ES/U3 Topic 7 Internet enabled SCM
Internet Technology has impacted our day to day life beyond imagination. It has changed the way we make purchase decisions, the process by which we compare products and finally buy the product. All this has been enabled instantly by the click of a mouse, sitting in the comfortable environs of your home.
Lets take the case of e commerce on a B2C model. You have just logged into the DELL website, compared the products and configurations. You go on to construct and build your own configuration laptop, get the pricing and click to make online payment through your credit card and have completed a purchase online.
Was this imaginable a few decades ago? No. Internet and E commerce have helped markets get closer to the customer. Customer Decision making and sales process has been shortened. Financial payment and delivery mechanism has been instantaneous in this case involving third party gateways making the transaction possible with collaborative networking.
How does the above transaction impact Supply Chain? At the back end, the customer order has been logged and a corresponding order has been placed on the nearest plant to assemble the required laptop as per order. This in turn will trigger a bill of material to be triggered to the vendor managed inventory warehouse to supply required parts.
Looking into the forward transaction, the laptop gets assembled, is dispatched to the forward stocking warehouse of the freight forwarder or logistics partner from where it is customs cleared and exported to the country of customer location or transported to the customer location if it is within the same country. In case of import into another country, the freight forwarder completes import customs clearance, takes it to his hub or warehouse to complete further leg of domestic transportation and delivery to the customer.
The entire exercise is completed within 7 days involving multiple vendors, plant, 3PL service Providers with integrated logistics flow through activities (warehousing, shipment consolidation, labeling, packing & transportation at various stages )besides involving airlines and customs agencies etc. The shipment is continuously tracked and shipment status is visible to all over the internet. This has been made possible with the various intern organizational systems operating Internet as platform, extranet, ERP, EDI, Emails besides online web tools.
Internet enabled technologies have impacted supply chain in major way. Earlier on ERP systems revolutionized business models and processes. These have further been impact with Internet enabling of ERP applications coupled with other technologies and applications.
On procurement front, e commerce has give birth to E Auction, Online Bidding and Global RFQs being floated with vendor evaluations being conducted through video conferring etc.
Further on, it has also enabled buyer and supplier to collaborate and implement lean inventory management concepts and auto replenishments using models like VMI, JIT, Kanban, etc.
In a typical supply chain involving supply of raw materials and components to a manufacturing location, three different systems of buyer, sellers and the 3PL service agency managing inventory talking to each other on real time basis exchanging information, data and managing transactions. Buyer is able to initiate an order, the 3PL is able to process the order, manage inventory and ship out and the supplier is able to replenish the inventory in very short time. Visibility of transactions and inventory is available to all the three parties involved.
In the case of Logistics, the freight forwarders system at the distribution center holding inventory is able to interface with buyer system and initiate processes for documentation from buyer, shipment label generation. The freight management department picks up details from warehousing system to further process and generates shipping documents and file with customs to custom clear export shipment and airlines to book the freight.
All documents are then uploaded on to a website from where the status of shipment can be tracked by the buyer, seller and others. Advance shipments are downloaded at the point of destination by the freight forwarding agent from the internet before shipment lands at destination. He files documents with customs for inbound clearance on EDI. After clearance, the shipment is delivered to the customer via domestic distribution network and delivery confirmation is uploaded into the website from where information is picked up by buyer and the sales process is completed.
Internet has shortened the supply chain transaction time, exploded boundaries of operation across, increased the amount of volume that the supply chain network can manage and finally has resulted in bringing down cost of logistics as well as procurement and inventory holding costs besides reducing manpower costs.