented system can connect companies and their business processes directly with suppliers while managing all interactions between them. A good e-procurement system helps a firm organize its interactions with its most crucial suppliers. It provides those who use it with a set of built-in monitoring tools to help control costs and assure maximum supplier performance. It provides an organized way to keep an open line of communication with potential suppliers during a business process. The system allows managers to confirm pricing, and leverage previous agreements to assure each new price quote is more competitive than the last. With electronic procurement all purchases are easier to track because they are done over the Internet and the company's managers can easily see who made which purchases without having to wait to receive a monthly revolving credit statement. Also, e-procurement saves time. Buyers do not need to leave their desks or make phone calls to suppliers in order to place orders, they simply go through the Internet. As well, because suppliers receive the order almost immediately, they can also fulfill and ship it much faster than with the traditional procurement methods. Although the benefits of e-procurement are plentiful, there are obstacles that can arise in implementing this type of process. The biggest pitfall is treating all areas of procurement and all products the same. The reality is that what may work for one good or service may simply not work for all of them, so successful e-procurement systems use a number of different techniques. The best way to illustrate this point is through a comparison of products. One product is what is called an urgent item. These items are those which are supplied by only a few companies or individuals, but which are in high demand. Most companies stock up on urgent items if possible so that they do not run out and find themselves in a difficult situation. Another product might be classified as a noncritical item, such as printer paper or coffee filters. These type of items are not extremely important to the business but they are needed. Generally, this category of items accounts for 80% of all company purchases (ABC inventory analysis or classification). While both products are needed by the company, they would require different procurement techniques or else the buyer would end up paying more. With an urgent item that is in high demand, for instance, a buyer would never want to hold a reverse auction because the seller would be able to drive up the price since
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they, not the buyer, have all the power in that relationship. Reverse auctions work quite well, on the other hand, for noncritical items and can lower costs for these items by as much as 35%. Large companies such as Dell conduct auctions of products or obsolete equipment on their web sites. Electronic auctions can shorten the cycle time in the SC and save on logistics and administrative expenses. e-Commerce (EC) can introduce structural changes in the SC. For example, the creation of electronic markets drastically changes order processing and fulfillment. In many cases, linear SCs are changed to hubs. An eHub is a web-enabled platform for multiple trading parties to find, exchange and prioritize information related to buying and selling. Also, it automates all the different transactions that need to occur in customer fulfillment, both inbound and outbound. The eHub is more than a static central repository for storing SC data. It is a dynamic environment that identifies and prioritizes the actions that need to occur in the SC at any given time. It then pushes relevant information to the appropriate trading partners so, they can react to it and make the best decision possible. It does this according to configurable workflows that automate some of the moremanual decision making that occurs in any well-defined business process. Integration of ERP with e-Commerce - Since many middle-sized and large companies already have an ERP system, and since e-commerce needs to interface with ERP, it makes sense to integrate the two. For example, SAP started building some EC interfaces in 1997 and in 1999 introduced mySAP.com as a major initiative. The mySAP initiative is a multifaceted Internet product that includes EC, online trading sites, an information portal, application hosting and user-friendly graphical interfaces. The logic behind integrating EC and ERP is that by extending the existing ERP system to support e-commerce, organizations not only leverage their investment in the ERP solution, but also speed up the development of EC applications. The problem with this approach is that the ERP software is very complex and inflexible (difficult to change), so it is difficult to achieve easy, smooth and effective integration. One other potential problem is that ERP systems tend to focus on back-office (administrative) applications, whereas EC focuses on front-office applications such as sales and order taking, customer service and other CRM activities. Ideally, one should attempt to achieve tight integration along the entire SC. Information technologies (IT) - The Center for Advanced Purchasing Studies reports that on average, across all U.S. industry categories, companies currently purchase about 9% of their total requirements through EDI arrangements with suppliers and about 4.5% through business-to business (B2B) e-commerce sites on the web (Center for Advanced Purchasing Studies, 2002). However, these numbers are expected to grow dramatically in the next decade. The more common B2B examples and best practice models are IBM, Hewlett Packard (HP), Cisco and Dell. For instance, Cisco receives over 90% of its product orders over the Internet. ITs are extremely useful in supporting global SCs. For example, TradeNet in Singapore connects sellers, buyers and government agencies via electronic data interchange (EDI). A similar network, TradeLink, operates in Hong Kong, using both EDI and EDI/Internet to connect thousands of trading partners. There are also difficult issues in global SCs such as: legal issues, customs fees and taxes, language and cultural differences, fast changes in currency exchange rates and political instabilities. e-Procurement models are still evolving and there are several categories of sites currently doing business on the web. These can generally be classified under the following categories: 6
