Internet or E-Commerce in Integrated Supply Chain Management | E-Commerce - B Com PDF Download

Advantages of Internet/e-commerce integrated supply chain 

The primary advantages of Internet utilization in supply chain management are speed, decreased cost, flexibility, and the potential to shorten the supply chain.

• Speed: A competitive advantage accrues to those firms that can quickly respond to changing market conditions. Because the Internet allows near instantaneous transfer of information between various links in the supply chain, it is ideally suited to help firms keep pace with their environments. Many businesses have placed a priority upon real-time information regarding the status of orders and production from other members of the supply chain.
•  Cost decrease: Internet-based electronic procurement helps reduce costs by decreasing the use of paper and labor, reducing errors, providing better tracking of purchase orders and goods delivery, streamlining ordering processes, and cutting acquisition cycle times.
• Flexibility: The Internet allows for custom interfaces between a company and its different clients, helping to cost-effectively establish mass customization. A manufacturer can easily create a custom template or Web site for a fellow supply chain member with pre-negotiated prices for various products listed on the site, making re-ordering only a mouse click away. The information regarding this transaction can be sent via the Internet to the selling firm’s production floor and the purchasing firm’s purchasing and accounting departments. The accuracy and reliability of the information is greater than the traditional paper and pencil transaction, personnel time and expense is reduced, and the real-time dissemination of the relevant information to interested parties improves responsiveness. These advantages can benefit both firms involved in the transaction.
• Shortening the supply chain: Dell computers has become a classic example of the power the Internet can have on a supply chain. Dell helped create one of the first fully Internet-enabled supply chains and revolutionized the personalcomputer industry by selling directly to businesses and consumers, rather than through retailers and middlemen. In mid-1996, Dell began allowing consumers to configure and order computers online. By 1998, the company recorded roughly $1 billion in “pure” Internet orders. By reducing sales costs and attracting customers who spend more per transaction, Dell estimates that it yields 30 percent greater profit margins on Internet sales compared to telephone sales.

DISADVANTAGES OF INTERNET/E-COMMERCE INTEGRATED 
 SUPPLY CHAIN

Negative features of an Internet-integrated supply chain include increased interdependence, the costs of implementation, and keeping up with the change in 
expectations.

• Increased interdependence: It is true that the Internet facilitates various levels of integration that help members of the supply chain to create improved partnerships, coordinate their operations more closely, and reduce inefficiencies; however doing so requires an enormous amount of trust and information sharing. To stay competitive, many companies find that they must share information electronically that they once considered proprietary. Increased commoditization, increased competition, and shrinking profit margins are forcing companies to increase outsourcing and subcontracting to minimize cost. By focusing on its core competencies, a firm should be able to maximize its economies of scale and its competitiveness. However, such a strategy requires increased reliance and information sharing between members of the supply chain. Increased dependency on various members of the supply chain can have disastrous consequences if these supply chain members are unable to handle the functions assigned to them.
• The costs of implementation: Implementation of a fully-integrated Internetbased supply chain is expensive. This expense includes hardware cost, software cost, reorganization cost, and training costs. While the Internet promises many advantages once it is fully integrated into a supply chain, a significant up front investment is needed for full deployment.
• Keeping up with the change in expectations: Expectations have increased as Internet use has become part of daily life. When customers send orders electronically, they expect to get a quick confirmation and delivery or denial if the order can not be met. Increasingly, in this and other ways, customers are dictating terms and conditions to suppliers. The introduction of Internet-based supply chains make possible the change to a “pull” manufacturing strategy replacing the traditional “push” strategy that has been the standard in most industries.