A supply chain can be defined as a system of people, organizations, information, activities, and resources which are involved in the process of transferring a product or service from supplier to customer. These supply chain activities are involved in the task of transforming the raw materials, natural resources and components into the finished product which is ultimately delivered to the end user.
The term supply chain management can be defined as the broad range of activities which are needed for planning, controlling and executing the flow of a product from acquiring raw materials to distribution of the product to final customer, in a most rationalized and cost- effective way possible (Christopher, 2016). This report is focused on the supply chain management challenges and solutions in the context of e- commerce. At the end of this report, some recommendations have also been made which can be taken into consideration for the purpose of tackling those challenges.
Supply Chain Challenges in the Context of E- Commerce
E- Commerce, also known as electronic commerce, can be regarded as the purchasing and sales of products and services along with the transfer of data and money for the execution of these transactions through the use of internet (Li, Chi, Hao and Yu, 2018).
This term is often utilized for the purpose of referring to the sale of physical products online or it can be described as the commercial transaction which is facilitated through the use of internet. In case of e- commerce, logistics also play a significant role. Logistics management is a part of supply chain management and is a narrow concept. On the other hand, supply chain management is a broad concept. Logistics ensure the management of products and resources at the time when they are storage and transit. In the context of e- commerce ventures, logistics can be regarded as the processes of transporting an inventory to a merchant or shipping order to the customers. A track of the goods is kept by the logistics processes till the point of their delivery.
There are a number of supply chain challenges faced in the case of e- commerce.
Difficulty to Localize in the Global Economy- In the earlier days, the businesses used to target only specific markets. Nowadays, the e- commerce companies possess the capability of quickly expanding into new geographies with the help of their strong supply chain network. E- commerce have assisted the businesses in diminishing the traditional boundaries and allows them to easily reach the customers across the globe. In other words, critical supply chain management challenges are presented by globalization in the context of e- commerce.
For the purpose of reducing the costs across the supply chain, e-commerce businesses often plan to move their manufacturing operations to different countries where there are low taxes, lower labor costs and lower costs of transport for raw materials. Furthermore, the e- commerce businesses are also required to make a significant change in their supply chain in order to adapt their products to various cultures and preferences (Monczka, Handfield, Giunipero and Patterson, 2015).
Due to this, they suffer from the risk of losing control, proper management over inventory and visibility and therefore require the management of diverse structures of data across different geographies in an effective manner. This is where difficulties is faced by the businesses in case of e- commerce supply chain due to the number of economic barriers, taxes, cross border government policies and so on. For example, various suppliers in Europe and North America still utilize EDI (Electronic Data Interchange) as a source of communication. However, with the advancement in technology the suppliers in the emerging markets should skip EDI altogether and switch to modern API (Application Programming Interface) driven approach (Mangan, Lalwani and Lalwani, 2016).
Difficulty in Retention of Customers- In case of the offline businesses, the businessman establishes a face to face interaction with the customers and therefore, has a realistic chance for the creation of an impact on the buying behavior of the customer. However, the case of e- commerce is completely different. In this case, the customer is at the far end of the selling cycle. Therefore, a genuine effort is required for the fulfillment of the customer expectations so that the customer knocks the door again. Also, in case of offline businesses,
the product is instantly available to the customer and usually there are no delays in the delivery of the product. However, the e- commerce businesses take minimum of 2-3 days for delivering the products to the customers due to which there are chances that the customers might switch to some other options. The only solution for this supply chain challenge is making efforts for the differentiation of the brand with the help of unique positioning (Waters and Rinsler, 2014).
For example, the e- commerce platforms suffer from the major issue of timely delivery of the products which depends upon infrastructure, location and unavoidable hassles during transmits which often results in cancellation of the orders by the users due to non- delivery of the products on time. This leads to difficulty in the retention of the customers by these platforms. Therefore, best supply chain models are to be adopted by the e- commerce platforms by conducting R&D.