Supplier-hosted web sites (essentially web-based catalogs & ordering) Supply-side trade exchanges Buyer-side trade exchanges Electronic auction sites
Figure 1 - B2B e-procurement web site types (Boston Consulting Group, 2002)
These various categories of e-procurement sites provide varying degrees of buyer control balanced against what might be called supplier friendliness. Figure 1 illustrates this spectrum. It remains to be seen which models or combination of models will ultimately prevail in the marketplace, but what is clear is that companies are under increasing pressure to realize the potential cost savings inherent in these e-procurement tools. In a study by the Boston Consulting Group, it was estimated that, on average, manufacturing companies could expect to save 12-15% of total cost on materials that were migrated from traditional procurement methods to eprocurement (Boston Consulting Group, 2002). Such potential savings will place procurement organizations under increasing pressure to expand e-procurement. 2.3 e-Procurement software Purchasing the goods and services that a company needs can be challenging. However, one technique can help simplify the process in many instances. This technique, called the reverse auction, allows buyers to initiate the proceedings and to choose from interested suppliers not just on the basis of price, but on whatever specifications they feel are most important to their needs. So, reverse auctions are a buyer-initiated quotation process, where purchasers post an RFQ (request for quotation) for a product, while suppliers electronically bid against each other in a progressive way and compete in an online bidding event to achieve a sale for the requested product. They are based on game theory, with dynamic price applications used to streamline the RFP (request for proposal) process (Mahdavi, 2011). The benefits of a reverse auction is best illustrated with an example. If a business needs to have flyer printed, it could send out RFPs to many potential printers. Unaware of what their competitors are providing or charging, each printer takes the time to prepare the offer and to submit it for 7
consideration. Then, the decision-maker for the buying business must review those detailed proposals to choose a supplier. On the other hand, the business could hold a reverse auction. With this method, the business simply alerts potential suppliers that the auction is underway and those interested suppliers bid on the project. Because the suppliers are able to determine what other individuals are charging and offering, they can compete by lowering their price, speeding up delivery times or providing unique extras. The buyer can then choose from among the bidders, but he is not obligated to choose the lowest bid. Instead, he can pick the supplier who has the best reputation or with whom he has the best relationship. He can also use the existing bids to negotiate with suppliers who bid higher. There are a number of benefits related to reverse auctions. For one, the entire time for procurement cycle is significantly reduced. All stages of the process from the listing of the auction, to the placing of bids, to the reviewing of supplier qualifications is faster than with the traditional RFP method. Besides, the buyer has the opportunity to pre-screen suppliers. Instead of requesting the RFP, then going through the qualifications, the buyer can look over those qualifications before giving serious consideration to the supplier's bid. As a result of using a reverse auction, buyers can end up reducing their purchasing costs by as much as 35%. It gives suppliers an opportunity to truly compete with one another through price, quality and service. Reverse auctions also save time for both buyers and sellers. Buyers no longer have to spend time reviewing numerous RFPs before making a purchasing decision and sellers don't have to go through the time-consuming process of preparing RFPs for buyers. Epiq (www.epiq.com) can assist most companies in running more effective reverse auctions by providing them with software that simplifies the process. For example, Epiq's e-procurement software supports numerous types of auctions, including private, vickrey, Dutch and hybrid varieties. The software also provides auction templates, specifiable parameters, customizable emails for particular events, buildable lists of qualified suppliers and many features that assist suppliers in bidding more efficiently such as outbid notifications, upcoming auction previews and registration areas. Beyond these features, Epiq's software also provides numerous reporting benefits. Users can review the bid history for specific auctions or suppliers as well as RFQ reports and winning bid comparisons. All of these features make it easier for businesses to create an auction, notify potential suppliers, manage and review bids, manually select a winner and compare statistics related to the process. For companies interested in streamlining the procurement process and in cutting their purchasing costs, reverse auctions are an excellent idea to consider. While they won't work in every purchasing situation, they can assist businesses in purchasing writing services, business materials, outsourcing assistance, computer-related services and more. Receiving these benefits is easier for businesses when they use such software to help them plan, run and review their reverse auctions. 