BAI 2006

The investigate of information systems

Its impact on supply chains to B2B customer service operations
Dr. Jenkins C. H. CHEN
Director of Mobile Marketing Commerce Centre
Assistant Professor of Department of Management Information System
Far East College
49 Chung-Hua Rd, Hsin-Shih 74448, Tainan County, Taiwan
[email protected]
Ya-Ling Tsai
Doctoral research Student of Marketing, University of Stirling,
Stirling Fk9 4LA Scotland
[email protected]

ABSTRACT

The use of IT to share data between customers and suppliers has created an
effective system. Though most supply chains is their incomplete visibility of real
demand, shared information between supply chains partners can only be completely
leveraged from side to side process integration. This process integration means a
collaborative relationship between suppliers and customers, joint product
development, common systems and shared information. In addition to this, the CRM
have the advantage of providing improvements to the supply chain, as firms have
moved to a new model that emphasises the matching of the degree of customer care
with the particular customer and the customer’s real needs for a service. In a B2B
situation, most of the customers will be large, fully developed accounts that are
looking to automate or improve the way they transact their business with the
suppliers. However, the supplier also has to select a regular and technical approach,
as most of the companies can improve their competitive advantage through the wealth
of a good supplier manager.

Keyword: Information system, supply chain management, e-SCM, CRM

Introduction

The twentieth century saw new economic advancements in IT and new business
practices, facilitated by the IT (Sweet, 2001). Although information and knowledge
have always been critical components of economic growth, it was the beginnings of

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technology and the Internet that has brought about such transformational change in
the economy. Castells (2000) argued that this new economy is different from what has
gone before because it gains its advantage through the effective use of information,
global concepts and networks among economic agents. ‘Technology’ refers to the
package of technological resources, skills and experience, which gives firms their
characteristic competitive edge in the new global economy (Bessant and Rush, 2000).

The consequences of new technology for B2B operations

Technology has traditional been viewed as the key to output in the manufacturing
industries. However, in recent years it has greatly facilitated the exponential growth of
the sector by offering firms an all-important competitive edge. Market competition
has forced firms to incorporate modern technology into their key offerings, to satisfy
those discerning customers who have little product loyalty (Chapman, et al., 2003).
Technology now makes it possible for firms to assign their functional departments
deliberately to international locations. This allows firms to draw on a global network
of knowledge and services, thus augmenting the strength of their pre-existing superior
service to their internal and external customers, 24 hours a day, seven days a week.
Nowadays, the Internet and the World Wide Web are widely accepted since they
broaden business partners to gain benefits, or reduce costs that enhance customer
satisfaction, as well as retaining competitive advantages.
This is a challenge faced by many high tech companies due to the product life
cycles growing shorter and shorter. The engineering changes involved in many
operations require both new suppliers, new bills of materials, and new requirements
for existing parts. Like Dell Computers for example, who started in 1984 in Austin,
Texas; Dell Computers was ranked the number one PC maker in the US market in
1999. Dell’s PCs are made by electronic orders and are delivered directly to its
customers. Dell’s direct-sales model is well known to the business community. Dell
has eliminated the middleman within their supply chain and has also exemplified an
innovative business model through their effective SCM. Dell computers continue to
improve and widen their competitive advantage by integrating the Internet into its
entire business process, including online sales, procurement, customer support and
relationship management (Shah, 2001).
The Internet business-to-business (B2B) gap is receiving great attention and the
evaluation of widely trading B2B companies is escalating rapidly. On the other hand,
the survival of supply channels has helped to make society more efficient in resource
allocation. Most producers use intermediaries to bring their products to the market,
they try to create a supply channel, that is, a set of interdependent organisations

