Processes Integration and e-business in Supply Chain Management

Transcription

1 Processes Integration and e-business in Supply Chain Management Beatriz Minguela-Rata, Daniel Arias-Aranda and Marco Opazo-Basáez Abstract Turbulence and competitiveness define the current global business environment. Firms need to develop high quality products and services quickly and at lower costs than competitors by improving their internal operations as well as focusing on core activities while outsourcing non-core activities. This increasing competition forces firms to integrate their suppliers and customers into the overall value chain processes. To achieve this integration, sharing relevant information among components of the supply chain becomes crucial. Moreover, in these situations, information and communications technologies play a central role by allowing information sharing among suppliers and customers through facilitating information availability and reducing the bullwhip effect and improving quality. The purpose of this paper is threefold. Firstly, it intends to provide an extensive theoretical framework on Supply Chain Management process integration. Secondly, e-business is presented as a SCM integration processes enhancer, and thirdly, some practical implications for managers are provided. Keywords Supply chain integration e-scm framework e-procurement e-collaboration e-fulfillment B. Minguela-Rata (&) Facultad de Ciencias Económicas y Empresariales, Universidad Complutense de Madrid, Madrid, Spain minguela@ccee.ucm.es D. Arias-Aranda M. Opazo-Basáez Facultad de Ciencias Económicas y Empresariales, Universidad de Granada, Granada, Spain darias@ugr.es M. Opazo-Basáez marco.opazob@gmail.com F. J. Martínez-López (ed.), Handbook of Strategic e-business Management, Progress in IS, DOI: / _10, Ó Springer-Verlag Berlin Heidelberg

2 218 B. Minguela-Rata et al. 1 Introduction Nowadays, firms operate in a global business environment which is characterized by an increasing turbulence and competitiveness. This forces companies to develop high quality products that meet consumers needs, quickly and at lower costs than competitors. Therefore, on the one hand, this increasing competition has forced firms to improve their internal operations. Another tendency for businesses is to concentrate their efforts on their core activities and outsource non-core activities. This phenomenon causes that variables related to quality, delivery and price of products, depend not only on the capabilities of a company, but also largely on the provider network it interacts with (Modi and Mabert 2007). On the other hand, this increasing competition has driven firms to focus on integrating their suppliers and customers into the overall value chain processes (Klein 2007; Prajogo and Olhager 2012). Therefore, the integration among companies of supply chain is a key factor for competitive position, especially when the environment is characterized by uncertainty and dynamism (Youssef 1992; Handfiel and Nichols 1999; Frohlich and Westbrook 2001; Sanders 2007, 2012). This integration involves upstream and downstream relationships. In this sense, Hammer (2001) argues that successful companies are those that apply this approach in their business activities by working closely with partners to design and manage processes that go beyond their organizational boundaries. Harland et al. (2007) state that in the current environment, in many cases, competition is not a matter of company competitiveness, but a matter of supply chain competitiveness. To achieve this integration, sharing relevant information among components of the supply chain becomes crucial. Besides, in these situations information and communications technologies in general, and the Internet and the Web in particular, play a central role by allowing information sharing among suppliers and customers while facilitating information availability by reducing the bullwhip effect and improving quality. Thus, integration is a both sided advantage (suppliercustomer) in a way that suppliers can organize detailed production and customers are able to respond in time to market needs, reducing uncertainty, inventory levels and costs (Lee and Whang 1998). Moreover, nowadays many companies have integrated information and communication technologies (ICT) in their supply chain, so companies facilitate the alignment of forecasting and scheduling of operations between partners of supply chain, allowing better inter-firms coordination (Prajogo and Olhager 2012). Concepts like e-commerce, e-procurement and e-collaboration are now part of a dynamic supply chain in which the Internet turns into a natural platform. In fact, the impact of the Internet on supply chain Management allows sharing a large amount of information along the Supply Chain in real time, including operations, logistics and strategic planning data. This circumstance provides firms with more visibility, improves production planning, inventory management, and distribution (Devaraj et al. 2007; Sanders 2007). The purpose of this paper is threefold. Firstly, it intends to provide an extensive theoretical framework on Supply Chain Management process integration. Secondly,