2.4 e-Sourcing Saving money is always at the forefront of every business decision, but when it comes to purchasing and sourcing, there are a number of ways to cut costs that are often neglected or which do not use to their full advantage. Companies who fail to see these possibilities could be standing in the way of significant savings that would dramatically improve their bottom line. In order to identify potential savings opportunities in this area, companies need to take a straight look at their current operations to determine areas that need improvement. Rejected parts or 8
excessive downtime are two of the most common problems for many companies and both of these areas can significantly add to the cost of operations. To solve the problem, companies should call in their suppliers, provide them with the necessary information and ask them to come up with suggestions. These suggestions will usually come in the form of value-added services from the suppliers. These extra services can then become the backbone of the supplier selection process. Many companies make the mistake of choosing vendors strictly on the basis of the quoted price however, the lowest stated cost does not always spell the best deal for the business. Instead of focusing strictly on price, buyers need to evaluate suppliers additionally on their willingness to provide these value-added services. Most companies do not currently use the TCO model for judging vendor performance and instead base their decisions solely on quoted costs. These companies generally find out in the long run that a low price does not always equal adequate performance. While all of these cost saving measures may sound good on paper, many companies may find suppliers reluctant to cooperate. One reason suppliers are often hesitant to get involved in these value-added ideas is that to achieve their objectives they require cooperation from within the company itself. If a vendor is asked to make a process within the plant more efficient but workers within the plant are interfering with their ability to make that happen, then this reflects badly on the vendor who does not live up to his or her end of the bargain. Companies need to reassure suppliers that they will have total cooperation from all levels of management and staff to accomplish their tasks. The individuals in charge of purchasing should also maintain an open line of communication with the suppliers throughout the process so that, they can be alerted immediately if conflicts do arise. Companies often overlook the value-added services that many vendors offer simply, because their savings are harder to quantify. By using the TCO model and getting suppliers more actively involved in the creative process, however, companies can see definite improvements in their bottom line. 2.5 Electronic Marketplaces (e-Marketplaces) Laseter et al. (2001) define an e-marketplace as a ―forum that leverages the Internet to facilitate commerce among businesses including a wide range of entities — from independent or pure-play dotcoms financed by venture capital, to industry consortia backed by pooled funds, to private networks created by individual companies. An e-marketplace is a location on the Internet where companies can obtain or disseminate information, engage in transactions, or work together in some way. Most of the e-marketplaces provide two bases functions: 1) they allow companies to obtain new suppliers or buyers for company products, or 2) developing streamlined trading networks that make negotiating, settlement and delivery more efficient. Currently e-marketplaces exist in many different industries. E-marketplaces can be structured in several different ways. One way to structure a marketplace is similar to eBay, where the market-maker is neither a buyer nor seller, but is a neutral third party. Other e-marketplaces are set up to be a consortium of sellers that leverage their combined power to efficiently sell their products to buyers. Buyers can also set up a marketplace to reduce their costs and obtain better purchasing terms. In order for a site to fall into the category of an e-marketplace, the site needs to be open to multiple buyers and sellers and needs to provide one or more commerce related functions. These 9
functions include: forward or reverse auctions, vendor catalogues, fixed price ordering, trading exchange functionality, bulletin boards/ wanted ads, and RFQ, RFI (request for information) or RFP capability. Successful e-marketplaces can deliver significant value to their users or members. The Internet enables processes between organizations to be improved by more closely bringing together the four key SC elements - suppliers, manufacturers, customers and consumers -in the following equation: connectivity = collaboration = visibility = speed (1) With the Internet come new associated technologies and managerial policies that shift the frontier outward. An outward shift represents either a decrease in cost for a given level of performance along a customer need or a higher level of performance at a given cost. The shift in the efficient frontier on adding the Internet to available channels will vary by industry (Chopra et al., 2000). In some instances, the Internet may shift the frontier by significantly decreasing the cost for existing levels of performance (see Fig. 2).
