A SUPPLY CHAIN MANAGEMENT REPORT ON

“EFFECT OF INTERNET ON SUPPLY CHAIN”

IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR DIPLOMA IN MANAGEMENT DEGREE

(2014-2016)

Submitted To: Submitted By:

Prof. Somonnoy Ghosh Sandeep Reddy (14DM181)

Sagnik Sen (14DM173)

Neeraj Ravindranathan (14DM133)

Pragoon Dixit (14DM149)

Priya Malvia (14DM155)

Sant Singh (14DM184)

Introduction:The development of supply chains over the years has been slow. Companies developed individual parts of their supply chains beginning first with the transportation component and moving on to include warehousing, finished goods inventory, materials handling, packaging, customer service, purchasing, and finally, raw materials inventory. The goals of supply chain systems are multidimensional and include cost minimization, increased levels of service, improved communication among supply chain companies, and increased flexibility in terms of delivery and response time.

Throughout the 1960s, 1970s, and 1980s the ability of firms to achieve these goals was limited, since the communication and knowledge links in the existing supply chains did not bring together all of the key databases. Also, there was the reluctance on the part of firms in the supply chain to share data with each other. This hesitancy was due to a variety of factors, including the perceived threat of giving away competitive advantage to other firms, the sharing of sensitive information such as inventory levels and production schedules with other channel members, and the potential of loosing customers to other competitors. Today, much of the reluctance to interface with other firms in supply chains is breaking down. The change in attitude is due to variety of factors including just-in-time (JIT) programs, electronic data interchange, and point-of sale data sharing programs. Each factor made traditional logistics managers realize that there is more to be gained by working with other supply chain firms than there is to lose. For example, one of the greatest barriers to JIT was the fear that sharing production information with vendors would hurt a company by revealing its production-planning schedule to the competition. The fear was groundless, because what mattered most

was keeping inventories low and reducing the resulting administrative costs of carrying inventory at manufacturing, plant, and dealer locations. Electronic data interchange (EDI) had the same effect on the fears of the data sharing in the supply chain. Here, firms were actually linking up their companies with computer-to-computer ordering and data exchange. The fear was greatest among small companies. Implementation of EDI required an investment in computers and software, on the parts of both the vendor and the buyer. Standardization was also a requirement that made the switch to EDI a lot slower than with JIT. Point-of-sale information programs were a major influence in altering among logistics managers the thinking that data exchange in the supply chain can be beneficial to all parties involved. This was dramatically demonstrated by the results experienced by large mega-discounters such as Wal-Mart and Kmart, which were the first retailers to link their point-of-sale information with the computers of their vendors. Here, the vendors were informed immediately of the stock levels of their respective products sold through the stores of the buyers. If the stock levels required replenishment, then the vendors were immediately informed by the point-of-sale systems, which were direct links from the cash register scanners at the respective store outlets. If any item fell to its minimum level of stock, an order was issued for replenishment. The order was electronically transmitted to the vendor. It was filled by the vendor and sent directly to the store or central warehouse.

The Challenge of the InternetThe growth of the Internet has presented supply chains with many significant opportunities for cost reduction and service improvements.

These opportunities include:

1. On-line vendor catalogs from which buyers can find, select, and order items directly from suppliers without any human contact

2. The ability to track shipments using a wide variety of modes including truck, rail, and air transport

3. The ability to contact vendors or buyers regarding customer service problems from late deliveries, stock-outs, alterations in scheduled shipment dates, late arrivals, and a wide variety of other service issues

4. The ability to reserve space in public warehouses for anticipated deliveries to market locations

5. The ability to schedule outbound shipments from private and public distribution centres on a 24-hour basis

6. The ability to provide 7-day/24-hour worldwide customer service

7. The ability to receive orders from international customers

8. The ability to check the status of orders placed with vendors

9. The ability to place bids on projects issued by government and industry buyers

10. The ability to notify vendors of changes in configurations in products that are produced to order

11. The ability to pay invoices electronically and to check outstanding debit balances

12. The ability to track equipment locations including rail cars, trucks, and material handling equipment

13. The ability to directly communicate with vendors, customers, etc. regarding supply issues on a 7-day/ 24-hour basis via E-mail

