The Impact of E-Commerce Developments on Supply Chain

Topics: Supply chain management, Inventory, Supply chain Pages: 10 (2574 words) Published: March 23, 2006
In recent years, the impact of E-Commerce (EC) on supply chain (SC) has caught considerable attention. Many companies in the supply chain engage themselves in the field of EC to pursue benefits.

This report is authorized by the CEO and focuses on the improvements brought in by EC in SC. In the first section, it gives a brief overview of the supply chain management (SCM) and EC concepts; in the second section, it discusses the benefits offered by EC such as convenient information interchange; lower inventory level, less management time, value-added relationship and cost effectiveness; the security and legal problems with EC are also mentioned in the third section; in the last section, the report gives out the author¡¦s suggestion for the Chinese companies.

The report is based on a survey of available literature. Due to time limited, the information collected is not very completed.

ĆSCM and EC Concepts
Simchi-Levi, et al. (2000) define SCM as ¡§a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize systemwide costs while satisfying service level requirements¡¨.

Kalakota and Whinston, (1996) summarized EC as ¡§the buying and selling activities of information, products, and services via computer networks¡¨.

The report only focuses on two types of EC ¡X Business to Business (B2B) and Business to Customer(B2C).While B2B still captures 80 percent at least of total EC activity and dates back to the pre-internet era of electronic data interchange (EDI) based solutions, B2C is linked inextricably to the development of Internet as a new channel for the communication of a firm with the consumer (Angeliki &Loukas, 2003).

While EC focuses on the process improvement of inter-organizational transactions, SCM concerns more about the material and information flow coordination. An analysis of EC and SCM reveals a complementary relationship with some overlapping ¡X EC concentrates on shaping information and contracting activities, and SCM primarily focuses on planning process and the organization of various flows (Alt et al., 2000).

ĆImprovements of the SC Offered by EC
The advent of EC makes SCM much different from past. Members in the SC could utilize EC from the fast information interchange and just-in-time (JIT) operations to achieve a ¡¥pull¡¦ strategy providing products and services in exact quantities on a continuous basis with minimum lead times. In this way, the inventory level could be reduced, the system coordination could be improved, better partner and customer relationships could be achieved and thus, the final aim¡X minimize the costs could be reached.

In the following part, I will discuss the improvements offered by EC in details through the following five aspects: information, inventory, time, partnership and cost.

Information processing is an important component for effective SC. Members of the SC could improve performance with an increasing level of information sharing.

Uncertainty rise when members of the SC only have accurate data about themselves. To reduce uncertainty, information of the whole SC should be shared. Most research suggests that centralized information can improve a decentralized supply chain¡¦s performance (Yu et al, 2001).

An advantage of EC technology is that it could provide information visibility throughout the supply chain. With the help of EC, members of SC could benefit a lot from the relevancy, accuracy and timeless of centralized information.

In the past, partners in the SC mainly use the method of EDI to realize information flow. Nowadays, Internet is used as another major method of information transferring. Information could be transferred to both partners and customers in real time with least transaction cost and global reach....
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