Fast-changing Markets- the behavior of the customers in the market is affected to a great extent by various personal, social, cultural and psychological factors which are constantly being changes due to globalization and technology. Social media is increasingly putting pressure on the e-commerce businesses for utilizing the different sources of information for the purpose of responding towards the changing preferences in order to stay relevant and interesting (Wisner, Tan and Leong, 2014). This fast changing consumer market is also resulting in different supply chain management challenges:
Firstly, the life cycle of the products is becoming shorter due to rapid changes taking place in the market demand. The e- commerce businesses are under pressure to portray latest trends and innovative products. Therefore, there is a demand for a flexible supply chain which can be utilized for future projects and manufacturing of other products. Agile supply chain is also required for responding well towards the demand and production requirements (Schönsleben, 2016).
For this purpose, the e- commerce companies should ask the suppliers regarding whether they have the needed data for making the planning decisions so that the challenges created by the fast changing markets can be duly addressed. For example, if more time is taken by the suppliers than the stated lead time, higher inventory levels are required and the costly decisions around optimization and network planning also get affected.
Talent- Another challenge faced by the supply chain management of the e- commerce businesses is searching for the right talent for the fulfillment of the objectives of the business. Right talent is the one which is qualified for meeting the requirement of the position. An extensive understanding of the key duties and competencies is required by the supply chain leaders of the e- commerce businesses for the effective regulation of the supply chain management roles. They should also have the ability of efficiently sourcing the particular skill sets and methods for the development of the future leaders. (Fredendall and Hill, 2016)
Quality and Compliance- Aside from creating an influence on the behavior of the customers, social media also highlights the significance of high- quality products. E- Commerce platform offers an opportunity to the customers to openly provide their feedback on the products used by them. This feedback plays a great role in persuading the shopping behavior of the customers. Furthermore, this has also raised the expectations of the customers regarding product quality. The E-commerce businesses face intense pressure for creating high- quality products and this is done by way of taking care of the quality at each and every level of supply chain such as the procurement of raw materials, manufacturing, packaging, logistics and handling of the product to the ultimate customer (Schaltegger and Burritt, 2014).
Product quality and compliance are the two concepts that go hand- in- hand. The e- commerce businesses are also required to ensure the meeting of international and local regulatory standards in terms of manufacturing, packaging, handling and shipping of the products.
The e- commerce businesses are required to go through the safety tests and the quality control tests along with making the preparation of the compliance documents such as licenses, permits and certification which have the ability of overwhelming them and their supply chain management systems. Smart Packaging, IoT and Blockchain are some of the emerging capabilities which are changing the manner of enforcement and measurement of compliances. IoT provides a number of benefits such as value creation, upgradation of the operational processes, risk management and cost reduction (Rong, Hu, Lin, Shi and Guo, 2015).
Personalized Customer Experience- If personalized services is provided to each and every customer, extra life can be added to the supply chain management of e- commerce business. the expectations of each and every customer is different and therefore the business is required to put itself into each customer’s shoes for the purpose of adding value to the e- commerce supply chain. In other words, customer service is still at the center of supply chain management. It means that the right products are required to be delivered to the customers in the right quantity and at the right timing (Yu, Wang, Zhong and Huang, 2017).
Challenges in Relation to Technology Adopted- It becomes difficult for sustaining the e- commerce supply chain if the best- fit technology is not used for the business. There are certain requirements related to the possession of order management system for order processing, delivery tracking system, fully equipped Warehouse Management System and a customer relationship management tool for offering best experience to the customers (Ross, 2016). The non- usage of these tools by the e- commerce businesses can create serious challenges for them. The maintenance of these systems will also assist the business in controlling the costs (Monczka, Handfield, Giunipero and Patterson, 2015).
Cyber Risks- Digitalization has become the trend of every industry these days. The manner in which the business is conducted has been completely transformed by digital technologies. Innovative new systems have emerged which are assisting in the creation of solutions to the problems that have always affected the industry. However, this digitalization in the supply chain has presented a number of risks as well. Therefore, there is a challenge for ensuring that resistant to the cyber- attacks is maintained by the supply chain (Touboulic and Walker, 2015).