14. The ability to schedule pickups and deliveries

15. The ability to be more responsive to customer service problems

16. The ability to reduce service costs and response time.

Traditional Logistics Practices: The development of the Internet has created innumerable opportunities for companies and their supply chains. While there are significant cost reduction opportunities, companies are in a quandary as to how to take advantage of them. Traditional logistics practices are “slow to die” among vendors, carriers, and shippers. For example, the face-to-face negotiation that had always taken place between carriers and shippers over rate negotiation is no longer needed. Rate negotiation can now be carried out over the Internet quickly and at a cost lower than before. Inventory management can be made more accurate with the use of bar code readers that can transmit stock levels to computers. The data can be accessed by the Internet and transmitted directly to logistics managers responsible for the inventory. This system is quicker and more accurate, since stock levels can be reviewed frequently. It is still common practice, however, for logistics managers to plow through long inventory status reports to check for out-of-stock situations.

LITERATURE REVIEW

The use of the Internet in supply chain management (SCM) is a relatively recent phenomenon. Its principal applications have been in the areas of procurement, transportation scheduling, vehicle tracking, and customer service. There have been few, if any, studies done on the use of the Internet in SCM. The principal literature support comes from the descriptions of projects of companies, on how they have utilized the Internet in the management of their individual supply chains. For example, General Electric, in its appliance division, uses the Internet to schedule shipments out of centrally located

warehouses in metropolitan areas. The goal is to allow the company to more accurately and cost effectively deliver its products on time. The numbers of deliveries per hour has increased significantly while transportation costs per order have dropped dramatically. Fisher Scientific effectively used the Internet in its supply chain by increasing build-to-order production. The firm is experiencing lower inventory costs and somewhat higher production costs. With the use of the Internet to more accurately track inventory, Fisher Scientific is building to order and configuring to order all of the products it sells to its customers. The Ford Motor Company uses the Internet to track small quantities of spare parts shipped to customers on a daily basis. PPG Industries, Inc. utilizes the Internet to monitor the weekly route performance of carriers from its main production plants. The company also uses the Internet to track long-haul deliveries across the country. Air Products and Chemicals Inc. uses the Internet in its global sourcing process. The Internet informs the firm of which delivery terminal and which plant is the best for servicing the customer. Weyerhauser uses the Internet to monitor vessel-shipping while taking into consideration the stop-off costs for the sites. For Rollins Leasing Inc., the Internet has helped it reduce its supply chain costs by 5% to 15% through increased partnering with its suppliers. The partnership made implementing an automated routing system faster and easier and led to a routing system that would save money and time while increasing asset utilization. Using maps for routing method no longer met the company’s needs, and as the company’s customer base grew, the time and effort to route manually became unmanageable. The Internet enabled the firm to track shipments and supplier schedules more accurately. For Emery Worldwide Logistics, the use of the Internet enabled the company to determine the efficiency of its private fleet versus its previous outsourcing of transportation by

monitoring its own shipments on a daily basis. Waste Management, Inc. uses the Internet to augment its customer service centre. Customers can register complaints and request product update information through the company’s Web site by means of E-mail. The firm has found that customers who once would only talk to a Waste Management service representative are now happy with the information and problem resolutions they receive through the Web. Huffy Service, a technical service company, uses the Internet to keep in touch with its field technicians. The firm has learned to use the data it obtains from the Internet to more efficiently schedule its field personnel and to be more responsive to customer needs.

The Role of the Internet in Supply Chain Management:Supply chain management can be defined as the planning as well as management of all activities that are involved in sourcing as well as procurement, conversion, plus including all logistics management activities. In addition, it is important to note that it also includes the coordination plus collaboration with channel partners that may be intermediaries, suppliers or customers, etc. In other words, supply chain management merges supply as well as demand management within and across businesses or companies. And, it has an integrating function with the main responsibility of linking primary business functions as well as processes within as well as across business firms into a strong and high-performing model.

