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Chapter 6 Supply chain management 331

Introduction

In the end business all comes down to supply chain vs supply chain.
(Robert Rodin, then CEO of Marshall Industries, one of the largest global distributors of
electronic components, 1999)
Supply chain management is essentially the optimization of material flows and associated
information flows involved with an organization’s operations. To manage these material and
information flows e-business applications are today essential to bring the benefits illustrated
in Box 6.1. Supply chain management is presented as the premier application of e-business
in Part 2 of this book since it is a unifying concept that incorporates both e-procurement
(Chapter 7) and sell-side e-commerce (Chapters 8 and 9). By applying information systems,
companies can enhance or radically improve many aspects of the supply chain. In the con-
text of Figure 1.1, which was used to introduce the concept of e-business, supply chain
management can be enhanced through buy-side e-commerce, internal communications,
relationships with partners and sell-side e-commerce. E-business technologies enable infor-
mation flows to be redefined to facilitate the sharing of information between partners, often
at lower costs than were previously possible.
Supply chain management capabilities are best known for their importance in delivering
profitability. For example AMR (2008) reported that Nike, a company best known for its
marketing, used improvements to its supply chain to increase operating margins of between
10 and 15% in each of the last four years. But for Nike and other companies such as Nokia
which constantly innovate to renew products, selecting the right technology is important to
‘orchestrate the constant collaboration between supply, demand, and product management
groups that brings profitable new products to market’. The importance of supply chain man-
agement capabilities on customer satisfaction and so repeat business for an e-business is
highlighted by Mini Case Study 6.1.

Mini Case Study 6.1 Premier Farnell uses its global supply chain system to improve
customer satisfaction

Constant investment in technology is vital for electronics component distributor Premier Farnell, a growing

business with a mission to deliver industry-leading customer service.
The FTSE-250 company, which supplies electronic components, in North America, Europe and Asia,
has a demanding group of valuable customers who need to know swiftly and accurately when their order
will be shipped.
Most of them are design engineers building prototypes of high-tech goods, working for manufacturers
of a wide range of equipment.
‘For our customers, service is paramount’, explains Laurence Bain, chief operating officer. ‘They are
looking for a product and they are looking for it now.
‘So we had to address the completeness of our product range, our stock levels, and ensure next-day
delivery.’ As a result, an efficient supply chain operation is essential.
Premier Farnell sets a tough target: 99.9 per cent of shipments must arrive the next day. Shipments also
need to be complete.
Add to this a move into China – Premier Farnell now offers next-day delivery to 90 cities for items in its
Chinese distribution centre – and the company would seem a prime candidate for investing in a new supply
chain management or ERP system.
This option was considered carefully, says Mr Bain. The company, however, decided to keep its existing
technology. This allowed it to focus its resources on improving connections between the supply chain
systems in North America, Europe and Asia, and critically, improving business processes.