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312 Chapter 11 • Supply Chain Management

effort. It is also through the physical distribution process that the time and space of customer
service become an integral part of marketing; therefore, it links a marketing channel with its
customers (e.g., links manufacturers, wholesalers, retailers).

CUSTOMER SERVICE MANAGEMENT PROCESS Customer service provides the source of
customer information. It also provides the customer with real-time information on promising
dates and product availability through interfaces with the company’s production and distribution
operations. In retail industry, product return is a big issue, and it contributes to the name “closed
loop” supply chain because some of the products will return to the origin of the manufacturing
facility due to imperfection or some other issues.

FORECASTING Some literature includes forecasting into the demand management process.
It is a crucial part for supply chain management. Forecasting seeks to predict levels of weekly or
monthly product activity over a time horizon. The statistical methods proven to make such
predictions have been used by manufacturers and distributors since the advent of MRP II
systems. In addition to increased availability, the nature of forecasting is also changing. Forecast
systems are used to increase agility. Companies are able to consolidate demands from multiple
business units, reduce forecasting cycle times from weeks to days, and simultaneously increase
forecasting accuracy, thereby eliminating excess inventory and ensuring that material is on hand
for scheduled production. A failure to consolidate the forecasting information along the supply
chain will result in bullwhip effect. The bullwhip effect is an observed phenomenon in forecast-
driven distribution channels. Because forecast errors are a given, companies often carry an
inventory buffer called “safety stock.” Moving up the supply chain from end consumer to raw
materials supplier, each supply chain participant has greater observed variation in demand and
thus greater need for safety stock. In periods of rising demand, downstream participants will
increase their orders. In periods of falling demand, orders will fall or stop in order to reduce
inventory. The effect is that variations are amplified the farther you get from the end consumer.

E-BUSINESS AND SUPPLY CHAIN MANAGEMENT
Supply chain management is poised for a rapid evolution. Brick-and-mortar manufacturers are
increasingly adding e-commerce capabilities and, as a result, facing new challenges (e.g., indi-
vidual delivery of products). The biggest challenge ahead may be to overcome the notion that a
single organization can achieve best-in-class SCM. The truth is that organizations must work
together to help each other succeed. Everyone in the supply chain is a strategic link. Strong links
make strong supply chains; weak links hurt everybody, from the raw material producer to the end
customer, who evaluates how well a supply chain is performing every time he or she makes a
purchase.
A Web-enabled supply chain management (e-SCM) solution is the digital nerve center of the
entire business. An effective e-SCM solution can save companies millions of dollars in costs.
e-SCM is the optimal combination of technology and business processes that optimizes delivery of
goods, services, and information from the supplier to the consumer in an organized and efficient
way. A complete supply chain management solution also includes customers, service providers,
and partners. The creation of an integrated e-supply chain solution will be a major key or barrier to
entry and would provide a critical edge over competitors as it speeds time to market, improves
order fulfillment, improves customer service and satisfaction, improves order management,
improves decision making, improves forecasting and demand planning, improves warehouse and