The System of Electronic Business - Essay Example

"E-business- the use of Internet-based computing and communications to execute both front-end and back-end business processes - has emerged as a key enabler to drive supply chain integration." Abstract We take the title of this paper as the starting point to critically analyze and evaluate key factors in "e-supply chain strategies" as they apply to the specific case of UPS (United Parcel Service). By mapping what UPS has done in this domain to different authors' interpretations of what must be considered for e-logistic strategies which emphasize e-fulfillment, e-procurement and e-transport, we determine what UPS has accomplished according to existing models. By comparing other information presented in the literature on this subject, we also indicate what UPS has yet to accomplish. We also examine not only how UPS has applied this notions to its own organization, but how it also offers the same capability as a paying service to its customers. Introduction Supply chain management has been defined as the integration of key business processes, from raw-material suppliers through end users, that provide products, services, and information that add value for customers and other stakeholders (Lambert 1996). Whereas supply chain management is relatively straightforward to define, e-logistics inspires varying definitions. E-logistics can be defined to be the mechanism of automating logistics processes and providing an integrated, end-to-end fulfillment and supply chain management services to the players of logistics processes. Those logistics processes that are automated by e-logistics provide supply chain visibility and can be part of existing e-Commerce or Workflow systems in an enterprise (Zhang 2008). On the other hand, in a commercial manifestation, UPS presents its e-Logistics service as the hosting of a virtual logistics department for other companies that then present this capability as their own, but leave UPS to run and manage it (Levy 2008). These viewpoints can be considered as two halves making a whole in the light of the case-study that we have selected: UPS, the company under consideration applies e-logistics in Zhang's sense to its own internal operation and offers e-logistics as in Levy's description to its business customers. With regard to these definitions, e-logistics is a part of supply chain management in general, but not an obligatory part. Supply chain management may or may not include such e-enablement. However in this paper our goal is to investigate the situation when supply chain management does use Internet either wholly or partially and in particular what advantages or disadvantages are conferred by e-logistics. If the supply chain business process relating to e-logistics is most naturally that of order fulfillment, other processes that complete the picture are customer relationship management, customer service management and demand management. These processes involve all of the major departments of a typical company which are those of quality, logistics, marketing and sales, production, R&D and finance (National Research Council 2000). Literature review A common theme in works on supply chain management is the competitive advantage to be gained from a fully integrated supply chain. Integrating into a single supply chain is hailed as the deciding factor for companies that will now succeed or fail (Handfield & Nicolas 1999). In the continuing battle for many companies to provides customer service that is cheaper, faster and better, there is a growing understanding of the need to form supply chain alliances with solid partners above and below in the chain, as few companies have the resources to do it all themselves. It is a natural step to then link the increase in global competitiveness to an increase of a company's market share and from there to arrive at a conclusion of increased shareholder value (Coyle 2003). The requirement for rapid and sustainable development within supply chains then becomes one of the major preoccupations of businesses. Reaping the benefits from the value stream that should be inherent in any correctly constructed supply chain goes hand in hand with the notion of competitive advantage. The company is no longer a stand alone entity, but rather part of a linked collection of businesses with a clear "upstream" and "downstream". To improve a supply chain, the concept of value stream management is used to understand and implement the creation of absolute value (Hines 2000). It may also be construed as a variant of lean thinking applied to the supply chain that also indicates how a company and its executives should start thinking strategically about the changes to be made. In addition, companies will need to take the supply chain models that exist for separate processes such as new product development, materials purchasing, transformation and customer delivery to consider models that deal with the integration across several organizations of such information and materials (Handfield & Nicholas 1999) Within the overall area of integrated supply chain performance, logistics performance can be singled out for particular attention (Bowersox & Closs 1996). It can be modeled as having three components which can be measured in order to compare with supply chain management performance and corporate performance as a whole. The definition of useful standards by which cost management and tracking may be measured is the first item and corresponds to a measure of logistics productivity. Standards by which to measure the performance of the logistics department to satisfy customer service objectives then form the second component of measurement (logistics service performance). Finally, the third component consists of measurement applications that indicate in detail what needs to be improved across the