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involved in the processes of making a product or service available for use or use by
the consumer or business users (Janta, et al., 2003). Armstrong and Kotler (2000)
argued that intermediaries play an important role in matching supply and demand.
However, one of the frequently raised questions during the beginnings of e-commerce
was whether the functions of the traditional supply channels with remain. Will
suppliers retain their locations as the channel of promoting products to users (Janta, et
al., 2003)? The contributions to the B2B area are in e-commerce; the most from
improved efficiencies through reduced costs and prices and improved business
practices that will lead to better international competitiveness (Mackay, et al., 2003).
It is widely accepted that companies are increasingly facing the challenge of e-
business. The evolution of information and communication technology has fostered
the development of powerful tools that are expected to improve supply chain
performance dramatically, through higher levels of process efficiency and integration.
In fact, there is still poor evidence for the actual implementation and effectiveness of
e-business practices (Cagliano, et al., 2003).
Online exchanges which are being created in almost every supply chain bring
buyers and sellers together in ways that were not possible before the arrival of the
Internet. Since new technologies have created new markets and opportunities, new
technologies will replace the older ones. There is no argument that the cycle rate of
new technologies allows the suppliers to bring, less developed, and often more
compound product lines into the mix, as the relationship with customers is still
necessary even though the Internet may travel through another completion vehicle
(Janta, et al., 2003). Wigand (1996) has defined disintermediation as the displacement
of market mediators; that enable direct trade between sellers and buyers without
agents. However Picot et al. (1997) argued that with the support of information and
communication technology, and to enable them to complete the originally delegates
tasks on their own. In line with this argument, Pitt et al.,(1999) suggested that many
mediators will die out, while new channels and new mediators will take their place as
a result of the appearance of the Internet.

The expansion of the information system in B2B operations

EDI is the electronic arrangement of structured documents between business

partners. XML was created so the richly structured documents could be used over the
web (Milutinovc and Particelli, 2002). EDI played an important role in the
development of SCM, as SCM applications used networks aimed at controlling costs,
reducing paperwork, lowering inventory levels, and shortening product cycles. EDI
has been heavily used in industries, with a significant disadvantage being that it does

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not operate in real time (Graham, 2002).

The growth in high-technology programs such as enterprise resource planning for
ERP and CRM shows that SCM is an important factor for general enterprise
applications. SCM serves as a back-end application by linking suppliers,
manufacturers, distributors, and resellers in a consistent production and distribution
network, with the IT industry regulating the ability of a variety of services over time.
During the long term relationships, the industry will define the standard capabilities of
SCM, CRM, ERP, and other services (Chou, et al., 2004).
Kumar and Van Hillegersberg (2000) described ERP system as an integrated set of
application software modules, including accounting, distribution, sales and marketing,
material management, human resources, logistics and more. Instead of focusing on
detailed areas that weren’t connected, these modules work as an integrated unit by
bringing the visibility of real time information to all departments and thereby focus on
the business process. ERP systems are an effect of Materials Requirement Planning
(MRP) systems that were developed in the 1970s largely out of manufacturing
concerns. They were originally designed for the time phased word order and purchase
order release system which, for many companies, eventually lead to inventory
reduction, improved customer services and better production efficiency. As these
systems evolved (e.g. MRPII in the early 1980s), they began to fit in with the new
financial controls and measures, the master production scheduling and the capacity
planning.
The SCM software is becoming more prominent as companies widen their choices.
SCM encompasses the supply chain planning, the forecasting of component and
product availability, and the supply execution through manufacturing and distribution.
Some of the applications are fairly basic in that they perform MRP, manufacturing
scheduling, and order processing in the traditional, internal environment, but may
provide for similar operations across organisational boundaries as well, as ERP
software has no intention of being edged out by SCM. In addition, specialty
companies, known as integrators, are filing key linkages in the chain, with software
helping to line up the outputs from one link to the inputs for the next. One implication
of an extended supply chain software capability is the ability to form collaborative
relationships, known as intelligent supply chains. This means going beyond the
immediate suppliers and customers to a real-time knowledge management of
suppliers’ suppliers and customers’ customers (Green, 2001).

