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E-Com Supply Chain and SMEs
report on a German SME initiative, whereby a Web portal facilitates interaction between custom-ers and three competency networks: engineering services, rapid prototyping, and manufacturing. 3DUWLFLSDWLQJ 60(V EHQH¿W IURP FRRSHUDWLQJ with others in the network, as their combined competencies provide competitive advantage. Harrison and van Hoek (2005) describe a district portal initiative which assists more than 100 small companies in the Macerata shoe district of Italy with B2B relationships and order management.
Just as the ASP approach in ERP provided a YLDEOHRSWLRQIRUPHGLXPVL]HG¿UPVWRPRYH to enterprise systems, on-demand supply chain solutions are now becoming available for some SMEs (Lewis, 2005). This approach shares SCM infrastructure (hardware, software, ap-plications) across many companies, with access via the Internet. Over time, applications aimed at a variety of SMEs should become available at reasonable cost.
CHALLENGES
SCM in General
Supply chains are complex, and managing them is not easy. Furthermore, the highest payoff supply chain projects tend to be the largest and riskiest. The trade press frequently reports on supply chain projects that have gone awry. In the follow-LQJVHFWLRQVRPHRIWKHFKDOOHQJHVLGHQWL¿HGEJUHDWHVWEHQH¿WVZHUHREWDLQHGE\¿UPVZKHUH SCM was part of the overall business strategy (and hence a CEO-level agenda item), and where companies were willing to reorganize the supply chain itself when appropriate, rather than simply making adjustments within the existing supply chain structure (sometimes called ‘breaking the mould’).
Muckstadt, Murray, Rappold, and Collins (2001) looked at the challenges of supply chain collaboration, considering both design and RSHUDWLRQ7KH\LGHQWL¿HG¿YHLPSHGLPHQWVWR constructing a competitive chain: (1) demand uncertainty, which is inadequately addressed; (2) long and varied response time among chain members, resulting in an inability to respond to environmental changes; (3) poor information in-IUDVWUXFWXUHVZLWKLQ¿UPVEXVLQHVVSURFHVVHV both intra- and inter-organizational, that do not support evolving supply chain conditions; and (5) decision support systems and operating policies that cannot contend with supply chain uncertainty. In response to these challenges, they provide a set of guiding principles for the effective design and execution of supply chain systems.
As Ranganathan et al. (2004) point out, the success of e-SCM is largely contingent upon the extent to which the system is assimilated inter-QDOO\ZLWKLQHDFK¿UPDQGGLIIXVHGWKURXJKRXW WKHHQWLUHVXSSO\FKDLQQHWZRUNZLWKHYHU\¿UP in the chain pulling in the same direction. End-to-end visibility, facilitated by full information sharing, can mitigate supply chain risk and build
researchers are reviewed. These include aligning FRQ¿GHQFHDPRQJSDUWQHUV&KULVWRSKHU /HH
WKHLQWHUHVWVRIFKDLQPHPEHUVSURMHFWGLI¿FXOW\ taking on high rather than low payoff projects, dealing with abnormal events, and forecasting.
A Booz Allen survey, conducted in late 2002, found that overwhelmingly senior executives at large companies worldwide believed SCM had failed to live up to expectations (Heckerman et al., 2003). Technology alone was not the solution, ZLWKRIUHVSRQGLQJ¿UPVVWDWLQJIT solu-tions had failed to live up to expectations. The
2004). Narayanan and Raman (2004) point out that misaligned incentives can result in excess inventory, stock-outs, incorrect forecasts, inad-equate sales efforts, and poor customer service. They suggest three reasons why incentive-related issues arise in supply chains: (1) when companies FDQQRWREVHUYHRWKHU¿UPV¶DFWLRQVWKH\¿QGLW KDUGWRSHUVXDGHWKRVH¿UPVWRGRWKHLUEHVWIRU WKHQHWZRUNLWLVGLI¿FXOWWRDOLJQLQWHUHVWV when one company has information or knowledge
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that others do not; and (3) incentive schemes are often badly designed. The authors provide a three-stage process for aligning incentives and building trust.