board (Ross 2003). Other topics discussed with respect to logistics management in general include how to integrate strategic alliances, materials and inventory management and the holistic viewpoint of physical distribution, manufacturing support and procurement (Bowersox & Closs 1996). As logistics is part of supply chain management, in the same way, e-logistics is a subset of e-Supply Chain Management. A further definition of e-logistics can be given as the transfer of goods and services using Internet communications technologies such as electronic data interchange, email and the web (Gunasekaran & Ngai 2003). The influence of Internet becomes apparent in different appreciations of value chains, including models of primary activities that a company is required to do to stay in existence and secondary activities which fulfill the role of controlling and developing the business and which are transversally applicable to the primary activities (Coyle 2003). More and more these aspects of e-logistics practices are being studied to appreciate the impact of Internet on business performance and growth. The shift of power from the seller to the buyer is also helping to mold buyers' expectations of e-logistics. Buyers are increasingly intolerant of unexpected surprises in this domain, whether it concerns partial shipments, substandard reverse logistics (product returns) or unexpected stock-outs (Bayles 2001). It is the application of e-logistics technologies that has allowed supply chain management to evolve beyond its original status as a productivity and cost optimization tool to become a strategic entity in its own right with the power to put together new and original value propositions for customers by the alliance programs already mentioned which make full use of Internet and its faculty for collaborative programs (Ross 2003). E-business is however sometimes confused with e-commerce. A definition for each has been given: e-commerce is a driving force; e-business is the platform that responds to this driving force where conventional IT configurations give way to integrated application structures including Supply Chain Management, Enterprise Resource Management, Customer Relationship Management and others (Kalakota & Robinson 2001). Many Internet "pure play" companies as well as "clicks and mortar" hybrid corporations have come to the realization that facilitating access to information, communication and the delivery of their products or services make strong contributions to a company's competitiveness in the market place. Internal benefits realized from projects to increase effectiveness by improved planning and operation of supply chains, shows how e-SCM can go beyond the simple application of Internet technologies and boost productivity and performance. In this context, US logistics costs (represented as a percentage of the GDP), went down to 9.9% in 1999 compared to a figure of 10.6% from in 1990 (Unescap 2008) Companies may accomplish supply chain integration internally or externally. For example, companies may buy or otherwise acquire entities so as to have complete ownership of the supply chain from one end to the other. In this case, intranet computing and communications may be a more appropriate term. On the other hand, companies may elect to subcontract parts of their supply chain to external partners, with the possible policy of changing or replacing partners according to requirements, performance or other considerations. Whether logistics, SCM or the company as a whole, targeted strategic management of the companies operations resources is the strategic focal point now. Operations is more and more being identified as the unifying power to link the highly variable requirements of the market together with company's resources which may be developing under the influence of Internet (Kalakota & Robinson 2001). In IT and data communications terms, the supply chain business processes require: secure and convenient access for users; a user interface that allows productive access, interrogation and updating of information; back-end applications to process data; and scalability. The advantages of using Internet and Web technologies for supply chain management and e-logistics in particular are centered on the communications aspects. In particular, Internet offers universally accessible points of access, either by physical or wireless connection, a standardized browser interface, relatively good security protocols and the introduction of new technologies such as AJAX and FLEX to enhance the user interface in terms of user-friendliness and productivity. Internet computing as such is the application of these front-end technologies and user interfaces to any back-end application whether it is based on similar open standards to Internet, or on legacy technology that is proprietary to a particular IT vendor. E-business becomes the key enabler to drive supply chain management because of its relative ease of deployment and because of its capability to include SCM alliance partners. The ease of deployment comes from the existence of computing platforms such as Microsoft Windows, browsers such as Internet Explorer and Firefox, and the prevalence of user interface enhancing technology such as Adobe's Flash Player. IT departments have a standardized environment that applies to 90% of all users' computers, making application or application interface design easier, faster and more robust. Alternatives to e-business as defined by Internet computing and communications are given by varying the communications media or the user interface. As we explained above, varying the back-end computing process is a separate issue; as long as there is an interface that returns results in response to user requests and commands, the nature of the back-end process is relatively independent of aspects of Internet. The