The collaboration in B2B operations

To ensure better supply chain integration, members of the supply chain need to

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continue gathering and analysing information from their partners and adjusting their
operational strategy accordingly. The real challenge is that collaborative supply chain
business practices involve deeper relationships than the traditional forms of business
interaction (Green, 2001). In addition to improving collaboration and planning, by
taking an e-business approach to supply chain integration, firms can also foster much-
needed cooperation and develop innovative products for the marketplace (Tjader,
2004).
Despite the fact that the traditional supply chain was for the development of long-
term relationships, the active results of e-SCM may potentially lead to less focus on
collaborative efforts. The objectives of e-SCM is gathering goals, not maintaining
collaborative relationships, when compared to traditional SCM. Consequently, the
relative value of partnerships and alliances has become fundamentally important
(Williams, 2002).
Collaboration in the middle of trading partnerships helps e-SCM participants to
gain huge profits from providing end customers with high quality, low cost products,
through flexible and efficient distribution. Web technologies boost the supply chain
visibility by providing more real-time data from all links of the supply chain, resulting
in greater collaborations among trading partners. Collaboration is very important
because al the relevant information needs to be presented in the appropriate
information system at the right time, to the right person (L. Hanebeck and Tracey,
2003).
This great collaboration made e-commerce, like B2B, known to almost everybody
in business circles. With the advancement of IT, the collaboration of business partners
will continuously improve the effectiveness of e-SCM. In order to gain full
collaboration, all trading partners have to reach a common vision about their SCM
strategies. Moreover, corporations need to overcome natural confrontations by
providing helpful business secrets to their partners (Chou, et al., 2004).
Through the progress of web technologies, the revolutionary tendency of SCM
mainly focuses on helping choice makers enhance and manage customer
relationships, by professionally integrate applications and collaborating in real-time
with trading partners.
For this reason, we have to develop SCM. The change in corporate strategies
has increases their reliance on suppliers. Under this situation, the collaborative
relationship between trade partners in the supply chain becomes dangerous, so
effective SCM must rise to this challenge. The Internet offers the supply chain huge
possibilities and completely new methods for the reorganisation and coordination
between business partners and customers. The Internet enhances SCM’s performance
and it is a critical part of e-commerce. As SCM develops in the information age, the

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networks supporting the organisation between the business partners need to make all
the information, transactions and decision flow through the network. Generally
speaking, in an environment where the competition is increasingly based on supply
chain efficiency, firms need to put SCM into the spirit of their business model to be
successful (Chou, et al., 2004).
A collaborative e-supply chain requires a significant change in the business
processes, as well as changes in strategic and tactical thinking. This change in
thinking requires a change in mindset, which does not come easily, and thus demands
strong management endorsement. Management’s willingness to take the initiative and
implement e-business that suits the supply chain needs is crucial for its success
(Tjader et al., 2004).
Opportunities for collaboration among business partners will vary depending upon
the organisations prospective role in the supply chain. Collaboration enables partners
to jointly gain a better understanding of future product demand and implement more
reasonable to satisfy that demand. As Sahay (2003) pointed out, the supplier
collaboration and customer collaborative types are as follow:
1. Supplier collaboration: Collaborating with suppliers, will derive benefits in the
key activities like new product development, order fulfillment and capacity
planning. It will help ensure that future material needs are satisfied.
2. Customer collaboration: To collaborate on business partners need to share and
modify each other’s demand planes and forecasts electronically. This approach
helps to ensure that consumer requirements are met efficiently.
The aim of collaboration is to augment throughput and reduce stock and
operating costs. As a requirement to ensure productivity, the chain members must be
able to quickly identify and remove the constraints and ensure that they can continue
to accurately meet changing customer requirements (Simatupang, et al., 2004). A
collaborative system is necessary with members cooperating and promising that their
communal self-interests are realised, improved and sustained.
Therefore, this kind of relationship can be managed with a small number of
suppliers. Additionally organisation can work with limited strategic suppliers in order
to maintain its collaborative relationship and also to copy the global competition in its
supply chain (Cebi, and Bayraktar, 2003).
Anyway, the real value of collaboration is in addressing problems that check
whether the participating members are responding effectively to customer needs.
Otherwise collaboration will be good for the supply chains’ circumstances but will fail
to address the real problems within the supply chain. Collaboration requires common
question and actions to locate any potential areas where they may be gaps. The
question is a way of providing different perspectives to explore improvement ideas

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and create better practices for supply chain’s circumstances. As well as collaboration
not only identifying gaps relative to their competitors, it also encourages the chain
members to find and solve core problems. This cycle helps the members to
concentrate on ways to improve on their rapid responses to customer needs and wants.
Therefore, collaboration concentrates on not only the questions of how to compare
themselves to their other’s competitor but also focuses on those areas that need to be
improved. The argument is that the supply chain should focus on interring company
level activities that integrate collaboration and enhance the allocation of the chains’
members to achieve an overall better supply chain performance (Simatupang and
Sridharan, 2004).