Now the internet has revolutionized supply chain management. There are at least five roles the internet has played when it comes to this. Below are the different areas in which this has happened:

Inventory Management:

Definitely one aspect of supply chains that is most costly is inventory management.

And, the internet has made it possible for business firms to quickly set up EDI information programs with their clients. Before the emergence of the internet, EDI will usually take a longer time to be implemented in a supply chain.  Then, every channel member had to massively invest in software, equipment, as well as training before EDI systems could be made operational.

PurchasingThe internet has also made it possible for cost associated with purchasing to be reduced. In the United States, business firms have been able to make use of the internet to streamline the purchasing function. With it there is reduction in paper-flows as well as order-cycle times- the time it takes for purchased order to be delivered. Today, face-to-face negotiations, which might be considered the order of the day in the past, are not frequently used as bargaining, re-negotiations, term and price agreements, etc. can now be done via the internet.

TransportationTransport management is probably the most popular use of the internet in supply chains. This is so important for any business since the tracking of shipments to regional depots will provide the firm with data that shows how reliable or otherwise the performance of its carriers is, making it possible for transport managers to confirm whether their motor carriers are meeting the promised arrival time. And, it also enables them to inform carriers about shipment delays as this occurs rather than wait for days or even longer before informing them.

Order processingThis critical role of order processing is one that the internet has helped to dramatically reduce costs. And, reduction in paperwork is a major item of this cost saving when compared to conventional practices. Okay another major benefit that the internet has

bestowed on this process is the increase in speed with which order processing is now done. Since there is now a reduction in the time it takes for orders to be placed and received by clients.

Vendor relationshipsA critical factor when it comes to vendor relations for a business is being able to rate the performance of its vendors. This will be based on elements agreed by both parties (the company and its vendors). And, such performances include factors like deliveries to the company’s warehouses including depots; vendor raw material inventory among others. The internet has been used to monitor these areas.

Customer serviceThe internet has made it possible for customers to have 24-hour access to a business firm’s customer service department making it possible for companies to be notified of any problem or service issue. Now apart from providing another option for customers to contact a company concerning service issues this has helped improve communication flow between business firms and their customers. 

The Dramatic Impact of the Internet on Supply Chain Strategies: Internet technology has forced companies to redefine their business models so as to improve the extended enterprise performance. This is popularly called e-business. The focus has been on improving the extended enterprise transactions including intra-organizational, Business-to-Consumer (B2C), and Business-to-Business (B2B) transactions.

This shift in corporate focus allowed a number of companiesto introduce a new supply chain paradigm, the Push-Pull strategy. In this whitepaper, we’ll review and analyse the

evolution of supply chain strategies, fromPush strategies, to Pull strategies, and then to Push-Pull strategies.

A New Supply Chain Paradigm: E-business is a collection of business models and processes motivated byInternet technology, and focusing on improvement of extended enterprise performance.

E-commerce is the ability to perform major commerce transactions electronically.

Observe that this definition leads to several observations. First, e-commerceis only part of e-business. Second, Internet technology is the force behindthe business change. Finally, the focus in e-business is on the extended enterprise, i.e., intra-organizational, Business-to-Consumer (B2C), and Business-to-Business (B2B) transactions. B2C refers to businesses that are direct to customer, especially retail activities over the Internet including products, insurance, banking, etc. B2B refers to business conducted over the Internet predominantly amongbusinesses. This includes exchanges but also collaboration with suppliers andvendors to achieve common goals.

Many companies have recognized that the Internet can have a huge impact onsupply chain performance. Indeed, these companies observed that the Internetcould help them move away from the traditional Push strategy employed by mostsupply chains. Initially, the move was toward a Pull strategy, but as we demonstrate below, eventually, many companies ended up with a combination of Push-Pull supply chain.