3 Processes Integration and e-business in Supply Chain Management 219 e-business is presented as a supply chain management integration processes enhancer, and thirdly, some practical implications for managers are provided. The paper is organized as follows: in Sect. 2, eight supply chain management key processes are analyzed by identifying their respective sub-processes. In addition, five business processes and their respective characteristics are depicted. In Sect. 3, the supply chain integration process is described along with the types of information shared among supply chain partners. In this chapter we also attempt to describe the bullwhip effect; its sources, causes, characteristics and the importance to minimize its impact on ICTs. In the Sect. 4 we introduce e-supply Chain Management; its main activities, concepts, applications and processes involved, through internet and IT use among partners. Finally in Sect. 5 we present the main conclusions, suggestions for further analysis, managerial implications, and a brief discussion of the practical implications. 2 Supply Chain Management: Concept and Processes The scope of Supply Chain Management (SCM) has created a certain discussion in the literature (Croom 2005). As a result, Oliver and Webber (1992) considered it as just the mere planning and control of the total materials flow while Ellram (1991) considered SCM as an alternative form to vertical integration. Other perspectives as of Ellram and Cooper (1993) consider SCM as the management of relationships both between corporate functions and across companies and define SCM as the management of a network of organizations or entities (Christopher 1998; Lee and Ng 1997). More recent literature such as Council of Logistics Management (2003) argues that SCM is implemented by integrating corporate functions using business processes within and across companies; so, SCM includes more than just the activities of any individual corporate function (Lambert et al. 2005). In this line of reasoning, Croom (2005) proposed SCM to focus on some of the core processes and functions related to the management of supply chains (for example, fulfillment, operations planning and procurement). Currently, SCM is considered a dynamic and ever-changing process that requires the coordination of all activities among partners of the supply chain in order to satisfy the final customer and maximize total supply chain profitability (Sanders 2012). In the last decades, academics have tried to describe the key business processes of supply chain management. The Global Supply Chain Forum (Cooper et al. 1997) defined supply chain management as the integration of key business processes form end user through original suppliers that provides products, services, and information that add value for customers and other stakeholders (Lambert et al. 1998:1). Its implementation requires three main elements: the supply chain network structure, the supply chain business processes, and the management components. Lambert et al. (2005) argue that supply chain network structure is comprised of member firms linked to key processes. In this framework, eight supply chain management processes are identified: customer relationship

4 220 B. Minguela-Rata et al. management, customer service management, demand management, order fulfillment, manufacturing flow management, supplier relationship management, product development and commercialization, and returns management. Previously, the Supply Chain Council developed the Supply-Chain Operations References framework (SCOR model) in Initially, this framework included four business processes. Later, in 2001 (Supply-Chain Council 2001), a fifth process was added resulting into plan, source, make, deliver, and return (Lambert et al. 2005). Srivastava et al. (1999) suggested an alternative framework incorporating three business processes: customer relationship management, product development management, and supply chain management. Another framework was suggested by Bowersox et al. (1999) based on three contexts: operational, planning and control, and behavioral (Lambert et al. 2005). On the basis of this latter framework, Melnyk et al. (2000) included eight business processes: plan, acquire, make, deliver, product design/redesign, capacity management, process design/redesign, and measurement (four of eight business process were already included in the SCOR model). Supply chain management frameworks focused on the cross-functional interaction within a firm and on the relationships developed with other supply chain members were introduced in later research (see Mentzer 2001; Mentzer et al. 2001; Mentzer 2004). Therefore, SCM is referred as the integration of all activities that add value to customers, from product design to delivery, taking into account the existence of three flows between the initial suppliers and final customers: a flow of goods, a flow of information, and a flow of money (Fisher 1997; Lee and Whang 1998; Huang et al. 2002; Pagell 2004; Power 2005; Nurmilaakso 2008; Prajoso and Olhager 2012; Sanders 2012, among others). For Simchi-Levi et al. (2000:1) SCM is a set of approaches utilized to effectively integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize system-wide cost while satisfying service level requirements. Nowadays, managing relationships with customers, suppliers and the rest of partners of the supply chain is a challenge and an element of competitive differentiation (Arias-Aranda et al. 2010). To achieve this, a greater coordination and synchronization is necessary through information process sharing based on cooperation among firms, where information and communications technologies (ICT) on various value-adding activities along the supply chain have an essential role (Naylor et al. 1999; Gunasekaran and Ngai 2004; Bagchi et al. 2005; Wagner and Sweeney 2010, among others). In this sense, Sanders (2012) distinguishes three SCM activities: coordination, information sharing, and collaboration. Higher levels of integration are characterized by increased logistics-related communication, greater coordination of the firm s logistics activities with those of its suppliers and customers, and more blurred organizational distinctions between the logistics activities of the firm and those of its suppliers and customers (Stock et al. 2000; Prajoso and Olhager 2012).