Supplier- Partner Relationship Management- the creation, understanding and follow- up of the mutually agreed standards plays an important role in the e- commerce business in order to have a proper understanding of the current opportunities for improvement and performance. Wastage of time and effort is resultant from the use of two different methods for the measurement and communication of performance and results. Therefore, the e- commerce businesses should place their focus on trusting a single system for attaining consistent results and better partner/ supplier relationships (Rushton, Croucher and Baker, 2014).
The e- commerce platforms can apply the resource- based view theory of supply chain which provides explains the competitiveness of the business, decides the boundaries of the firm and develops competitive advantage through the assessment of the resources of the e- commerce business. in other words, the application of this theory will assist the e- commerce businesses in analyzing the fact that the business consists of a number of heterogeneous resources and these resources provides a competitive advantage to the business (Brandon? Jones, Squire, Autry and Petersen, 2014). The dynamics of inter- organizational relationships can also be evaluated with the help of this theory. When the use of resources will be made in a proper manner, the e- commerce businesses will be able to overcome the challenges faced by them in relation to supply chain management (Halldorsson, Kotzab, Mikkola and Skjøtt-Larsen, 2007).
Another theory which can be applied in case of the e- commerce platform is transaction cost economics. It provides that by way of reduction of the supplier base of transport firms and entering into long germ and close cooperation with the key operators, the transaction costs of the firms can be reduced. This transaction cost is associated with the collection of information from various suppliers, costs of negotiation and writing a contract along with the enforcement costs after negotiation.
The role of logistics is crucial in supply chain management (Sadler, 2007). Moreover, in case of e- commerce, the on- time delivery of the products to the customers is ensured by logistics. The transaction costs can be divided into enforcement costs, information costs and bargaining costs. The proper division of the transaction costs can assist the e- commerce platforms in meeting the challenges of supply chain management such as inventory visibility, channel specific processes and speed of delivery (Short, Toffel and Hugill, 2016).
Solutions to the Supply Chain Management Challenges in the Context of E- Commerce
Since a number of challenges are faced by the e- commerce businesses in the supply chain management, there are also a number of possible solutions which can be adopted for the purpose of overcoming these challenges. Following are some of the solutions to supply chain management challenges.
Data Integration and Data Management- Data management and data integration can be of great help for the purpose of overcoming the supply chain management challenges in the context of e- commerce. In other words, at the core of these challenges, there is a requirement for better data integration and data management (Christopher, Harrison and van Hoek, 2016).
E- commerce businesses faces challenges in respect of market expansions, global operations and stricter regulatory and quality standards and therefore are overwhelmed by bulk of information coming from different customers and suppliers in various geographic location which is required to be managed. This includes data and information from different stages of supply chain such as labor agreements, materials (direct and indirect) , freight bills, rental contracts, tax related documents, compliance certificates, etc. Data management and integration can be regarded as the key for resolving the challenges by way of establishing a connection between the supply chain management systems of the e- commerce business and their partners and suppliers.
The e- commerce businesses are in a better position to have control and visibility over the supply chain processes like procuring, manufacturing, warehousing and logistics with the help of data management and integration. Both structured and unstructured data is contained in the raw information received from the partners, suppliers and customers which created difficulties for the e- commerce businesses in the consumption, generation and analysis of the insights from these disjointed pieces of information. The transformation of the raw information into the compatible format is ensured by the data management and integration and is needed by different supply chain management systems for ensuring a seamless flow (Ayers and Odegaard, 2017).
Providing Adequate Data to the Customers- For the purpose of overcoming the challenge of providing personalized services to the customers, the first thing that needs to be taken into consideration is to understand that the needs of different customers are also different. This is the era of customer customization. Therefore, there is a great impact of this shift on the manufacturing of the products along with on the logistics process for the purpose of delivering the products to the ultimate customers (Ellram and Cooper, 2014). E- Commerce is a platform through which the entire information can be easily made available to the customers.