Figure 2 - The Impact of the Internet on the efficient frontier (Chopra et al., 2000)
For example, at industrial supplier W.W.Grainger, e-business does not change any of the underlying processes, but makes them cheaper to execute. This would mean that the main advantage from e-business would be to increase efficiency by automating previous activities (i.e., substituting labor for capital). Sometimes, e-business may shift the frontier out along both dimensions simultaneously, as is the case for Dell Computers that is able to deliver both higher customer value in terms of customization and responsiveness, and lower process cost. We are interested in characterizing the conditions under which e-business is most likely to increase cost efficiency or to enhance value in terms of some non-price factors like responsiveness, variety or quality (see Fig. 2). Firms can use such a characterization to decide how e-business can best be positioned to support the strategic position (Chopra et al., 2000). 3. MAPPING WEB GENERATIONS WITH SCM TECHNOLOGIES With the advent of cloud computing, older, standalone ERP solutions may not be the right decision. Nowadays, the practice needs a multi-party cloud computing model which is one very similar to a retail network. Cloud ERP is a hosted service delivered over the Internet. One example is Plex manufacturing ERP software — reside in the cloud. The cloud provides the computing power to run the ERP solution which is available to users ‘on demand’ via subscription pricing. For the Plex manufacturing ERP software users need only an Internet connection for secure access. Custom
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feature requests are folded into the base application. The Plex manufacturing Cloud ERP solutions are always up to date. Typically, new features are enabled when configured (www.plex.com/, accessed 6/10/2014). Since ERP solutions are single entity solutions, these products are not really addressing all problems. When one looks at business processes, especially those in operations such as SCM, they are all multi-party. Logistics, distribution, etc. all require many parties to work together to optimize the process. Companies need to rethink their strategy to move themselves into the 21st century (See Fig.3).
Figure 3 - Mapping web generations to SCM technologies (Shaikh, 2014) Table 1 - Selected examples of SCM solutions (Shaikh, 2014)
Technology solutions to SCM evolve with the evolution of the technology itself. With each web generation development came newer technology solutions to SCM challenges. Fig. 3 shows the adoption of evolutionary web technologies to move SCM from an enterprise platform to a mobile platform with location based secure solutions and anticipated selected examples. Some of the selected examples of SCM solutions are listed in Table 1 and mapped in Fig. 3.
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Web as a Platform - The first concept of Web was introduced by Tim Burners-Lee in 1989 and in the due period of time researchers talked about Web 2.0 which is believed as the current era. He also talked about Web 3.0 and even Web 4.0 which do not exist but there are currently speculations based on the trends of web technologies and the business needs of large global organizations who need efficiency in their SCs. The era of Web 2.0 brought technologies like user centered design, crowd sourcing, using web as a platform, collaboration, power decentralization, dynamic content, software as a service (SaaS) and rich user experience. Aghaei et al. (2012) presented an overview of the evolution of four web generations and compared their characteristics. They predict that artificial intelligence (AI) techniques will be embedded in all aspects of web applications and will allow intelligent interactions. Compatibility of platforms and different applications had been one of the main challenges in terms of collaboration in SCM. Web 2.0 resolved this compatibility issue by allowing users to use the web as a platform and eliminated the requirement to download any application (Ooi et al., 2011). Figure 4 summarizes the web generations and their characteristics as given by Getting (2007).