Push Supply ChainsIn a Push supply chain, production and distribution decisions are based onlong-term forecasts. Typically, the manufacturer uses orders received from theretailer’s warehouses to forecast demand. It therefore takes much longer fora Push-based supply chain to react to the changing marketplace. In addition, since long-term forecasts play an important role, it is important to understandthe following four principles of all forecasts and their impact on the supplychain.

The forecast is always wrong.

The longer the forecast horizon, the worse the forecast.

Data updates lead to forecast updates.

Aggregate forecasts are more accurate.

Thus, the first principle implies that it is difficult to match supply anddemand, and the second one implies that it is even more difficult if one needsto predict customer demand for a long period of time, e.g., the next 12 to 18months. The third principle suggests that as the firm receives more demand data, it uses the data to update its forecast, and therefore update inventory levels, safety stock, and order quantities.

This implies that traditional inventory management techniques practiced ateach level of the supply chain lead to the Bullwhip Effect, which is a phenomenoncommon in Push supply chains. The Bullwhip Effect suggests that variabilityof orders received from retailers and warehouses is much larger than variabilityin customer demand. This increase in variability is directly related to supply chain lead time – the longer the lead time, the larger the increase in variability.

Evidently, this increase in variability leads to:

Excessive inventory due to the need for large safety stock

Large and more variable production batches

Unacceptable service levels

Inability to manage resources effectively since it is not clear whether the firm needs to plan resources on average demand or on peak demand.

Pull Supply ChainsIn a Pull supply chain, production and distribution are demand driven so thatthey are coordinated with true customer demand rather than forecast. That is, in a pure Pull system, the firm does not hold any inventory and only producesto order. These systems are intuitively very attractive since they allow thefirm to eliminate inventory, reduce the Bullwhip Effect, increase service levels, etc.

Unfortunately, it is very difficult to implement a Pull supply chain strategywhen lead times are too long that it is impractical to react to demand information.Similarly, in a Pull strategy, it is frequently more difficult to take advantageof economies of scale, since production and distribution decisions are in responseto specific customer demand and therefore batch production or truckloads arehard to achieve.

These advantages and disadvantages of Push and Pull supply chains have ledcompanies to look for a new supply chain strategy that takes advantage of thebest of both world. Enter a hybrid of the two systems – Push-Pull supply chainsystems.

Push-Pull Supply ChainsIn a Push-Pull strategy, the initial stages of the supply chain are operatedin a Push-based manner and the final stages are operated in a Pull-based strategy.We typically refer to the interface between the Push-based stages and the Pull-basedstages as the Push-Pull boundary.

Consider a PC manufacturer who builds to stock and thus makes all productionand distribution decisions based on forecast. This is a typical Push system.In a Push-Pull strategy, the manufacturer builds to order. This implies thatcomponent inventory is managed based on forecast, but final assembly is in responseto a specific customer request. Hence, the Push part is the part of the manufacturer’ssupply chain prior to assembly while the Pull part is the part of the supplychain that starts with assembly and is performed based on actual customer demand.

Observe that in this case the manufacturer takes advantage of the fourth principleof all forecasts, namely, that aggregate forecasts are more accurate. Indeed, demand for a component is an aggregation of demand of all finished productsthat use this component. Since aggregate forecasts are more accurate, uncertaintyin component demand is much smaller than uncertainty in finished goods demand.This, of course, leads to safety stock reduction. Dell Computers is an excellentexample of the impact the Push-Pull system on supply chain performance.

Postponement, or delayed differentiation, in product design is also an excellentexample of a Push-Pull strategy. In postponement, the firm designs the productand the manufacturing process so that decisions about which specific productis being manufactured can be delayed as much as possible. The manufacturingprocess starts by producing a generic or family product, which is differentiated

to a specific end product when demand reveals itself. Thus, the portion of thesupply chain prior to product differentiation is typically a Push-based strategy.That is, the generic product is built and transported based on long-term forecasts.Since demand for the generic product is an aggregation of demand for all itscorresponding end products, forecasts are more accurate and thus inventory levelsare reduced. In contrast, customer demand for a specific end product typicallyhas a high level of uncertainty and thus product differentiation occurs onlyin response to individual demand. Thus, the portion of the supply chain startingfrom the time of differentiation is a Pull-based supply chain.