Therefore, the e- commerce businesses should aim at proving as much data as possible to the clients such that they can make an informed decision. Moreover, this platform also allows the businesses to easily communicate the possible changes and shifts in the supply chain such that the issues do not arise at a future date. Therefore, new technologies are required to be adopted by e- commerce businesses in order to excel in customer service (Fernie and Sparks, 2014).
Adoption of Right Technology- Cost control can become effective only when right technology is adopted for the purpose. Technology can be adopted as the greatest weapon in the case of supply chain. The e- commerce businesses can make investment in platforms like Yard Management System (YMS) and Transportation Management System (TMS) with the help of which the professionals can have the visibility required by them for having a look at the different parts of the supply chain (Mukasa, Ali, Farron and Van de Weerdt, 2017).
Furthermore, along with the use of right technology, cost control can also be made possible through business intelligence. Business intelligence is not only about data analytics and focuses on using the information for the purpose of making the soundest possible judgments. Improvement in cost control can be brought only with the help of continuous monitoring of the plans and making adjustments as per the requirements (Jacobs, Chase and Lummus, 2014).
New Systems That Provide Cyber Security- Cyber- attacks is also a challenge faced by the supply chain management of e-commerce businesses. Therefore, they should adopt new systems which can provide proper security. Supply chain can face threats from anywhere such as from an attachment, an email or from a public Wi- Fi. Therefore, there is a necessity to understand the different kinds of cyber risks such that adequate measures can be taken for the purpose of keeping the information private (Wang, Wallace, Shen and Choi, 2015).
Therefore, it can be concluded that a supply chain is a coordination of people, organizations, information, activities, and resources which are involved in the process of transferring a product or service from supplier to customer. E- Commerce, also known as electronic commerce, can be regarded as the purchasing and sales of products and services along with the transfer of data and money for the execution of these transactions through the use of internet. This report focused on the supply chain management challenges and solutions in the context of e- commerce.
The challenges faced by e- commerce businesses are related to globalization, difficulty in the retention of the customers, fast changing markets, right talent, quality and compliance, personalized customer service, technology related challenges, and cyber risks. Moreover, the solutions to these challenges have also been suggested in this report, which are data management and integration, providing proper information and data to the customers, adoption of right technology, and adoption of systems that provide cyber security. Furthermore, some recommendations should also be taken into consideration by the e- commerce businesses for the purpose of overcoming these challenges.
Following recommendations should be taken into consideration by the e- commerce businesses for the purpose of overcoming the supply chain management challenges.
Appointment of Professionals or Experts- E- commerce platform is capable of attracting a number of customers and therefore, are required to resolve the supply chain challenges faced by them on timely basis. A number of advancements have taken place in the digital technology and therefore, e-commerce businesses should also increasingly focus on the supply chain risk and globalization.
The appointment of the professionals can be made who are specialized in the creation of right impact regarding the globalization plans. These professionals can also assist the e- commerce business with the big data insights and can easily predict the trends as well. Logistics professionals can further assist in the analysis of the large amount of data which is produced across the supply chain of e- commerce and then bringing quantitative results which can assist the business in the process of decision making (Kache and Seuring, 2017).
Supply Chain Training Program- The optimization of the supply chain becomes necessary for taking the advantage of the emerging opportunities which will further assist the e- commerce business in expanding into a new market. The supply chain managers of the e- commerce business should benefit from the supply chain training program which will help them in learning the necessary techniques for establishing the operations in the interconnected world. Such programs will prove to be cost effective and will help in spreading the knowledge across various supply partners and regional offices (Hugos, 2018).
Understanding the Importance of Globalization- The e- commerce businesses need to be aware regarding the importance of globalization in the supply chain management along with the interconnectedness brought by it. This supply chain has a number of wholesale distributors and their interconnectedness requires a solution which is flexible enough for adaption to any web of business irrespective of its depth and breadth (Chaffey, 2015).
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