Figure 4 - Web generations and their characteristics (Shaikh, 2014)
B2B and e-commerce may also allow application to use web as a platform but Web2.0 uses AJAX (Asynchronous Java Script) and XML (Extended Markup Language) due to which only little information will pass between the server once the page is loaded and the web site will be loaded in real time dynamically (Anderson, 2007). SaaS and Cloud Computing - SaaS is a business delivery model for many business applications such as MIS (Management Information System), CRM, DBMS, ERP, HRM, CAD etc. The SaaS is especially suitable for SME to reduce SCM cost as it can be deployed on the Internet according to the demand and requirements of a customer and the customer only pay for what is needed (Ooi et al., 2011). Cloud computing is similar to distributed computing which means to run a program on all the connected computers in a network at the same time. This cloud computing also helps the SME to reduce the cost of powerful applications. Unlike other business technologies like B2B, EDI etc, separate server is not required and the SME can use it for SCM without paying a lot. Today cloud
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computing solutions are not only available but viable. In what follows below we discuss how to embrace, not replace, the ERP systems or their components for successful deployment. ERP systems are limited to a single enterprise model. The inability to represent the entire value chain causes major issues in terms of how customer service levels are managed because there is often limited visibility to inventory, in-transit info or supplier production planning information. Partners are challenged as they cannot see finished goods demand or consumption. This requires the retail business to build in manual processes that do not guarantee compliance and instead require buffering against uncertainty by building more inventory or compromising service. This reduces the return of a project and complicates the solution. ERP solutions in the market today have embedded the process model in the database schema. This reduces the ability of the application to map to unique or variant models. This increases cost, time and risk. The integrated approach that ERP vendors have taken when trying all of their business processes to one model has limited their customer’s ability to use and benefit from other vendor or custom applications. This is because integration to other applications is extremely difficult, time consuming and expensive. In theory, value chain partners should all be focused on the same metric: customer satisfaction. The disparity in the plans creates the classic bullwhip effect. As a result, the products are not available when you need them, transportation costs are higher than they should be, and raw material is not available when manufacturing needs it.
Figure 5 - Extended Supply Chain
Extremely large, multi-party, cloud computing networks are revolutionizing industries. With the advent of new technologies, such as multi-party cloud computing and the use of cycles of learning – the long, costly, high risk projects focused only on internal needs, can be converted to full value chain focused projects organized in manageable, low risk phases, each resulting in rapid ROI. A demand-driven cloud computing network can be deployed at thousands of customers and has been proven to drive significant results not just for a business, but for the entire value chain (see Fig. 6). Inside software solutions such as ERP, the cloud provides the perfect architecture for multi‐ enterprise solutions, which are inherent in the SC world. When companies integrate the information they capture it during stages of the value chain – from inbound logistics and production through sales and marketing - they construct an information
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underlay of the business. This integrated information provides managers with the ability to see their value chains from end to end.