The B2B community in e-SCM

The cultural process concern that which is intended for collaboration amongst the
trading partners in the supply chain and is based on the integration of trust and
commitment (Min, 2001). Also, a successful supply chain performance is based on a
high level of trust and a strong commitment amongst the supply chain partners (G
Kwon and Suh, 2004). This commitment is a key success factor in achieving supply
chain integration, with trust being the root in fostering such a commitment.
In general, the Internet offers the business community a selection of opportunities
and challenges. SCM has been enabled by convergence, which refers to the
integration of computer and communication technology (Short, 2002). The
communication process was followed on each company’s website to find out whether
it was used for web chat, web call back or for e-mails. In addition to this, a Business
also can sends offers to their customers as text messages through mobile telephones,
as well as allowing them to be connected to the call centre to complete the transaction.
The communication within B2B can also use the Windows Messenger service (MSN)
and Skype to contact each other throughout the world. It is very convenient and
affectively and immediately links suppliers to their customers.
However, the advantages in terms of customer convenience and subsequent loyalty
can make this effort worthwhile (Bradshaw and Brash, 2001). The change in supply
chain thinking and also in marketing communications thinking is the move from push
models of selling, or combined push and pull approaches(Chaffey, 2002,pp216-254).
The push model is illustrated by a manufacturer who perhaps develops an innovative
product and then identifies a suitable target market. The distribution channel is then
created to push the product to the market. The alternative approach which is
consistent with ECR focuses on the customer’s needs and starts with an analysis of
their requirements which is accumulated through market research and close

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cooperation with customers and suppliers for new product development. The supply
chain is constructed to deliver value to the customer by reducing costs and increasing
service quality. The Push supply chain is a supply chain that emphasises the
distribution of products to passive customers. Another is the Pull supply chain which
places an emphasis on using the supply chain to deliver value to customers who are
actively involved in product and service specifications (Chaffey, 2002,pp216-254).
Commitment is an operational factor where an industrial customer continues to
purchase from a particular supplier because the customer values the relations it has
with the supplier (Abdul-Muhmin, 2002). As Barratt (2004) said, the inter-
organisational relationships trust has been calculated at length, not only as a challenge
for the supply chain but also because trust can add considerably to the long-term
constancy of an organisation. Also, this argument suggests that effective co-ordination
of the supply chain is built on a foundation of trust and commitment. Nevertheless,
the implementation of such a holistic view of the supply chain requires a degree of
trust between all players, that's why it is linked with partnership initiatives.

The value of B2B in e-SCM

Effectual supply chain planning is based on the sharing of information and trusts
between partners and is an essential requirement for successful SCM (G Kwon and
Suh, 2004). Most companies developing supply chain technology are only getting a
small separation of those benefits that are promised. It is not that a company doesn’t
trust the technology (Sherer, 2005). In contrast, a partnership with high trust would
enjoy open communication and a willingness to take risks. In addition to this, a
company in a high-trust relationship are not afraid to share all their information and
believe in the content of the information received. A limitation should be noted here,
in that information sharing and plus point specificity could be used as tools to enhance
the level of trust (Abdul-Muhmin, 2002). When supply chain members have a
relatively balanced dependency and a high degree of trust, the information flow in the
supply chain will be effective. This in turn increases the speed and volume of the
information transfers, and enhances the accuracy and transparency of the supply chain
operation (Tjader, 2004).
In addition to mastering technological challenges, companies will need to
determine the degree to which common databases will be shared with enterprise
partners. Referred to as the ‘trust factor’, shared information is the key to assuring
that decisions can be made as soon as the demand is realised, so knowledge
management is a strong benefit for the value chain in B2B.

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Knowledge management in e-SCM