5 Processes Integration and e-business in Supply Chain Management 221 The eight supply chain management key processes identified by Global Supply Chain Forum (Croxton et al. 2001; Lambert et al. 2005) are described by a collection of sub-processes at strategic and operational levels: Customer Relationship Management. This process provides the structure on how the relationship with the customer is developed and maintained. This process includes five sub-processes at the strategic level: (1) review corporate and marketing strategy, (2) identify criteria for categorizing customers, (3) provide guidelines for the degree of differentiation in the product/service agreement, (4) develop framework of metrics, and (5) develop guidelines for sharing process improvement benefits with customers. The purpose of this process at strategic level is to identify key customers, provide criteria for categorizing customers, provide customer teams with guidelines for customizing the product and service offering, develop a framework for metrics, and provide guidelines for the sharing of process improvement benefits with the customers (Croxton et al. 2001). At the operational level, this process intends to write and implement the product and service agreement through seven sub-processes: (1) differentiate customers, (2) prepare the account/segment management team, (3) internally review the accounts, (4) identify opportunities with the accounts, (5) develop the product/service agreement, (6) implement the product/service agreement, and (7) measure performance and generate profitability reports. Customer Service Management. Croxton et al. (2001) and Lambert et al. (2005) define this process as the firm s frontline for the customer and a single source of customer information (e.g., product availability, shipping dates and order status). Real-time information is provided to the customer through interfaces with the firm s functions, such as manufacturing and logistics. This process includes four sub-processes at the strategic level: (1) develop customer service strategy, (2) develop response procedures, (3) develop infrastructure for implementing response procedures, and (4) develop framework of metrics. The purpose of this process at strategic level is to develop infrastructure and coordination means for implementing the product/service agreement and providing a key point of contact to the customer (Croxton et al. 2001). At the operational level, this process must respond to internal and external events through four sub-processes: (1) recognize event, (2) evaluate situation and alternatives, (3) implement solution, and (4) monitor and report. Demand management. This process provides the structure for balancing the customers requirements with the supply chain capabilities. It also develops and executes contingency plans when some events disrupt the balance of supply and demand. This includes forecasting demand and synchronizing it with production, procurement and distribution (Croxton et al. 2001; Lambert et al. 2005). This process includes six sub-processes at the strategic level: (1) determine demand management goals and strategy, (2) determine forecasting procedures, (3) plan information flow, (4) determine synchronization procedures, (5) develop contingency management system, and (6) develop framework of metrics. At the operational level, demand management executes the forecasting,

6 222 B. Minguela-Rata et al. synchronization and contingency plans through five sub-processes: (1) collect data/information, (2) forecast, (3) synchronize, (4) reduce variability and increase flexibility, and (5) measure performance. Order fulfillment. This process includes all activities needed to deliver the order to the consumer (Giménez and Lourenço 2008): definition of customer requirements, design of a network considering manufacturing, logistics and marketing requirements -since this design of the network has a significant influence on the cost and performance of the system-, and enable the firm to meet customer request (Croxton et al. 2001; Croxton 2003). This process includes five sub-processes at the strategic level: (1) review marketing strategy, supply chain structure and customer service goals, (2) define requirements for order fulfillment, (3) evaluate logistics network, (4) define plan for order fulfillment, and (5) development framework of metrics. At the operational level, this process includes seven sub-processes related to customers orders (Croxton et al. 2001): (1) generate and communicate order, (2) enter order, (3) process order, (4) handle documentation, (5) fill order, (6) deliver order, (7) perform post-delivery activities and measure performance. Manufacturing flow management. This process deals with making the products and establishing the manufacturing flexibility required to serve the target markets (Croxton et al. 2001). This process includes all activities necessary to obtain, implement and manage manufacturing flexibility and transports products through the plants within the supply chain (Lambert et al. 2005). This process includes six sub-processes at the strategic level: (1) review manufacturing, sourcing, marketing, and logistics strategies, (2) determine degree of manufacturing flexibility requirement, (3) determine push/pull boundaries, (4) identify manufacturing constraints and determine capabilities, and (5) development framework of metrics. The purpose of this process at strategic level is to determine the manufacturing infrastructure needed for fulfilling the customer s needs and wants (Croxton et al. 2001). At the operational level, Croxton et al. (2001) argue that this process is directly related to internal operations management even though some characteristics of the process are designed to integrate internal operations management with activities in the supply chain. At this level, four sub-processes can be identified: (1) determine routing and velocity through manufacturing, (2) manufacturing and materials planning, (3) execute capacity and demand, and (4) measure performance. Supplier relationship management. This process relates a firm with their suppliers (Giménez and Lourenço 2008). Therefore it is connected with upstream relationships, preferably with a small number of suppliers, but for a long time. This process includes five sub-processes at the strategic level: (1) review corporate, marketing, manufacturing and sourcing strategies, (2) identify criteria for categorizing suppliers, (3) provide guidelines for the degree of customization in the product/service agreement, (4) develop framework of metrics, (5) develop guidelines for sharing process improvement benefits with suppliers. In this level, the firm needs to establish clearly the network of relationships it will maintain, and the process for segmenting the suppliers and working with them to develop

