E-SCM and inventory management: a study of multiple cases in a segment of the department store chain

Abstract

Inventory management through the supply chains is a theme that has always enticed managers throughout the world. Due to the increase in market competitiveness and complexity, the traditional statistical models of forecasting demand, based on time series, no longer met the needs imposed on businesses to maintain adequate levels of their inventory and supply interruptions. With the intent to meet these market demands, ERP systems appeared in the 1990's. Nevertheless, even if allowing for a more adequate level of inventory and supply interruptions achieved mainly by the optimization of internal processes and the reduction in lead time, ERP systems did not contribute to reach the SCM's desired levels of inventory that were aimed at by the more competitive businesses. This is because ERP limits itself to an internal analysis of the business. By contrast, inventory management depends on the consumption information (which is external to the business). Aiming to improve even further the level of services delivered to the end consumer, new solutions have been developed, among them the e-SCM, which, since it makes consumption information available in real time, ends up being more dynamic and efficient than the traditional demand forecasting models, Therefore, the present study aims to analyze how the e-SCM can collaborate in maintaining adequate levels of inventory and interruptions in the supply chains. The hypothesis made is that the traditional statistical forecasting models, based on time series and isolatedly, are no longer adequate to adjust the demand, as the tools based on these models do not update the demand in real time and this is fundamental in the current business dynamics. The research method used was the study of multiple cases in a segment of a chain involving a large retailer, its Distribution Center and a supplier of home appliances. For the analysis of the data, the content analysis technique was used. As main results, it was observed that, after the integration of the chain segment by the e-SCM, there was a reduction in the level of the inventory (36.8% in retail and 18% in the industry) and in inventory turnover (from 18.3 to 5.1 days in retail and from 19.6 to 3.2 days in the Distribution Center), aside from the variation in the interruption (from 17.3% to 2.6% in retail and from 3% to 0.1% in the case of the Distribution Center). Therefore, the study brings forth strong indication that the integration of the chain through the e-SCM, may contribute to the SCM's competitiveness.