Efficient and Responsive Supply ChainsFor companies struggling to improve supply chain performance, the challengeis clear. They need to identify supply chain strategies that allow the enterpriseto decrease system-wide costs and increase service levels. Unfortunately, theseare sometimes conflicting goals. Indeed, high service levels require buildinginventory that is in direct conflict with the objective of reducing system-widecost. By contrast, a focus on cost reduction in the supply chain may force thefirm to cut inventory, which may lead to low service levels.

These conflicting objectives have led to the introduction of concepts suchas efficient or responsive supply chains. Specifically, an efficient supplychain emphasizes cost reduction while a responsive supply chain focuses on theability to match supply and demand and thus focuses on service levels.

We argue that a Push-Pull supply chain is a strategy that allows the supplychain partners to achieve both objectives. Indeed, the Push part of the supplychain is applied to the portion of the

supply chain where long- term forecastshave small uncertainty and variability. Thus, service level is not a big challengeand the focus is on cost reduction. On the other hand, the Pull part is appliedto the portion of the supply chain where uncertainty and variability are highand hence the focus is on matching supply and demand

Consider, for instance, a supplier of fashion skiwear such as Sport Obermeyer.Every year the company introduces many new designs, or products, for which forecastdemand is highly uncertain. One strategy used successfully by Sport Obermeyeris to distinguish between high-risk and low-risk designs. Low risk products, i.e., those for which uncertainty and price are low, are produced in advanceusing long-term forecasts and focusing on cost minimization, a Push based strategy.

On the other hand, decisions on production quantities for high-risk productsare delayed until there is a clear market signal on customer demand for eachstyle, i.e. a Pull strategy. Since fabric lead times are long, the manufacturertypically orders fabric for high-risk products well in advance of receivinginformation about market demand and based only on long-term forecasts.

Thus, in this case, the manufacturer takes advantage of the fourth principleof all forecasts, which suggests that aggregate forecasts are more accurate.Since demand for fabrics is an aggregation of demand for all products that usethat fabric, demand uncertainty is low and thus fabric inventory is managedbased on Push strategy. The analysis thus implies that Sport Obermayer usesa Push-Pull strategy for all the high-risk products and a Push strategy forall low-risk products.

E-Business OpportunitiesThe previous sections have identified an emerging business model, the Push-Pullstrategy, driven by the Internet and allowing companies to increase supply chain performance. This business model requires a much closer relationship betweensupply chain participants and therefore calls for new practices and new modesof operation. At the same time, the Internet enables cross-enterprise activitiesbecause it is ubiquitous and standard. To put this concept in perspective, thinkabout the initial breakthrough application on the Internet: email. This applicationcrosses company boundaries and allows collaboration and problem-solving anytimeand anywhere, whether inside a company or outside.

Our objective in this section is to describe new business practices motivatedby the Internet and the e-business model. We will discuss the nature and importanceof these practices and opportunities as well as some of the tools applied toensure the success of these new developments.

Supply Chain RealignmentThe Internet and the new business models motivate significant changes in supplychain design. Early on, many believed that the Internet would allow companiesto eliminate inventory and distribution centres from their supply chain (seethe characteristics of Pull supply chain strategies).

As illustrated earlier, this is no longer the prevailing practice. Push-Pullstrategies suggest that inventory and distribution centres play an importantrole in supply chain strategies. Of course, determining the right number ofwarehouses, the type of inventory, such as components, low volume SKUs, highvolume SKUs, and the appropriate inventory levels is a major challenge. Forinstance, should Amazon.com establish

only one warehouse, a small number ofwarehouses each of which serves a large geographical area, or a large numberof warehouses each close to potential customers? The answer to this questiondepends, of course, on the trade-off between facility costs, inventory costs, transportation costs, and service levels.