7 Processes Integration and e-business in Supply Chain Management 223 appropriate product/service agreement under a win win basis (Croxton et al. 2001). At the operational level, seven sub-processes can be identified: (1) differentiate suppliers, (2) prepare the supplier/segment management team, (3) internally review the supplier/supplier segment, (4) identify opportunities with the suppliers, (5) develop the product/service agreement and communication plan, (6) implement the product/service agreement, (7) measure performance and generate supplier cost/profitability reports. Product development and commercialization. This process provides the structure for developing and bringing to market new products for integrating customers and suppliers in order to reduce time to market (Croxton et al. 2001; Rogers et al. 2004; Lambert et al. 2005). This process includes six sub-processes at the strategic level: (1) review corporate, marketing, manufacturing and sourcing strategies, (2) develop idea generation and screening processes, (3) establish guidelines for cross-functional product development team membership, (4) identify product rollout issues and constraints, (5) establish new product project guidelines, and (6) develop framework of metrics. Croxton et al. (2001) and Lambert et al. (2005) distinguish eight sub-processes at the operational level: (1) define new products and assess fit, (2) establish cross-functional product development team, (3) formalize new product development project, (4) design and build prototypes, (5) make/buy decision, (6) determine channels, (7) product rollout, and (8) measure process performance. Returns management. Actually, an effective returns management is vital for the firm to achieve a sustainable competitive advantage. For this, firms can identify productivity improvement opportunities and breakthrough projects (Croxton et al. 2001). This process includes all activities related to returns, reverse logistics, gatekeeping, and avoidance (Rogers et al. 2002; Lambert et al. 2005). Croxton et al. (2001) and Lambert et al. (2005) identify six sub-processes at the strategic level: (1) determine returns management goals and strategy, (2) develop avoidance, gatekeeping and disposition guidelines, (3) develop returns network and flow options, (4) develop credit rules, (5) determine secondary markets, and (6) develop framework of metrics. At the operational level, these authors distinguish six sub-processes: (1) receive return request, (2) determine routing, (3) receive returns, (4) select disposition, (5) credit consumer/supplier, and (6) analyze returns and measure performance. The five business processes identified by the Supply Chain Council (Supply- Chain Council 2003:7; Lambert et al. 2005:29) are as follows: Plan. This process tries to balance aggregate demand and supply to develop a course of action which best meets sourcing, production, delivery requirements, and management returns. The main goals are to access to supply sources, to add demand needs, to plan inventories, to calculate medium- term capacity, to use outsourcing or not, to design supply chain, to determinate long-term capacity, to calculate master production planning, etc. Source. This process covers activities related to procuring goods and services to meet planned and actual demand. This process includes aspects related with