Major supply chain projects require great effort. Heckmann, Shorten, and Engel (2003) UHIHU WR ³+HUFXOHDQ 6&0 HIIRUWV´ ZKLFK DUH commensurately rewardedthey report that companies making the biggest commitment to improving their SCM system outperform those where the effort is no more than incremental. Yet such projects bring considerable risk and are not easy to complete on time, on budget, and with the desired functionality.
Hendricks and Singhal (2005) studied the cost of SCM disruptions (project completion problems, mismatches between supply and demand, and so forth) by looking at public announcements and share prices. They found a major negative impact (average abnormal stock returns of almost -40%), with much of the underperformance observable in the year preceding and following the announce-ment (so the investment community recognized 6&0SUREOHPVEHIRUHWKH¿UPDFNQRZOHGJHG WKHVH)XUWKHUPRVW¿UPVGLGQRWUHFRYHUYHU\ quickly from the negative effects of the disrup-WLRQV-XVWDV¿UPVIRXQG(53SURMHFWVGLI¿FXOW VRDUHWKH\¿QGLQJ6&0SURMHFWV
Pant, Sethi, and Bhandari (2003) present an implementation framework for e-SCM projects. 7KH\SRLQWRXWWKDW³LWLVRIWHQRYHUORRNHGWKDW creation and implementation of integrated supply chains requires tremendous resources, a great deal of management time and energy, large orga-nization-wide changes, huge commitment from suppliers/partners, and sophisticated technical infrastructure.” They also caution that a standard VRIWZDUHSDFNDJHVROXWLRQFDQQRW¿WDOOW\SHVRI VXSSO\FKDLQV$VZLWK(53V\VWHPV¿UPVFDQ go with the ‘plain vanilla’ version (which means changing existing internal systems to match the capabilities of the software) or customize the soft-ware to support existing in-house systems. Either approach has advantages and disadvantages.
Within the supply chain literature, the concept of ‘breaking the mould’ comes up more frequently now. Firms can live with their current supply chain, working to incrementally improve it. Or they can redesign the chain, which can involve relocat-ing factories, outsourcing logistical and other responsibilities, or other fundamental changes. Experience shows the latter group obtains better results, compared to the former (Heckmann et al., 2003). Yet far greater resistance, both within WKHRUJDQL]DWLRQDQGIURPDFURVV¿UPVZLWKLQ the chain, can be expected when this approach is taken.
Research attention is also being turned to abnormal events that can disrupt supply chains. Natural disasters (hurricane Katrina hitting the U.S. gulf coast in 2005), labor unrest, terrorism, KHDOWKVFDUHV6$56%6(ELUGÀXDQGPRUH mundane risks can seriously disrupt or delay the ÀRZRIPDWHULDOLQIRUPDWLRQDQGFDVKWKURXJK an organization’s supply chain. At the time this chapter was written, Danish dairy giant, Arla Foods, faced a total loss of demand within Saudi Arabia because of outrage over cartoons published in a Danish newspaper. Annual sales for Arla within Saudi Arabia were estimated at 268 million euros, and this dropped to nothing virtually overnight as consumers boycotted their products and supermarkets, and removed all Arla products from shelves. Chopra and Sodhi (2004) recommend a ‘what if?’ team exercise called ‘stress testing’ to identify potential weak links LQD¿UP¶VVXSSO\FKDLQ
)RUHFDVWLQJGHPDQGLVSURYLQJWREHGLI¿FXOW within many supply networks, with greater atten-tion now being focused on this. Where possible, DFWXDO¿QDOFXVWRPHUGHPDQGLVIDUEHWWHUWKDQD IRUHFDVWSURYLGLQJWKHUHLVVXI¿FLHQWWLPHIRUWKH chain to produce the necessary goods/services. Some supply chains are now providing such information to major members. In the future, it will be easier for all chain members to have ac-cess to this important information. The type of market demand experienced (volatile vs. stable,
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E-Com Supply Chain and SMEs
predictable vs. unpredictable) has considerable impact on the accuracy of forecasting models. 3URJUHVVLYH¿UPVPRQLWRUWKHDFFXUDF\RIWKHLU forecasting models and improve them based on experience or modify them when the environment changes. However, some types of demand are not easily forecastable, and chain agility holds promise here.
SMEs in Particular
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