Impact of the Internet on Supply Chain Process - Essay Example

?E-Business Resit work Table of Contents E-Business Resit work Table of Contents 2 Introduction 3 Impact of Internet on Supply Chain Process 3 Impact of Internet on Retail Sector 4 Internet Based B2B Market in Retail Industry 6 Impact of Internet in the Supply Chain Process 8 Barrier for Further Development of E–Business In Retail Sector 9 Conclusion 11 References 12 Bibliography 17 Introduction The internet has major effect on the business scenario in the modern day context and has changed the present business processes. From the product development to review of after sales services, e-business and internet play key part in the flow of data, not only inside individual business but also between businesses of an individual or multiple companies. The internet based system has engrossed special concentration because of the market expansion and impact on business structures internationally (Park & Yun, 2004). The adoption of e–business is not restricted to any particular industry or particular company. From high tech aerospace industry to the farming industry, several companies of various sizes are conducting e–business activities at present. The paper will analyze the impact of internet and other digital technology in the supply chain process of retail industry (Jorge, 2008). The company chosen for retail industry is Topshop, a retail apparel company of the UK. It is a brand of Arcadia Group, a retailing giant of the UK. Topshop had earned its uniqueness through its own marketing strategies, retailing methods and online businesses (Topshop, n.d.). Impact of Internet on Supply Chain Process The impact of internet and digital technology in the market and within the general business performances are significant. In retail industry of the UK, the direct business system through internet had been applied by many companies. With regard to Topshop, it allows customers to choose any product through website and sell products without heavily depending on third–party distributors. The e– business of Topshop also assures convenience and cost cutback (Levi & Et. Al., 2004). A retail company such a Topshop is very successful in developing internet business model that let it to increase revenue radically and capture the market. According to Topshop, it sold almost 30 brace of knickers per minute, 500 brace of legging per hour and 6000 brace of jeans per day in the year 2006. The internet acts as a driver for business alteration (Rushton, 2007). The supply chain process is often viewed as a tactical asset as it has the strength to make a difference and develop sustainable advantage in the competitive economy. Presently, several new business enterprises had appeared to have complete advantage of the e–business e.g. ‘drop shipping’ which had rapidly gained reputation among retailers. In this system, an e–tailor takes order for product and provides the producer or distributor opportunity to send the product to the purchaser. In this system, the e–tailor does not possess any stock. Through the alteration of conventional supply chain process, the ‘drop shipping’ system helps to transfer the inventory management related difficulties to the producers (Feng, 2008). Impact of Internet on Retail Sector The retail industry had reacted lately to the competition from e–business environment and to identify the prospects offered by the internet. In recent times, the scene has changed, as many retail companies such as Topshop had introduced internet shopping to their offerings. Topshop knows the benefit they can have by entering into e-business. TopShop has its own virtual trade store and it services the products by its existing storehouse and supply chain network. High quantity products, whose demand is balanced with the supply on the basis of long-term estimation, are stocked in stores. In case of low quantity products, the storing is done centrally for the purpose of internet marketing. The products which are purchased online have high volatility of demand, thus the centralised stocking helps to minimise the uncertainty by combining demand across geographical regions. It also minimises the stock level (Levi, 2008). The impact of internet on retail sector in the UK is deep. Statistics show that internet sales in retail have increased by 19% in the year 2011. The increase is greatly contributed by apparel companies such as Topshop. The online marking is rising. According to IMRG, British people spend almost ?86 per head through online purchase. In June 2011, the apparel online sales in the UK had increased to 31% (Enright, 2011). In the year 2011, March, the total price of e-retail sales was calculated as almost ?529 million which accounts for 9.8% of total retail sales in the UK and in the first quarter of 2011 the value of online sales was almost ?31.5 billion. Only in June, 2011, the online sales in the UK had increased by 21% (Rigby, 2011). Source: (Office for National Statistics, 2011). Internet Based B2B Market in Retail Industry Internet had impacted the retail apparel industry in the UK and also in the international arena. For example, Topshop employs the internet to reach beyond the existing services and provide purchaser the value added internet purchasing experience. The impact of internet does not rely only on what people viewed on internet but how a retailing company influences the internet to convene both expressed and underlying customer’s preferences as well. The digital technologies reinvent the retail supply chain to provide consumers their desired products in their preferred places (Hammond & Kohler, 2000). An apparel