8 224 B. Minguela-Rata et al. obtaining, reception, inspection and storage material, supplier s quality certification, supplies logistics, contracts with suppliers, etc. Make. This process includes activities related to transforming products into a finished state to meet planned or actual demand. This process deals with request and receipt materials, production and assessment of goods, packaging, storage and shipment of goods, changes on productive process, equipment and resources management, control quality management, production scheduling, short-term capacity management, etc. Deliver. This process provides finished goods and services to meet planned or actual demand, for example, order, transportation, and distribution managements. Return. This process is related with returning or receiving returned products and extends into post-delivery customer support. Lambert et al. (2005) argue that in supply chain management processes, this framework integrates issues related to purchasing, operations, and logistics. The SCOR model does not focus on relationships with customers and suppliers but on transactional efficiency. 3 Supply Chain Integration Sharing relevant information among members of supply chain is a key factor for success. When retailers don t share sales and inventory status data with other partners in the supply chain, supply chain management is merely devoted to inventories management. In those cases, inventories act as shock-absorbing means to smooth demand fluctuations. This situation generates inefficiencies in the supply chain, especially in production scheduling, inventory control and delivery plans (Lee et al. 2004). Therefore, any inefficiency in a link of the chain will affect the whole chain. According to Wagner and Sweeney (2010: 26) the whole chain is only as strong as its weakest link. Frequency, quantity and quality of shared information among partners supply chains are crucial aspects as well. Lee and Whang (1998) define the types of information that partners supply chain should share to get a greater coordination and efficiency: Inventory level. When information about inventory level of partners supply chain is shared, inventory levels of the chain as a whole are reduced, decreasing space needs and costs. In addition, replenishment production and shipment can be scheduled more accurately (Devaraj et al. 2007). Sales data. Normally, sales data variance is lower than order data variance. When firms share only information about order data with suppliers, demand can be distorted creating the bullwhip effect. According to Lee et al. (2004), this refers to the phenomenon where orders to the supplier tend to have larger variance than sales to the buyer (generating demand distortions). Such distortions propagate upstream in an amplified form (creating variance amplification). Suppliers incur in excess raw materials and manufacturing costs, inefficient

9 Processes Integration and e-business in Supply Chain Management 225 utilization and overtime along with increasing warehousing expenses and additional transportation costs due to inefficient scheduling and higher shipping rates. Order status for tracking/tracing. Allowing customers to know about order status within the supply chain increases control and confidence. Sharing this information improves service customer to a large extent. Sales forecasts upstream to suppliers. Forecasts act as notification of future orders to suppliers. Suppliers can use this information to develop a production plan. However, when customers behave in an opportunistic way by communicating suppliers higher than real forecasts, there is a risk of inefficiency. According to Lee et al. (1997), Frohlich and Westbrook (2001) and Devaraj et al. (2007), sharing real demand forecasts from customers provide suppliers more visibility planning for capacity and material requirements minimizing inefficiencies. Production/Delivery Schedule. Getting to know suppliers production schedules in advance, helps customers improve production schedules, reduce forecast uncertainty and enable more detailed production quantity and timing as well as reliable delivery (Lee and Whang 1998; Lancioni et al. 2000; Wei and Krajewski 2000; Krajewski and Wei 2001; Devaraj et al. 2007). Other information sharing. Lee and Whang (1998) argue that information such as performance metrics (product quality data, lead times, queuing delays at workstations, service performance, etc.) and capacity information is susceptible to be shared for optimising purposes. The bullwhip effect is, from the above, the one that has attracted more attention in literature. Lee et al. (2004) suggest four sources of bullwhip effect: demand signal processing, rationing game, order batching and price variations. Demand signal processing refers to the situation where demand is non-stationary and retailers use past demand information as predictors of future demand generating distortion of demand information. The production schedule based on this distorted information is inefficient. This distortion effect amplifies as the number of partners in the supply chain increase. The rationing game refers to the strategic ordering behavior of buyers when supply shortage is anticipated. This phenomenon appears in product markets during the growth phase of the product life-cycle when demand exceeds supply. Lee et al. (2004) illustrate this source through a product whose demand potentially exceeds supply due to limitation in production capacity or uncertainty of production yield. The manufacturer would ration the supply of the product to satisfy the retailers orders. However, each retailer will order more units to secure the delivery what the retailer would order if the supply of the product is unlimited. Order batching refers to retail buyers decision process. The main goal is to gain economies in pricing and transportation, so they use traditional inventory management models to calculate optimum size of the order. This situation is usual when fixed order cost is nonzero, so ordering in every period is uneconomical