Knowledge management can also consider the supply chains performance,

customer value, and for the members of the supply chain. Professional networks, such
as a B2B “vertical-net” network, allow the members of an industry to share
information with each other and keep industry practices. Industry networks also
succeed in contexts that are industry specific, such as trade shows and skill-based
groupings that promote particular skills. When B2B members sharing increases in
practice, as a result it benefits from improved knowledge management. For example
improvements in quality and cost reductions become possible. Business suppliers
must have an exact technological capability to qualify. A firm’s strategy for
knowledge management should reflect its competitive strategy (Hansen, et al., 1999).
Concerning those functions that are more likely to be replaced, suppliers should
collaborate with producers and customers to integrate their operational activities in
order to achieve a higher efficiency level, which will eventually benefit all the parties
in the supply chain. For those functions that are less likely to be replaced, suppliers
may continue to strengthen their competitive edge and further add value to customers.
Suppliers may need to ensure that large volumes of supply and demand data are well-
managed and offers near-perfect information to buyers and sellers, as well as making
sure they are easily available. The ability of suppliers to provide market intelligence
to producers is considered as added value because it is difficult for producers to
monitor each and every one of their customers. Furthermore, with the findings,
suppliers may make some strategic decisions (Janta, et al., 2003). In actuality, the
value of the supplier-to-business relationship, are that it is reliable on delivery,
service, support, and flexibility, which are all more significant than the character of
the product in influencing purchasing decisions. With these affected changes,
relationships carry on their values in formative customer performance, as in other
traditional forms of competitive differentiation, relationships are growing in
importance in determining whether businesses succeed or fail (Greenberg, 2002).

The relationship between SCM and CRM in B2B

What then is CRM? It is a complete set of processes and technologies for

managing the relationships with potential and current customers and business partners
across marketing, sales, and services, regardless of the communication channel. The
goal of CRM is to optimise customer and partner satisfaction, revenue, and business
efficiency, by building the strongest possible relationships at an organisational level.
Successful CRM requires a holistic approach to every relationship, with the entire

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organisation sharing and contributing to that view (Greenberg, 2002).

CRM technology links the front office, such as sales, marketing and customer
service, to the back office, such as the financial, operations, logistics and human
resources functions with the company’s customers (Chen and Popovich, 2003). The
communication with customers can be through the Internet, e-mail, sales, direct mail,
telemarketing operations, call centres, advertising, fax, pagers, stores, and kiosks. A
CRM business strategy leverages the marketing, operations, sales, customer service,
human resources, R&D and finance, as well as IT and the Internet, to maximise
productivity for customer communications. For customers, CRM offers
customisation, simplicity, and convenience for completing their communications,
regardless of the channel used for contact. IT has long been recognised as re-
designing the business process, by facilitating changes to work practices and
establishing innovative methods that link a company with its customers and suppliers.
CRM takes full advantage of technological innovations with their ability to collect
and analyse data on customer patterns, interpreting customer behaviour, developing
predictive models, responding with timely and effective customised communications,
and delivering products and service value to individual customers. CRM is a broad
approach that promises to maximise relationships with all customers, including
Internet or ‘e-customers’, distribution channel members, and suppliers’, by getting to
‘know’ each customer through data mining techniques and a customer-centre business
strategy that helps the organisation to proactively and consistently offer more products
and services that improve customer maintenance and loyalty over longer periods of
time. Organisations today must focus on delivering the highest value of service to
customers through better communications, faster delivery, and personalised products
and services. Since a large percentage of customer connections will occur on the
Internet, rather than with employees, technology must adapt to the changing and
changeable market (Chen and Popovich, 2003).
The computerisation of the customer and supplier management process helps
the enterprise to fully implement the CRM strategy in each department, to achieve a
close relationship with suppliers and their partners by combining their strategy, and
accordingly increasing the manufacturer's revenue, competitiveness, and reputation in
the market. It is intended to build long-term and profitable relationships with chosen
customers, as well as to maximise the value of a manufacturers' supply base by
increasing flexibility and responsiveness to customer requirements and substantially
faster cycle times (Choy et al., 2003).
CRM has been paid more attention over recent years. It has long been
recognised that marketing requires a deep understanding of customers’ business
processes and indeed of their value creation processes. The achievement of this

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change must begin with the identification of the interlinking roles of CRM and SCM
processes. This thesis will shortly examine CRM processes in more detail; however, it
is firstly appropriate to explain why the supply chain is so important in the context of
CRM. The purpose of managing CRM and SCM in an integrated manner is to enable
the organisation to become more agile in its response to demand (J.Baker, 2003).