The increasing the number of warehouses will entail:

Increase in fixed costs

Decrease in transportation costs since facilities are closer to the customers

Increase in inventory costs since inventory is disaggregated and thus achievingan accurate demand forecast is much more difficult, leading to an increasein safety stock

Reduction in response time to customer orders

Thus, the firm must balance the costs of opening new warehouses with theadvantages of being close to the customers. Put differently, supply chainrealignment is crucial to efficient Push-Pull strategies.

Supply Chain CollaborationDeveloping a new business model using Internet technology, the main objectivein e-business, requires companies to transcend traditional models for workingwith suppliers and customers. Supply chain collaboration is now key to achievinge-business success. Evidently, collaboration between enterprises is an enormous challenge from the business aspect much more so than from the technological one. Indeed, the Internet provides accessibility and universal standards that allow for the transmission and integration of data across supply chain

partners. New data integration standards, such as XML and Rosetta Net, and the tools developed around them, significantly lower integration cost and time.

The challenge in supply chain collaboration is to implement the cultural andorganizational changes that allow supply chain partners to achieve responsivenessand efficiencies.

We classify supply chain collaboration into three categories:

Sharing information

Coordinating plans

Creating supply chain communities

Sharing Information

This is the basic level of collaboration in which supply chain partners shareinformation about demand, inventory levels, and promotional activities. Forinstance, in the retail industry, suppliers receive POS (Point-of-Sale) datafrom the retailers and use this information to synchronize production and inventoryactivities with actual sales at the retailer. In this strategy, the retailerstill prepares individual orders, but the POS data is used by the supplierto improve forecasting and scheduling and thus to reduce lead-time in the supplychain.

Coordinating PlansThe second level of collaboration is motivated by the recognition that sharinginformation is not enough. That it is important to agree on forecasts and replenishment strategies that will allow the supply chain to achieve a higher level of coordination.

One important example of this level of collaboration is a strategy used byretailers and suppliers called Collaborative Planning, Forecasting and Replenishment (CPFR). CPFR is a process in which

supply chain partners coordinate plans tobetter match supply and demand. This strategy was first developed and implemented successfully by Wal-Mart in collaboration with Warner-Lambert in early 1995.The CPFR process, as implemented by these companies, require buyers and sellersto:

Establish a front-end agreement and a joint business plan (CollaborativePlanning)

Create a sales forecast, identify and resolve exceptions (CollaborativeForecasting)

Create orders and projected orders (Collaborative Replenishment)

Creating Supply Chain CommunitiesThis is the highest level of collaboration where companies consolidate intotrue supply chain communities whose members share common goals and objectives across and among enterprises. The supply chain community streamlines business transactions across partners to maximize growth and profit.

The electronics industry is the most advanced in this respect due to the cutthroatcompetition. Companies such as Dell, Cisco, and Micron practice a form of collaboration that is significantly more intimate than the one practiced in other industries. These companies share not only product development plans, forecasts, and replenishment strategies, but also have supplier personnel working in their plants and participating in their planning meetings.

Supply Chain VisibilityVisibility in the supply chain is one of the main strategies used to reducethe Bullwhip Effect described earlier.

Supply chain visibility refers to providingeach stage in the supply chain with complete information on customer demandand inventory levels. It also refers to the transfer of information from eachstage of the supply chain on inventory and production levels, shipment status, and fulfilment needs.

To understand why visibility reduces the Bullwhip Effect, note that if demandinformation is shared, each stage of the supply chain can use the actual customerdemand data to create accurate forecasts rather than relying on orders receivedfrom the previous stage. These orders typically have much higher variabilitythan customer demand.

At the same time, information visibility allows supply chain partners to bettercoordinate production and distribution and thus not only reduce costs, but alsoreduce lead times in the supply chain. This reduction in lead time, as observedearlier, results in reduction in inventory levels across the supply chain, aswell as reduction in the Bullwhip Effect.

Thus, supply chain visibility has a significant impact on supply chain performance.Unfortunately, while companies have plenty of information in their systems, this information may not be accessible to the parties who need it, or it maynot be in a format that is conducive to making business decisions. Similarly, there is a need for tools that allow executives and managers to visualize, understand, and plan based on large databases.

