The definition of supply chain management that is adopted in this
paper is:
The management of upstream and downstream relationships with
the suppliers and customers to deliver superior customer value
at less cost to the supply chain as a whole.
Thus for example a shirt manufacturer is a part of a supply chain
that extends upstream through the weavers of fabrics to the manufacturers
of fiberss, and downstream through distributors and retailers
to the final consumer.
The goal of supply chain management is to link the marketplace,
the distribution network, the manufacturing process and the procurement
activity in such a way that customers are serviced at a higher
levels and yet at a lower total cost. Prior to discussing the
web based electronic supply chain management, we will define the
transformation stages:
| Table 1. Transformation
stages |
| Stage one: baseline |
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| |
| Stage two: Functional integration |
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| |
| Stage three: internal integration |
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| |
| Stage four: external integration / collaboration |
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| |
| Source: Stevens, G.C. “integrating
the supply chain”, International Journal of Physical
Distribution and Materials Management, Vol 19, No. 8, 1989 |
As seen in stage four of the diagram, it is already evident that
external integration / collaboration is a must, and the internet
and Web portals have forever transformed the way buyers and sellers
communicate and do business. Web portals have played a vital role
in the exchange of information and the creation of digital marketplaces,
which have taken buyers and sellers to a new level of trade.
Corporations are turning their attention to Internet models built
on real business processes. This opens the door for the Private
Trading Exchange (PTX) as defined below:
| Figure 1: The Private Trading
Exchange |
 |
 Source:
AMRResearch, |
SCM is where the action will be in the next decade. But as the SCM
industry grows, so does confusion over which software apps do what
functions best. With a host of products for every task from forecasting
and purchasing to warehousing and shipping, and with countless variations
in the terms used for various supply chain functions, managers struggling
to improve their SCM infrastructure find themselves wandering in
the dark. In order to turn on the lights, we must first understand
the basics of SCM.
Inter-enterprise integration is the core of SCM. SCM is evolving
from the current enterprise-centric (e.g., Nabisco) models to
more collaborative, partnership-oriented modes (e.g. the Procter
& Gamble and WalMart continuous replenishment model in the
customer packaged goods industry). And leading-edge companies
such as Intel and Dell in the high-tech industry have gone even
further to create an increasingly streamlined supply chain model
with mass-customization and customer-direct capabilities.
No company wants excess inventory. The rallying cry behind inter-enterprise
integration is "drive down inventory, production, and distribution
costs."
SCM is a business framework comprised of multiple applications
and divided into two application camps: planning and execution.
The planning process focuses on demand forecasting, inventory
simulation, distribution, transportation, and manufacturing planning
and scheduling. Planning software is designed to improve forecast
accuracy, optimize production scheduling, reduce inventory costs,
decrease order cycle times, reduce transportation costs, and improve
customer service.
The execution process addresses procuring, manufacturing, and
distributing products throughout the value chain. Supply chain
execution apps are designed to manage the flow of products through
distribution centers and warehouses and help ensure that products
are delivered to the right location using the best transportation
alternatives available.
These processes result to collaborative scenarios that should
be adapted in the private trading exchanges.
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