Figure 6 - Web-based supply chain involving exchanges
4. EMERGING SUPPLY CHAIN SOLUTIONS FOR MANAGEMENT DECISIONS The trends in SCM fall in line with the technological developments in the IT industry. Kumar (2001) stated that ― enterprise-focused systems such as ERP systems, executive information systems and decision support systems become a key to achieving cost efficiencies and organizational effectiveness through intra-organizational process integration. He further emphasized the use of Advanced Planning Systems (APS) which was later integrated as part of the ERP systems. The SC managers then had already started looking forward to transfer information and raw data into knowledge that can be used for operations. Singh (2003) discussed the concept of Automatic Data Capture (ADC) which was capable of handling bar code scanning, voice recognition and radio frequency data capture (RFDC). He further added that Artificial Intelligence (AI) can be used to solve complex SC problems that involved intelligent decision-making data and online analytical processing (OLAP). It was already predicted by 2005 that RFID can fill some of the information gaps in the SC, especially in retailing and logistics and as a mobile technology, RFID can enable ―process freedom and real-time visibility into SCs (Angeles, 2005). RFID started gaining popularity and the researchers predicted RFID and EPC (Electronic Product Code) as an enabler to provide intelligent B2B e-commerce SCM (Wamba et al., 2006). In the year 2007, RFID was among the most promising technologies in SCM and the others in the list were multi-enterprise visibility systems, people enabling software, execution-driven planning solutions, and human SC technology (Harrington, 2007). A collaborative research project (Soon, 2008) based on oil industry was conducted from the Auckland University to examine the emerging technologies for SC. In this research, which was based on the oil industry, were found four very rapid up-and-coming
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technologies that again included RFID along with GPS (Global Positioning Systems), AIDC (Automatic Identification and Data Capture), and OCR (Optical Character Recognition). A study on retailers and the emerging technologies listed RFID, wireless data communications such as 2.5 and 3G, EDI, POS (Point of Sales), and DM (Data Mining) as most promising technologies (Xie, 2009). To end all the government needed documentation and approvals in easier manner which reduces cost and enhance responsiveness time, the use of SC Networks was proposed with egovernment ideology (Chen, 2011). For example, Adidas has effectively saved resources and money by reducing material waste, transportation and distribution costs by utilizing 3D virtualization technology. In 2004, Adidas Group set out to begin using 3D digital technology to showcase their products after being influenced by how effective the automotive and aerospace industries were in using this technology to save resources. Since then, they've experienced amazing results. Besides, General Motors has provided its dealers with a variety of tools that allow them to become web-enabled. So that, e-commerce is already having a significant impact on SCM in some companies. Internet technologies have grown out of a range of standards that are based on the need to communicate and interact openly. As such, we can expect to see day-to-day activities such as shopping, ordering, booking tickets and personal services increasingly moving online. With the use of Internet, the design and execution of local SCs within cities will change significantly. Local and national government will need to adapt to new realities such as taxation, voting patterns, education levels and payments as people question the need for fixed assets and locations such as buildings. Government and local SCs will need to be more responsive or companies and people will be increasingly willing to circumvent their authority and control. While e-commerce will make us more efficient it is also likely to make our SCs more vulnerable to shocks. 5. CONCLUSIONS In this paper, we have outlined how the impact that has e-commerce on the SCM will increase over time as companies adopt e-commerce solutions more broadly and increasingly collaborate between companies and across countries. The benefits of SC technological improvements will be considerable, however, representing 5–15 per cent of overall SC costs. Leading SC operators are likely to achieve collaboration with their key value chain partners far more speedily and effectively than their slower competitors. We can expect soon a fundamental restructuring of the way that companies collaborate and synchronize their SCs. The benefits of cost savings and performance improvements will accrue to the companies that are the best at harnessing e-commerce solutions. As companies perfect the way of handling returns for e-commerce transactions, consumer confidence in e-business will increase dramatically. Meanwhile, virtual fulfillment companies will become more tangible. It’s time for B2B e-commerce to focus on the broader set of activities in SCM. It’s time to move away from simple auction and e-procurement capabilities for indirect materials and toward collaborative SC planning and execution automation for indirect and direct materials. e-Commerce will not only have an impact on the SCs of medium to large companies. It will also change the way we live and work in our cities and communities, it will change government at both local and national level and it will affect the way that we build contingency into our lives. There will be also more virtual 3PLs (third-party logistics providers) and new fourth/five/six/sevenparty logistics providers—essentially, the 4PLs will manage the 3PLs, etc.