10 226 B. Minguela-Rata et al. (Lee et al. 2004). These authors consider that this phenomenon is a consequence of the periodic review process and the processing cost of purchase transactions. Finally, the last source of bullwhip effect is price fluctuations. This source refers to non-constant purchase prices of the product (for example, manufacturer s trade promotions with price discounts). In these cases, the buyers want to capitalize on the discount offered during a short period of time. According to Lee et al. (2004), it causes irregular production schedule for manufacturers, unnecessary inventory costs and distorted demand information. These authors suggest reducing the frequency and depth of promotions. Supply chain intends to minimize the bullwhip effect by increasing demand visibility along supply chain (Wagner and Sweeney 2010). In these situations, Information and Communications Technologies play a central role. ICTs allow firms to increase the volume and complexity of information sharing with their partners in the supply chain as well as to share real-time supply chain information (sales data, inventory level, delivery status, production planning and scheduling). In addition, ICTs facilitate the alignment of forecasting and scheduling of operations between partners of supply chain, allowing better inter-firms coordination (Prajogo and Olhager 2012; Ghobalkhloo et al. 2011). Auramo et al. (2005) suggest that the use of ICTs is crucial, especially in fast-moving industries for managing contemporary supply networks. Levary (2000) and Auramo et al. (2005) argue that ICTs in supply chain management provides a reduction in cycle time, in inventories levels, a minimization of the bullwhip effect, and improvement in the effectiveness of distribution channels. According to Simchi-Levi et al. (2003: 267) the aims of ICTs in supply chain management are: (1) providing information availability and visibility, (2) enabling a single point of contact for data, (3) allowing decisions based on total supply chain information, and (4) enabling collaboration with supply chain partners. Therefore, the literature refers to ICT as an essential enabler of supply chain management activities (Mabert and Venkataramanan 1998). Of all ICT, Internet and the Web have a central role in a supply chain management. They may have an important impact on business integration and collaboration (Rabinovich et al. 2003; Sanders 2007). It is a most cost-effective means of driving supply chain integration as it allows rapid growth of web-based information transfer between partners in the supply chain (Watson et al. 1998; Johnson and Whang 2002; Gunasekaran and Ngai 2004). Such possibility of acquiring and sharing information easily and fast increases process transparency (Deeter- Schmeltz and Norman-Kennedy 2002; Ronchi 2003; Michelino et al. 2008). In this sense, according to Cooper et al. (1997), Giménez and Lourenço (2008: 311) define e-scm as the impact that the Internet has on the integration of key business processes from end user through original suppliers that provides products, services, and information that add value for customers and other stakeholders. Johnson and Whang (2002) also argue that combination of Internet and supply chain integration is transforming many business processes within supply chain management. So important are ICT in supply chain management that these authors

11 Processes Integration and e-business in Supply Chain Management 227 have defined e-business as the Internet use to get supply chain integration (Johnson and Whang 2002). In the next section, some aspects about e-business in supply chain management are presented. 4 e-business in Supply Chain Management In current global markets, firms are forced to satisfy more demanding customers in order to obtain competitive positioning and competitive advantages. This involves changing traditional business structures into a flexible and integrated Supply Chain Management strategy. The development of ICT s and the Internet World Wide Web (WWW) have increased and speeded up the flow of information between companies and customers creating e-business partners. Internet has augmented the richness of communications through greater interactivity between the firm and the customer (Watson et al. 1998). Therefore, the main impact of Internet on SCM is the possibility of sharing a large amount of information along the supply chain in real time, including operations, logistics and strategic planning data. This fact provides firms with more visibility, improving production planning, inventory management, and distribution (Devaraj et al. 2007; Sanders 2007). The value creation process extends beyond the boundaries of the firm, and involves integrating business processes among partners of the chain (Stevens 1989; Tan et al. 1998). Therefore, integration, collaboration and coordination across individual firm functions and throughout the supply chain are fundamental (Sanders 2007). ICT, Internet and e-business are enabling supply chain collaboration and coordination (Sanders 2012). Nowadays companies seeking to integrate their business processes implement Information Technologies (IT) in order to be more flexible and responsive. This way companies are able to break traditional barriers between departments or functions and reduce unnecessary efforts. In this section, essential e-business integration solutions will be analyzed according to their importance, benefits and contribution for SCM as well as the role of information systems to achieve e-business objectives. Supply chain integration started way before Internet. In the seventies, interorganizational systems such as Electronic Data Interchange (EDI) were used for coordination with suppliers and customers. In the airline industry, computer reservation systems were used to communicate with travel agencies and other customers. EDI can be defined as the transmission of standardized business documents through a shared format between applications of two involved agents in an economic transaction. This technology became a standard before the Internet turned into an extended technology allowing transactions at reduced costs (Walton and Gupta 1999; Sanders 2007). However, technologies before Internet were based on proprietor standards, implementation was rather complex especially in early stages with complicated management interfaces and important trade-offs. Internet has allowed to overcome all of these disadvantages (Frohlich 2002; Johnson y Whang 2002) due to the increase in flexibility of an affordable technology for