communications media could become that of a private network or a virtual private network. For certain specialized SCM operations, for example, those requiring very high security, such private networks might be the preferred choice, but compared to Internet, they lack the enabling features of ubiquity, flexibility and low cost. Similarly, user interfaces might be modified to give the "command line interface" sometimes preferred by technical users for its relative power and simplicity. However this would be at the expense of the user-friendliness which encourages the use of such systems and without which an SCM or logistics system loses much of its appeal for the employees who must use it to accomplish their work for the company (Dresner 2001). Case Study - UPS UPS is a global corporation that transports goods, information, and funds between companies and people. Its operations ensure multi-modal (air and land) delivery and it offers services from its customer shipping centers and over Internet at www.ups.com. On average over 13 million parcels are delivered each day (UPS 2008). Having started in 1907 in the U.S. and growing to provide delivery and associated services to businesses and consumers worldwide, the advent of Internet and e-commerce alerted the company to possible changes to be made to its business model. In 1994, it began work to target the enabling of e-commerce and to form new business units that would exploit these possibilities (Decker 2008). We have selected UPS as a case study concerning supply chain management and e-logistics for two reasons. It corresponds well to an example of implementation and development in these two areas; it also has the extra dimension of offering these services to its own customers. UPS's goal has been to maximize return both internally and externally on the solid infrastructure and competence that it has built up. The actions undertaken by UPS can be mapped onto a number of concepts or observations from authors in the field, and in particular the redefinition of its core business. UPS in fact redefined its business from being a premier deliverer of packages to being a global enabler of commerce, the new business vision being significantly more challenging that the old one. Further more, UPS also identified the concept of mass-customization as being of major potential. Mass-customization is the automation of a process to treat every individual customer as though he or she were unique. It combines the competitive advantage of personalized service with the efficiency of computerized operations (Slack 2001). UPS accomplished its business transformation by starting with its fundamental assets and skills and conducting an analysis of its operations and value chain. The analysis included the various components of the company from the physical fleets of vehicles and aircraft though the call centers to their data communications network. By breaking down the information and rebuilding it to find new possibilities thanks to Internet, the result was the creation of a number of new subsidiaries to take advantage of the significant changes in technology and connectivity that the Web brought (Levy 2008). UPS had also identified a power shift where buyers and customers were taking over from sellers and vendors. As part of the plan to address this new configuration, UPS also increased the amount of data that it collected from each individual delivery. This information is now sifted and sorted by different applications to give precisions on revenue, profitability and customer trends. There was also a shift in the way that UPS related to its customers which was enabled by a combination of wireless and internet technology. Prior to this, UPS drivers were typically more concerned about meeting productivity goals than anything else. The new way of working, made possible by the productivity enhancing technology at the point of delivery is to focus on customer satisfaction. It is an reminder of the "social" aspect of the Web 2.0 and how this translates across to "e-Business 2.0" (Kalakota & Robinson 2001). Perhaps just as important is the way that these moves also had positive repercussions for UPS customers as well. UPS occupies a special position in the overall supply chain of numerous companies. It acts as the liaison between the physical and the electronic world. It is in this sense that it offers a range of e-logistics possibilities to its partners and patrons. In the first place there is the E-Logistics service itself. This is the virtualization of the logistics function where UPS customers offer a full logistics service to their market, and the service is in fact entirely run by UPS behind the scenes. In addition to this, UPS offers APIs (Application Programming Interfaces) so that logistics partners can superpose their own applications that exploit the vast databanks that UPS adds to daily in terms of shipment information. This move goes some way to alleviate a problem of consistent user interfaces in e-logistics and e-SCM (e-Supply Chain Management) (Dresner 2001). The results are also to be seen in terms of new business models, whether from the reconfiguration of existing elements or the introduction of new ones. Because of a swing to tracking data coming in over the web instead of via its call centers, UPS has now integrated what used to be capacity for internal requirements into solutions for external customers, like Nike. UPS has contributed to the new model of B2B and B2C web commerce. It uses the data that it collects on each delivery to also feed information to the online companies using UPS's services, and they then use this to refine their own business models. In an operational sense, UPS has also moved from an organization defined by function to one that is defined by process, including the processes of customer relationship-management, customer