Thus, we identify three main requirements that any supply chain visualizationneeds to satisfy:

Provide summary of key performance measures. These are facility-related, product-related, and supply chain-related performance measures.

Alert when performance measures violate certain, predefined thresholds.

Integrate pertinent data for supply chain collaboration and optimization.

Visibility is achieved through integration of the relevant information fromexisting systems and presenting it to users in a way that assists their abilityto make decisions. The integration technology that is widely becoming standardis XML-based processing. However, EDI and other forms of coordination, suchas flat file, are still popular and are supported by most vendors. Once thedata is integrated, the system allows users to tailor the interface to theirown needs – so they can see the relevant information through their Web browsers.

Logistics data exchanges can also provide visibility. In fact, some of theexchanges are touting visibility as the main benefit. For example, Cellario, a logistics exchange, advertises their offering as “enabling logistics transactionsand connecting customers with their internal systems and supply chain partnersthrough the latest messaging technologies, ultimately providing retailers, manufacturers, distributors, carriers, freight forwarders, and other trading partners withthe information they need to improve customer service and profitability.”

Supply chain visibility systems typically do more than measure and report, they also attempt to diagnose the problem and dynamically alert different participantsto violations of thresholds and constraints. Extending this information directlyto supply chain partners allows them to collaborate on and improve the overallsystem. Supply Chain Event Management (SCEM) is the name of this applicationand it is fuelled by e-businesses looking to coordinate and control supply chain

activities. Real-time exception-based management is crucial if a company isto succeed in distributing supply processes among trading partners, and that’swhere SCEM plays a significant role.

Tactical PlanningWith ample information available, the firm can optimize decisions at all levels, the strategic, tactical, and operational levels. Indeed, supply chain planningtools can access the data that has been accumulated and assist users in makingintelligent long and short-term decisions.

In the last few years, planning tools have been used extensively to assistin optimizing the structure of the supply chain. Specifically, these tools have been used to answer the following questions: How many warehouses? Where should they be located? How should the firm assignproducts to the different warehouses? Should all SKUs be at all warehouses orsome SKUs at some warehouses? How should the firm assign customers, or territories, to warehouses? Many of these questions need to be answered by companies adoptingthe new supply chain paradigm, the Push-Pull strategy.

Planning tools have also been used extensively to assist in operational decisions including production scheduling and transportation optimization. The tactical level, on the other hand, has been relatively neglected because of its complexity, scarcity of tools, and inaccessible data. At the same time, there was a certain lack of urgency compared to the operational level.

ConclusionThe Internet has created the opportunity to revolutionize old business modelsand in particular to implement new supply chain strategies. Indeed, the successof giants such as Dell Computers and

Cisco and the significant market capitalizationof newly established companies such as Amazon.com are mainly attributed to sophisticated Internet-based supply chain strategies.

At the same time, the collapse of many dot-com companies sends an alarmingmessage that e-business presents not only opportunities but also great challenges.Key to these challenges is the ability to identify the appropriate supply chainstrategy for a particular company and individual products. Indeed, the premisethat many of the dot-com companies have been built on that says that in thenew e-economy there is no need for either physical infrastructure or inventoryhas been disastrous. The new supply chain paradigm, Push-Pull strategy, advocatesholding inventory, albeit it pushes the inventory up-stream in the supply chain.

Of course, identifying the right structure of the supply chain, the appropriatelevel of collaboration with suppliers and customers, the effectiveness and thefrequency of dynamic pricing strategies, and the appropriate visibility andplanning tools, is anything but an easy task. Nevertheless, these are the newopportunities provided by the Internet, opportunities that allow companies tobecome industry leaders.

References:https://en.wikipedia.org/wiki/Supply_chain_management

http://www.grahamjones.co.uk/2013/articles/online-business-articles/the-role-of-the-internet-in-supply-chain-management.html

http://mthink.com/article/dramatic-impact-internet-supply-chain-strategies/

http://www.insead.edu/facultyresearch/research/doc.cfm?did=2205