12 228 B. Minguela-Rata et al. small and medium firms (Lancioni et al. 2000; Zhu and Kraemer 2002; Zhu et al. 2004; Devaraj et al. 2007; Sanders 2007). According to Wagner and Sweeney (2010: 29), e-business solutions try to enhance supply chain effectiveness and efficiency through the automation of business processes, due to their interoperability and open-standard settings for the transfer of data among firms (Bailey and Rabinovich 2001; Rabinovich et al. 2003; Sanders 2007). The adoption of e-business standards provides higher transparency, improves information quality, facilitates collaboration and supply chain information sharing, lowers prices from suppliers, automates requisition and purchase order creation, integrates payment processes, improves speed and flexibility, diminishes transaction costs, increases customer service levels, reduces investments in supply chain inventories, and helps organizations to develop plans for the more effective management of sourcing and logistics (Neef 2001; Essig and Arnold 2001; Deeter-Schmelz et al. 2001; Auramo et al. 2005; Johnson et al. 2007; Devaraj et al. 2007; Sanders 2007; Wagner and Sweeney 2010; Prajogo and Olhager 2012). Johnson and Whang (2002) and Lee and Whang (2002) distinguish three categories in e-business applications: e-commerce, e-procurement, and e-collaboration. E-commerce refers to the use of the Internet for identifying and responding quickly to changing customer demands. E-procurement refers to the use Internet for procuring direct o indirect materials and value-added services. Finally, e-collaboration refers to the use of Internet for business-to-business interactions (e.g., information sharing and integration, decision sharing, process sharing, and resource sharing). Some authors separate upstream and downstream processes, distinguishing supply and demand integration, or e-procurement and e-fulfillment (Frohlich 2002; Frohlich and Westbrook 2002; Muffato and Payaro 2004). In detail: E-commerce. Is the denomination used for the trade of goods and services that takes place electronically over the Internet (Dolber et al. 1998). Supply chains of information goods and physical goods have undergone deep changes by the use of Internet as E-commerce involves dealing with high volumes of individual customers. E-commerce grants firms the possibility to develop economic activities electronically (on line) and exchanging information in real time with suppliers coordinating supply chain activities. E-procurement. Johnson and Whang (2002) argue that Internet offers a natural platform to facilitate corporate supply. Internet facilitates efficient negotiations between customers and suppliers through some pre-established protocols. E- procurement involves dealings with firms in the marketplace with numerous customers and suppliers together in virtual markets seeking information to buy and sell goods and services. Nowadays, e-procurement has automated and streamlined numerous corporate purchasing processes under an online basis (Sengupta 2001; Sanders 2007; Wagner and Sweeney 2010). It reduces operational costs, improves process efficiency, delivers greater centralized control over purchasing and increases negotiation power with suppliers through order consolidation. In relation with supplier evaluation, e-procurement solutions

13 Processes Integration and e-business in Supply Chain Management 229 provide data warehousing capabilities. This ameliorates supplier performance more efficiently (Giménez and Lourenço 2008; Wagner and Sweeney 2010). E-collaboration. Refers to supply chain coordination through Internet. This process includes activities such as information sharing and integration, decision sharing, process sharing, and resource sharing (Johnson and Whang 2002). E- collaboration improves customer service, reduces inventory levels, increases agility and flexibility, and lowers bullwhip effect (Seidmann and Sundararajan 1997; Cachon and Fisher 2000; Lee et al. 2000; Yu et al. 2001; Zhao et al. 2002; Dejonckheere et al. 2004; Devaraj et al. 2007; Sanders 2007; Swafford et al. 2008; Prajogo and Olhager 2012). However, members of supply chain share information on the basis of a mutual trust among them (Fossas-Olalla et al. 2010). In this context, Sanders (2012:320) argues that (1) a cooperative relationship results in the development and sharing of joint objectives; (2) managerial strategies to get coordination are easier to implement; and (3) cooperation and coordination result in the elimination of duplication of efforts among parties, so supply chain productivity is increased. Fossas-Olalla et al. (2010) and Prajogo and Olhager (2012) suggest some challenges on the firm relationships with their suppliers: long-term relationships with their suppliers instead of shortterm contracts (based on power relationships), reduction of base of suppliers, election of supplies considering factors such as quality, services, delivery time, etc. instead of only price, and consideration of suppliers as a strategic part of the firm, etc. E-fulfillment. This concept is even broader than e-commerce which increases efficiency for order placement and fulfillment (Giménez and Lourenço 2008). Pyke et al. (2001) describe the difficulties of effectively executing e-fulfillment as it involves sharing these data among partners of the supply chain in real time. Lee and Whang (2001) present a framework for making e-fulfillment effective based on a good use of information and leveraging of existing resources. E-fulfillment requires the use of data batches such as customer s order and inventory levels, and online manufacturing levels in order to benefit from cost saving, shorter order cycle time, inventory reduction, among others (Gunasekaran and Ngai 2004) (Fig. 1). This massive information and data exchange in real-time is commonly stored and managed by information systems. These systems integrate, coordinate and manage all supply chain management information between suppliers and customers. Enterprise Resource Planning (ERP) was firstly used to connect different functions of a firm, but nowadays, these systems also connect to other supply chains from partners. ERP allows the flow of information between all business functions inside the boundaries of the firm and manage the connections to other partners of the supply chain (Sanders 2012). ERP systems incorporate different information in a centralized database that is accessed by all partners supply chain for improved decision making. It allows every function of supply chain to store and retrieve information in real-time as well as to avoid information delays and distortions along the supply chain and increase transparency and to reduce

