Concept of e-SCM, Strategic Advantages and Benefits

E-Supply chain management is practiced in manufacturing industries. E-SCM involves using internet to carry out value added activities so that the products produced by the manufacturer meets customers’ and result in good return on investment.

E-SCM is the effective utilization of internet and business processes that help in delivering goods, services and information from the supplier to the consumer in an organized and efficient way.

Improved product and material flow

• Time-to-consumer is a crucial indicator of product flow efficiency. The less time it takes for goods to reach the end customer, the more efficient the product flow. However, there are many other factors to consider such as the quality of the materials or goods that reach customers, the supply and demand balance, shipment options and costs, and inventories.
• Effective supply chain management enables companies to improve product flow through accurate demand and sales forecasting and also improve inventory management to arrest the bullwhip effect and avoid underproduction. SCM also minimizes delays and allows full traceability and visibility into the movements of goods from the supplier to the customer. SCM enables working strategies that can accelerate time-to-market and optimize business speed, while ensuring high level of product quality.

Seamless information flow

• “The effective SCM requires not only the integration of material flows but also the integration of information flows in the supply chain (Frohlich & Westbrook, 2001; Trent & Monczka, 1998).” Today, with customers constantly demanding for real-time response and easy access to product and other supply chain content, information flow should be uninterrupted. Intermittent and insufficient information flow due to a fragmented supply chain can lead to poor supplier and customer relationships and huge costs to the tune of $1.2 billion per year, according to Oracle.
• Companies with effective supply chain management can remove the bottlenecks to supply chain information flow. It can help them evaluate the quality of information sharing, then implement solutions to best fill the gaps. SCM helps design effective best practices to facilitate different types of supply chain information that usually come in different formats and structures. SCM also enables accurate, timely, complete, and relevant information flow to avoid missed opportunities and possible risks.
• Effective and seamless information flow addresses information distortion and miscommunication and promotes enhanced collaboration and relationship value among supply chain stakeholders. It also helps improve visibility into all transactions and accelerate generation of supply chain insights through past reports creation.

Enhanced financial flow

• Another pain point for supply chain players is how to improve cash flow in the value chain, which involves “thousands of invoices and payments in a given year.” The unpredictability and variability of financial inflows and outflows can add more complexity to the inherently complex supply chain financial flow.
• According to Visa, generally, financial management challenges are:

(1) Slow processing due to manual and silo processes

(2) Unreliable, unpredictable cash flows because of lack of timely information

(3) Costly processes due to compliance and lack of employee empowerment

(4) High days sales outstanding (DSO) caused by invoice reconciliation delays; and

(5) Suboptimal credit decisions due to manual processes for setting optimal limits.

• Implementing supply chain management can help companies address all these cash flow challenges, allowing them to carefully evaluate their current processes, identify the weakest links that slow down and hamper financial flow, and determine the right solutions to address the problems.

Advantages of e-supply chain management

Companies implementing E-SCM can enjoy the following advantages:

1. It improves efficiency
2. It reduces inventory
3. It reduces cost
4. It helps to take competitive advantage over competitors.
5. It increases ability to implement just-in-time delivery, increases on-time deliveries, which enhances customer satisfaction.
6. It reduces cycle time, increases revenue, by providing improved customer service.
7. It improves order fulfillment, order management, decision making, forecasting, demand planning, and warehouse/distribution activities.
8. It reduces paperwork, administrative overheads, inventory build-up, and the number of hands that handle goods on their way to the end-user i.e., the customer.

Supply Chain Management flow

SCM flows can be divided into three main activities

• Product flow
• Information flow
• Financial flow

1. Product Flow: The product flow includes the movement of goods from a supplier to a customer, and also any goods returned by customers.
2. Information flow: The information flow involves transmitting orders and updating the status of delivery.
3. Financial flow: The financial flow consists of credit terms, payment schedules, consignment and title ownership arrangements.