From SCM to CRM in B2B

The CRM have the advantage of providing improvements to the supply chain,
as firms have moved to a new model that emphasises the matching of the degree of
customer care with the particular customer and the customer’s real needs for a
service. In a B2B situation, most of the customers will be large, fully developed
accounts that are looking to automate or improve the way they transact their business
with the suppliers (Poirier and Baure, 2000). Indeed, it has been suggested that in a
world of converging consumer taste, rapidly spreading technology, an escalation in
fixed costs, and growing protectionism, more collaborative relationships with
suppliers are critical instruments for serving customers in a global environment.
(Mchugh, etal., 2003).
B2B services cover an enormous range of activities, including: accounting,
advertising, book-keeping, consultancy, design, and so on. Suppliers have to decide
what services they want to offer their customers. Customisation has been the norm in
B2B markets for many years. Suppliers regularly make adaptations to suit the needs
of their customers, with it also being true that customers make adaptations to suit their
suppliers (Buttle, 2004).
However, is all about communication and activities; as it involves co-
production and co-consumption in which time, location, and identity boundaries
between the supplier and the customers. At the same time, each member in the value
chain is a separate and independent organisation with its own resources and
management, as it is an integrated network of organisations and not a traditional
integrated organisation. The point is a unique aspect of CRM, in that it is a value-
added activity through mutual interdependence and collaboration between suppliers
and customer. Finally, with electronic ordering and Internet commerce, it is also
becoming prevalent for traditional product offerings, especially in business-to-
business marketing (Parvatiyar and Sheth, 2002).
The application of IT is not only useful for transactions with the end users but
also has some fundamental advantages for transactions between businesses. The latter,
widely known as business-to-business (B2B), has superior advantages to offer over
the traditional market space.

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The link between SCM and CRM

The concentrated global competition between manufacturers to co-ordinate the

industry value chain from suppliers to customers and produce quick response has
made customer-supplier relationship management important in the new business era,
with the power of the customer being the crucial point because of the increasing
power of the customer community, as customers can share their opinions with each
other. Therefore, the focus of a corporate management approach should be to switch
to methods of dealing with customer-managed relationships (Law et al., 2003).
The business process integration of CRM and SCM further helps companies
manage and service a customer profitably, ensuring that the insights gained from
customers in the front end of the business planning process are transformed into
profits through planning efficiencies in the supply chain(Z.Zeng A., and K.Pathak B.,
2003). For example, a tightly integrated CRM and SCM solution allows companies to
bring the service management business process to life, promoting the management of
everything from call centre operations and field services, through to service delivery
and inventory management. True CRM and SCM integration allows companies to
translate fluctuations in the demand chain and changes in market conditions captured
in the CRM system into real-time optimisation in the supply chain. This is achieved
by integrating the campaign and demand planning and the demand and supply
planning capabilities of the SCM system. The solution further enables organisations to
effectively manage customer expectations, based upon the capabilities of an
organisation's supply network. These capabilities allow companies to maximise
revenue opportunities, and more importantly, to provide higher levels of customer
satisfaction.
CRM is a new initiative that focuses on aligning the whole organisation to build
profitable, lasting relationships with customers, and thus presenting the trend for
supply chain development. SCM, as discussed before, coordinates within and between
various supply-chain members and aligns interdependent decision-making processes.
These technologies with their existing features and functions can collectively provide
the ultimate end-to-end integration. The concept of integration is achieved based upon
the functionality of the existing CRM, ERP, and SCM (Z.Zeng A., and K.Pathak B.,
2003).
ERP and CRM are both a past and a future. ERP, enterprise resource planning,
got on everyone's as a way of providing companies with an integrated suite of
applications together with a wide range of disparate back-office functions and
information(Z.Zeng A., and K.Pathak B., 2003).It was the corporate ‘killer

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application’ of the early to mid-1990s. CRM, which evolved over many years from
less capable and more narrowly focused sales automation and customer service
applications, emerged more recently as a killer application in its own right and is by
some accounts the fastest growing software category. In fact, the reach being granted
CRM is one factor that is impelling to connect and integrate CRM functions with all
the power latent in the information living within the established ERP?

Conclusion

It is apparent form the development of the supply chain management process

history. The business processes, integration, challenges, and organisation structures
are common throughout successful CRM implementations. CRM builds long-term
corporate survival and customer retention and is now a practical and cost-effective
practice to implement due to the emerging technology. The e-CRM strategy brings
affect brick and mortar companies. How though does the high-technology help form a
positive bridge from SCM to CRM? The benefits from a positive CRM exceed the
information from SCM and display a very good linkage with the business model. It
also will be relative research in the future.

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