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The e-based solutions discussed in this article are real, highly effective new approaches to SCM. However, the objectives that underlie them are the same ones that have always been in the heart of SC issues. How far we go in empowering our SC depends solely upon how much we want to try to do. As companies become more comfortable with using the Internet to handle their purchasing needs, the number of companies will continue to grow. Once companies see the potential benefits of such a system, they can only choose to move forward. So that, e-business activities and solutions are shaping the SCM into e-SCM, and the related trends for that are provided in the present paper. These innovative SC technologies will greatly enhance the management decisions. References Aghaei A., Nematbakhsh M. A., and Farsani H. K., 2012, “Evolution of the world wide web: From web 1.0 to Web 4.0”, International Journal of Web & Semantic Technology (IJWesT), vol. 3, no.1, pp. 1-3. Anderson, P., 2007, “What is Web 2.0?” Ideas, Technologies and implications for education. Available: http://www.jisc.ac.uk/media/documents/techwatch/ tsw0701b.pdf Angeles R., 2005, “RFID technologies. Supply-chain applications and implementation issues”, Information Systems Management, vol. 22, no.1, pp. 51-65. B2B Study, (2000), Boston Consulting Group. Center for Advanced Purchasing Studies, (2002), CAPS Database. Chen H., 2011, “An e-government initiative to support supply chain integration for small to medium sized enterprises: successes and challenges”, ACM SIGMIS Database, vol. 42, no. 4, pp. 63-80. Chopra S., Mieghem Jan S. Van, 2000, “Which e-Business is Right for your Supply Chain”, Supply Chain Management Review. July-Aug. Getting B., 2007, Basic Definitions: Web 1.0, Web. 2.0, Web 3.0. Available: http://www.practicalecommerce.com/articles/464-Basic-Definitions-Web-1-0-Web-2-0-Web-3-0 Grant N., Hurley James R., Hartley Kenneth M., Dunleavy John R., Balls John D., (2000), E-Business and ERP – Transforming the Enterprise, John Wiley. Harrington L., 2007. Defining Technology Trends. Available: http://www.inboundlogistics.com/cms/article/defining-technologytrends/ Kumar K., 2001, “Technology for supporting supply chain management: Introduction”, Communications of the ACM, vol. 44, no. 6, pp. 58-61. Laseter, T., Long B., and Capers C., 2001, “B2B benchmark: the state of electronic exchanges”, Strategy and Business (fourth quarter), pp.33-42. Lin G. et al., 2000, “Extended-Enterprise Supply-Chain Management at IBM Personal Systems Group and Other Divisions”, Informs, Volume 30 Issue 1, January-February, pp. 7-25. http://pubsonline.informs.org/doi/abs/10.1287/inte.30.1.7.11616 Mahdavi I., Mohebbi S., and Cho N., 2011, “Electronic Supply Network Coordination in Intelligent and Dynamic Environments: Modeling and Implementation”, Idea Group Inc (IGI), Business & Economics. Available: http://arrow.dit.ie/cgi/viewcontent.cgi?article=1003&context=nitlbk Miller, T., Nelson, M., Shen, S., & Shaw, M., (2003), E-Business Management Models: Service Perspective from the Revere Group, E-Business Management, Shaw, M. (ed.). NY, USA: Kluwer Academic Publishers. pp. 77-108. Ooi, K. B., Chong A. Y. L., and Tan B. I., 2011, “Application of web 2.0 in supply chain management: brief overview”, Trend in Applied Sciences Research. vol. 6, no. 4, pp. 394-399. Shaikh A., Rafiq M., and Raja K. Iyer, 2014, “Exploring e-Business Trends with Supply Chain Management Perspective”, International Journal of e-Education, e-Business, e-Management and e-Learning, Vol. 4, No. 3, June. Singh N., 2003, “Emerging technologies to support supply chain management”, Communications of the ACM-Why CS students need math, vol. 46, no. 9, pp. 243-247. Soon C. B., 2008, “Impact of emerging technologies on the management of future supply chains energy efficiency and sustainability”, Research Project Report, Centre for Supply Chain management (CSCM). The University of Auckland Business School. Аvailable: http://docs.business.auckland.ac.nz/?title=Research%20project%20report Wamba S., Lefebvre L., and Lefebvre E., 2006, “Enabling intelligent B-to-B e-commerce supply chain management using RFID and the EPC network: a case study in the retail industry”, in Proc. the 8th international conference on Electronic commerce, ICEC '06, pp.281-288. Xie Y., 2009, “Use of information technologies in retail supply chain. Opportunities and Challenges”. POMS 20th Annual Conference, Orlando, Florida U.S.A. http://www.pomsmeetings.org/confpapers/011/011-0026.pdf.
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