14 230 B. Minguela-Rata et al. Fig. 1 E-business forms and their impact on the supply chain (source Johnson and Whang 2002) bullwhip effects (McAfee 2002; Wagner and Sweeny 2010; Sanders 2012). In this sense, Gunasekaran and Ngai (2004) define ERP as systems that connect different functions within a firm (such as marketing, operations, sourcing, logistics) as well as a firm s supply chain partners (such as suppliers, distributors, third party logistics providers), enabling the partners to share information such as order status, product schedules, sales records, plan production, logistics and marketing promotions. Other system that allows collaboration among partner supply chain is Efficient Consumer Response (ECR). This tool improves certain demand s customer attention, through an automatic replacement system of purchased stock in the customer s facility. The information about this purchase is sent simultaneously to every supplier of purchase good. These suppliers plan and carry out purchase good replacement at the necessary moment. With the use of Vendor Managed Inventory (VMI) suppliers are responsible for managing the inventory located at a customer s facility. In this situation, the supplier is the owner of the inventory until it is purchased by the customer. So, the supplier provides the inventory, places replenishment orders, and places its exposition (Sanders 2012). Hence, the supplier has greater control over their product. With the use of VMI is necessary that suppliers and customers work together, collaborate and develop mutual trust. According to some authors, Continuous Replenishment (CR) improves the relationships with suppliers compared to VMI as inventory levels are easily managed on line. When this information and knowledge are shared among

15 Processes Integration and e-business in Supply Chain Management 231 members of supply chain, it refers to Collaborative Planning, Forecasting and Replenishment (CPFR). With this tool, all members of supply chain plan together. In this sense, Sanders (2012) argues that CPFR is a collaborative process of developing forecasts and plans jointly with supply chain partners. According to this author, CPFR brings value to their customers, allows risk sharing of the marketplace among different partners, and improves performance (Sanders 2012:230). Hence, supply chain partners jointly set forecasts, plan production, replenish inventories, etc. All these tools and systems facilitate sharing information among members of supply chain by connecting different functions within a firm (such as marketing, operations, sourcing, and logistics), as well as allowing collaboration among partners and mutual trust. 5 Conclusions Our main aim based on the comprehensive and vast literature reviewed in this paper is to clarify topics, concepts and processes widely discussed with a methodological approach. We present a practical and useful framework on e-business integration defining the pillars of its success and their implications on SCM. In this paper we also describe different internal processes inside the SCM; moreover, we define how data integration (supplier-customer) among different partners is focused on the type of information shared; the importance of e-commerce, e- procurement, e-collaboration, e-fulfillment, the significant and collaborative role of Information Technologies (IT) in this integration process and operational benefits and costs benefits as a result of this integration. We also determine the type of information that should be shared among partners to improve coordination and efficiency. According to managerial implications, practitioners must understand the importance of integration among companies considering SCM integration as an element of differentiation and competitiveness. Concepts like coordination, availability and quality of information have become an essential tool nowadays. This grants the company the possibility to compete in global markets in real time no matter the location of the supplier or customer. E-business will be the way to make ordinary business all over the world. If companies want to participate and be part of this globalized market they will be forced to integrate their SCM processes. To achieve this, information technology (IT) plays a crucial role to be implemented by managers. Information systems are capable to manage business and process information of partners or collaborative participants (customer suppliers) sharing while transfer of information gives companies the chance to satisfy and response to demanding market needs in a short period of time. For practical implication of SCM on e-business, supply chain management must be considered more than ever as a dynamic and flexible process in which all activities among partners of the supply chain are coordinated in real time to satisfy the final customer and maximize total supply chain profitability. The

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