company such as Topshop had gained significant value from applying the perfect blend of B2B marketing. The B2B marketing provides four advantages to retailers which are: Source: (Matthews & Et. Al., 2001). Minimize Supply Chain Expenditure: Through internet and digital technology, Topshop minimises the supply chain expenditure because B2B helps to enhance the design, supply, production, logistics and stock management. Topshop is able to distribute new products in just 14 days after supplier of the company receive orders (Smith, 2007). Minimise Product Price: The internet B2B helps to minimise the product price through improved market competence and simplicity. Internet provides absolute and latest pricing and dealer rating information from which Topshop is able to attain the lowest price supplier. Increase Revenue: Through B2B, retailers increase the revenue by making the supply chain process more flexible i.e. to finish the stock of low demand product and increase the inventory of high demand or high trendy products. It can help in minimising the cost of overall stock. The revenue of Topshop was ?300.6 million in 2006 (Rushton, 2007). Minimise Process Cost: Topshop minimises the process cost by minimising the cost of sales though internet B2B. The internet purchasing of Topshop helps to make the communication cost near about zero and in long-term period, Topshop can also share information through secure portal where information is noticeable to both merchant and vendor (Matthews & Et. Al., 2001). Impact of Internet in the Supply Chain Process This internet era is also termed as ‘Network Era’ which had caused distraction to the usual supply chain process. The advantages facilitated by internet have generated the needs for new supply chain models and practices. The internet and digital technology had broadened the options and functions of supply chain in accomplishing the business objectives. The continuous development of product requires new set of manufacturing process and modification in design of supply chain (Davis, 2009). Push Model of Supply Chain Process Push model was used traditionally in supply chain management. This model is based on parallel pattern where stock is maintained at every step in product flow process to make sure that future demand is fulfilled. In this model, the production is dependent on demand, not on the forecast. Majority of the production takes place based on the past ordering behaviour. It has several disadvantages for apparel companies such as Topshop. For example, in the end of any particular fashion season certain apparel products become obsolete. At times, the excess forecasting of demand can result in losses by investing in the extra stock (Kong & Allan, 2007). The internet had changed the traditional supply chain system. The shifts have occurred because of the disadvantages of push and pull strategy that has made retail apparel industry to apply new supply chain system known as ‘push–pull supply chain’. It is a hybrid strategy, where the early phase of supply chain is ‘based on push system’ and ending phase of supply chain is ‘based on pull system’ (Daspal, 2011). The major constituent of this strategy is to manage the design and restore the supply chain with regard to existing as well as new product so as to develop competitive edge. Internet helps to develop the ‘real time demand’ knowledge which helps an apparel company to manage the association between customer need and supply chain potential (Bidgoli, 2004). Barrier for Further Development of E–Business In Retail Sector The biggest barrier of development of e–business in retail industry is the method of payment. In e–business, the payment is done though credit cards, but majority of people prefer cash transaction than the credit transaction. The reason is that credit card is not ubiquitous and most importantly people are very much concern about the security issues or privacy. Thus, people avoid revealing the ‘credit card information’ to a particular company website for purchasing any product. Unless, a new secure method for payment in e–business appears, the retail apparel industry will face this problem hindering towards further development (Pahladsingh, 2006). Besides the payment problem, there are other difficulties for further development of e–business which are legal problems, lack of after sale service and insufficient knowledge about technology. These are the barriers that a company needs to concentrate before developing e–business structure (Harris & Dennis, 2007). Conclusion A company such as Topshop uses the internet to add value to their brand and products. Internet helps to create more sourcing opportunity. By the use of internet, a company can collect raw materials from anyplace according to company’s profitability. Several emerging digital technologies help to simplify information exchanges and business procedures within a company and among supply chain associates. Through internet, a company can minimise the expenditure and shorten the response time of market (Shah, 2009). In future, organisations will utilise internet immensely and subsequently the scope will increase. References Bidgoli, H., 2004. The Internet Encyclopedia, Volume 3. John Wiley and Sons. Davis, S. M., 2009. The Shift: The Transformation of Today's Marketers Into Tomorrow's Growth Leaders. John Wiley and Sons. Daspal, D., 2011. Push-Pull Supply Chains. Apparel Supply Chain and Its Variants. [Online] Available at: http://www.fibre2fashion.com/industry-article/11/1067/apparel-supply-chain-and-its-variants4.asp [Accessed July 27, 2011]. 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