1. Supply Chain and Competitive Advantage

2. The production of goods and services is the result of the efforts of many organisations – a complex web of contracts and co-operation known as the supply chain or the value system.

3. Supply Chains

4. Supply Chains (cont.) Supply chain parts Upstream supply chain
activities of a manufacturing company with its suppliers
Internal supply chain
in-house processes for transforming the inputs from the suppliers into the outputs
Downstream supply chain
activities involved in delivering the products to the final customers

5. Supply Chains (cont.) The success of an supply chain depends on:
The ability of all supply chain partners to view partner collaboration as a strategic asset
Information visibility along the entire supply chain
Speed, cost, quality, and customer service
Integrating the supply chain segments more tightly

6. Supply Chain Problems and Solutions
Typical problems along the supply chain
Slow and prone to errors because of the length of the chain involving many internal and external partners
Large inventories without the ability to meet demand
Insufficient logistics infrastructure
Poor quality

7. Supply Chain Problems (cont.)
Bullwhip effect: Erratic shifts in orders up and down supply chains
Creates production and inventory problems
Stockpiling can lead to large inventories
Effect is handled by information sharing—collaborative commerce

8. Supply Chain Problems (cont.)
Need for information sharing along the supply chain including issues on:
product pricing
inventory
shipping status
credit and financial information
technology news

9. Supply Chain Problems (cont.)
Information systems are the links that enable communication and collaboration along the supply chain
Information and information technology are one of the keys to the success, and even the survival in today’s economy

10. Supply Chain Problems (cont.)
Major solutions provided by an EC approach and technologies
Order taking
Order fulfillment
Electronic payments
Inventories can be minimized
Collaborative commerce

11. Porter’s value chain model
Primary Activities:
Inbound Logistics
Operations (Production)
Outbound Logistics
Marketing and Sales
Service

12. Porter’s value chain model
Support Activities:
Procurement
Technology Development
Human Resources Management
Firm Infrastructure

13. Linked value chains Inbound Logistics —from Suppliers
Outbound Logistics —from Customers

14. Porter’s value system Overall organisational competitive advantage:
(Inter-organisational value chain)
Porter’s value system
Overall organisational competitive advantage:
efficiency of the company
quality of its products
plus
efficiency and quality of suppliers
efficiency of wholesalers (Channel)
efficiency of retailers

15. Competitive advantage
Three basic strategies:
Cost leadership: Prices lower than the competition.
Differentiation: Products with some quality that makes them more attractive than the competition.
Focus: Concentration on a single aspect of the market (a niche).
(Porter, 1980)

16. IT and competitive advantage
Information and communications technologies (ICTs) can:
Cost leadership:
Reduce administrative cost (including the logistics supply chain)
Differentiation:
quality of service
responsiveness to customer requirements.
Focus:
Target information on the selected segment.
Gather customer data from that segment.
Quick response and just-in-time can:
Evolve new products and services.
Facilitate customisation.

17. Porter’s model of competitive rivalry

18. Porter’s model of competitive rivalry
The model helps a firm identify threats to its competitive position and to lay plans, that may include IT and e-Commerce, to protect or enhance that position.
The five forces identified by the model are:
Competitive rivalry among existing players.
Threat of potential new entrants to the sector.
Threat of a substitute product or service.
The bargaining power of the buyers.
The bargaining power of the suppliers.

19. Porter’s model – new entrants
The ease with which a company can enter a given trade sector.
Barrier to entry include the need for:
Capital
Knowledge
Skills
The need for IT investment can be a barrier to entry.
Internet e-Commerce can facilitate entry, e.g.:
Internet bookshops
Internet banks

20. Porter’s model – substitution
A new product or service that becomes available and supplies the same function as the existing product:
Substitution of natural fibres by synthetic fibres
Replacement of glass bottles by a plastic alternative
Replacement of the typewriter by the word processor
e-Commerce substitution:
Online banking
Down-loadable music

21. Porter’s model – bargaining power of buyers
Buyers have bargaining power where:
There are a number of competitors.
There is a surplus of supply.
Defences include:
Low production cost.
Product branding.
Efficient service (ICTs facilitated).
Value added services (ICTs facilitated).
e-Commerce defences:
Reshaped supply chain (dis-intermediarisation).

22. Porter’s model – bargaining power of suppliers
Suppliers have bargaining power where:
There are few or no competitors.
There is a shortage of supply.
(The mirror image of the buyer’s position)

23. Porter’s model – existing players
The competition between existing players is won on the basis of the generic competitive advantage of price, differentiation or focus.
The use of e‑Commerce can:
Reduce the administrative costs of trading.
Increase the logistic efficiency of the supply chain.
Meet any requirements to trade electronically.
Differentiate the product or service.
Cut out intermediaries in the supply chain.
Provide a new marketing channel.

24. First mover advantage
The first organisation to implement a new type of ICT system can gain the price advantage or differentiation while competitors are still operating with traditional methods and systems.
e-Commerce first movers include:
amazon.com
eBay
First mover take a big risk:
New business models.
New (expensive) technologies
Second/late movers copy proven ideas and technological applications. 

25. First mover advantage
To gain competitive advantage using IS and IT usually needs an element of surprise; the system needs to be out in the market place before competitors make a start in copying the idea.
Sustaining that competitive advantage requires either:
Converting the technical advantage into brand advantage.
Sustaining the technical lead by continuous product and service development.
The development of many e-Commerce systems, cannot be entirely private – customers had to become involved and competitors can copy.

26. Competitive advantage using e-commerce
Force
System
Competitive advantage
New entrants/ substitution
Internet e-commerce
Reduced entry costs
New sales channel
New service opportunities
Suppliers (& trade buyers)
e-commerce logistics (EDI/IeC)
Cost reductions
Quick response
Lockin
Buyers
Internet e-commerce
dis-intermediarisation
Customer Information
Competitive rivalry
E-commerce
Cost leadership
Differentiation
Focus