information-management and product management. The alignment mirrors the processes defined earlier (National Research Council 2000). We can compare these aspects with those identified by Lee and Whang (2001). In the UPS case, we see the use of Internet for the visibility over a widespread network of partners and the use of data from Internet for quick response to changing situations. We also find the four critical dimensions listed by Lee and Whang within the UPS model: integration of information, synchronization of planning, coordination of workflow and new business models. The back end operations in the supply chain integration of UPS have been modified and new product offerings have been created. The productivity and the efficiency extends across procurement, distribution, post-delivery service and marketing. In this sense, UPS processes and changes map onto and cover the principles identified. So what in that case has UPS yet to do The answers may well lie in the ecological aspects of logistics and, a fortiori, in e-logistics. E-logistics should bring concomitant benefits of less paper being used and less CO2 being generated (Sarkis 2006). These benefits come about from the intrinsic nature of e-logistics: transactions are handled electronically from computer screen to back-end database and paper is, in theory, a thing of the past. However, with UPS investing over one billion dollars per year on IT, the question mark is on the amount of hardware that is bought and the amount that is thrown out (Levy 2008). E-logistics also have the fundamental capability to propose "greening" of transport and delivery services. This concerns possible choices presented to the end-user about how physical items are to be shipped and whether transport modes that generate more or less CO2 are to be selected. Already used in the travel industry, UPS could at the same time score points with its clients, contribute to a better environment and increase transport efficiency in terms of energy per unit weight transported. Conclusion: Internet stands out as a key enabler because of the ease, power and accessibility of its communications. The computing processes while possibly using internet related technologies can and often do remain independent of internet technology. What is important is that the different applications present an internet interface to enable authorized users to access and make use of the applications. More than just a financial argument, Internet also opens up new vistas of possibilities. Indeed, one could justify the use of Internet at cost per byte transmitted parity with, or even more expensive than, other communications media, because of its ubiquity and ease of use and deployment. Companies across the globe have understood this and have implemented Internet modules of supply chain management of every possible scale, small or large. Many of them have also exploited the further possibilities of Internet to develop new business models which bring them competitive advantage. Internet will continue to be a key enabler of supply chain management. Only considerations of high security or utterly fail-safe operation will lead organizations to consider other technologies. Recommendations: Companies using Internet to enable supply chain management still need to enhance the user experience. Today, any complex transaction (more than one variable to be adjusted on the computer screen) is too often represented by a user experience lacking in "usability" (repeated screen refreshes, multiple stages before arriving at an end result. Companies can also benefit from the possibilities of feedback from the people who really matter in the chain, meaning the people who buy the companies products. Smart surveying techniques and collection of information could be processed by back-end applications to generate change recommendations in real time, possibly even with automatic implementation. With the arrival of software as a service, companies will be able to experiment even further with new business models. Instead of digesting the lead time to put in place different systems themselves, companies can use "on demand" software services (Dresner, 2001). References Bayles, D.L. 2001, E-commerce logistics and fulfillment: delivering the goods, Prentice-Hall International. Bowersox, D.J. & Closs, D.J. 1996, Logistics Management, McGraw Hill Coyle J., Bardi, E.J. & Langley, C.J. 2003, The Management of Business Logistics: A Supply Chain Perspective, 7th edition, South Western, Thomson Learning. Decker, K., Engleman, S., Petrucci, T., Robinson, S. 2008, United Parcel Service and the Management of Change, http://cobweb2.louisville.edu/faculty/regbruce/bruce//cases/ups/htm/ups.htm, Retrieved 11th April, 2008 Dresner, M. 2001, Internet Technology Use Across the Food Industry Supply Chain, http://www.allbusiness.com/management/business-support-services/816896-1.html, Retrieved April 11th, 2008. Gunasekaran, A., Ngai, E.W.T. 2003, Research paper, International Journal of Physical Distribution & Logistics Management; Volume 33, Issue 9. Handfield, R.B. & Nicholas, E.L. 1999, Introduction to Supply Chain Management, Prentice Hall Hines, P. 2000, Value Stream Management, Pearson/Financial Times Kalakota, R. & Robinson, M. 2001, e-Business 2.0 Roadmap for Success, Addison Wesley Lambert, D., Emmelhainz, M.A., & Gardner, J.T. 1996, Developing and Implementing Supply Chain Partnerships, The International Journal of Logistics Management 7, no 2 1996 pp.1-17. Lee, H.L. & Whang, S. 2001, E-Business and Supply Chain Integration, http://www.stanford.edu/group/scforum/Welcome/White%20Papers/EB_SCI.pdf, Retrieved April 11th, 2008 Levy, M. 2008, Case Study: United Parcel Service, Inc. (UPS), http://www.peachpit.com/articles/article.aspxp=20881, Retrieved April 11th 2008. 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