How can e-commerce be used for the restructuring of supply chain?

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written 8.5 years ago by

teamques10 ★ 68k

Supply Chain Management can be viewed as a continuum between internal control of supply chain elements and external control of supply chain elements through outsourcing.
The two end elements of continuum are usually referred to as ‘vertical integration’ and ‘virtual integration’.
The intermediate situation is sometimes referred to as ‘vertical disintegration’ or ‘supply chain disaggregation’.
This continuum is illustrated in the following figure:

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There was a general trend during the second half of twentieth century from vertical integration through vertical disintegration to vertical integration.
There has been a gradual move to sourcing more and more components to third parties.
Marketing activities such as website development, brochure fulfilment and advertising campaigns are now largely outsourced to marketing agencies.
Hayes and Wheelright provide a useful framework that summarizes choices for an organization’s vertical integration strategy. The three main decisions are:

a. The direction of any expansion: Should the company aim to direct ownership at the upstream or downstream supply chain? This is sometimes referred to as an offensive strategic move since enables the company to increase its power with respect to customers.

b. The extent of vertical integration: How far should the company take downstream or upstream vertical integration? Originally car manufacturers had a high degree of vertical integration, but more recently they have moved from a wide process span to a narrow process span.

c. The balance among the vertically integrated stages: To what extent does each stage of the supply chain focus on supporting the immediate supply chain? For example, if a supplier to a motor manufacturer also produced components for other industries this would be an unbalanced situation.
Combining these concepts, we can refer to the B2B Company. If it owned the majority of the upstream and downstream elements of the supply chain and each element was focused on supporting the activities of The B2B Company, its strategies would b to follow upstream and downstream directions of vertical integration with a wide process span and a high degree of balance.
Alternatively, if the strategy were changed to focus on core competencies it could be said to have a narrow process span.
Electronic commerce support for these strategies:

a. Through increasing the flow of information between the members of supply chain, a strategy of narrow process span can be supported by e-commerce.

b. However this relies on all members of the supply chain being e-enabled.

c. If only immediately upstream suppliers have adopted e-commerce then the efficiency of supply chain as a whole will not be greatly increased.

d. Companies undertaking offensive or defensive strategies will be in a better position to stipulate adoption of e-commerce, and so increase the overall efficiency of the supply chain.

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