IT in Supply Chain Management

Definitions
Supply chain: The flow of materials, information, money, and services from raw material suppliers, through factories and warehouses to the end customer; includes the organizations and processes involved. Supply chain management (SCM): The planning, organizing and coordinating of all supply chains activities. E-supply chain: A supply chain that is managed electronically usually with Web2 based software.

The Flows in the Supply Chain

Materials flows: These are all physical products, raw materials, supplies, and so forth, that flow along the chain. The concept of materials flows include reverse flows-returned products, recycled products and disposal of materials or products. Information flows: All data related to demand, shipments, orders, returns, and schedules. Financial flows: All transfers of money, payments, credit card information and authorization, payment schedules, e-payments and credit related data.

The Structure and Components of Supply Chains

The supply chain involves three segments: Upstream, where sourcing or procurement from external suppliers occur Internal, where packaging, assembly, or manufacturing take place Downstream, where distribution or dispersal take place, frequently by external distributors Supply chain also include the movement of a product or a service and the organizations and individuals involved, are part of the chain as well.

An Automotive Supply Chain

Types of Supply Chains

Integrated make-to-stock, Continuous replenishment, Build-to-order, and Channel assembly.

Supply Chain Problems and Solutions

Problems along the supply chain from two sources: Uncertainties Need to coordinate several activities, internal units and business partners A major source of supply chain Uncertainties is the demand forecast. The actual demand may be influenced by several activities such as competition, prices, weather conditions, technological developments, customers general confidence, delivery times and more.

Bullwhip Effect
Erratic shifts in orders up and down the supply chain. It is related to properly setting inventory levels in various parts of the supply chain

Solution to Supply Chain Problems

Vertical integration: the upstream part of the supply chain with the internal part, typically by purchasing up- steam suppliers, in order to ensure availability of supplier . Using inventories: The most common solution used by companies to solve supply chain problems is building inventories as an insurance against Chapter 8 9 supply chain uncertainties.

Solutions to SC Problems cont

Information sharing: sharing information along the supply chain can improve demand forecasts. Such sharing can be facilitated by EDI, extranets, and groupware technologies. Vendor-managed inventory (VMI): allowing suppliers to monitor, the inventory levels of their products in the retailors stores and to replenish inventory when needed.
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Solutions to SC Problems cont

Changing a linear SC to a Hub: In linear supply chains, information is processed in a sequence , which slows down its flow. One solution is to change the linear chain into hub. Each partner in the supply chain can directly access the images in the data bank Supply chain collaboration:. Proper supply chain and inventory management requires coordination of all different activities and links of the supply chain. Successful coordination enables goods to move smoothly and on time from supplier to manufacturers to customers, which enables a firm to keep inventories low and costs down
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Solutions to SC problems cont

SC Team: A group of tightly integrated businesses that work together to serve the customer; each task is done by the member of the team who is best capable of doing the task. Virtual factory:. Collaborative enterprise application that provides a computerized model of a factory.
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IT Supported Solutions to SC Problems

Problem Area
Slow communication Difficult product configuration Select and coordinate suppliers Supplier arrive when needed

Solution
Use wireless devices to find vehicle locations to expedite salespeoples contact with headquarters. Use hub supply chain to enable online access to information Use DSS and intelligent systems for rapid and accurate analysis Use DSS to determine which suppliers to use, determine how to create strategic partnerships Use just-in-time approach and collaboration with suppliers. use IT-enable outsource. Use DSS to determine what to outsource and when to buy and not make Use e-commerce tools and business intelligence models Use optimization models to decide and employ e-procurement

Handle peak demands

Expedite lead time for buying and selling Tool many or too few suppliers Control inventory levels Forecast fluctuating demand Expedite flows in the chain suppliers relationships

Manufacture only after order received (online) . Use VMI and web-services Use collaboration (like CPFR) or intelligent system Automate material , information and money flows Improve supplier relationship by using portals, web-based call center, and other CRM and PRM tools

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ROLE OF INFORMATION TECHNOLOGY

Purchasing Operations Logistics Customer Relationships Vendor Relationships Internal To Firm

What is the role of Information Technology in supply chain management? What are the key challenges in adapting information technology to improve the efficiency of the supply chain? What are the future trends in terms of the way IT is going to influence supply chain management?

Use of Information Across the Supply Chain

Major Functional Roles of IT in SCM Processing basic business transactions: IT supports frictionless transaction execution through supply chain execution systems. This forms the core of SCM. Processes related to the subject of order management, manufacturing execution, inventory management, procurement, transportation execution, warehouse management are mapped. Enhancing collaboration and coordination in chain: IT is a means for enhancing collaboration and coordination in supply chains through Supply chain collaboration systems. The collaborative part focuses primarily on cooperation with partners and customers via the internet. Support SCM DSS :IT-based decision support systems (DSS) can be used to aid better decisions through Supply chain planning systems. This provides capability to SCM to process and evaluate SCM related decisions using different optimization techniques. Measure and report SCM performance: It is important for companies to measure their supply chain performance to know if they are improving. IT-based business intelligence (BI) includes a technology stack with layers for reporting and analysis tools, data warehouse platforms, and data integration tools.

Impact of IT in Supply Chain Management

Technologies for Effective Supply Chain Management Collaboration and Coordination Systems

Electronic data interchange (EDI) refers to a computer-tocomputer exchange of business documents in a standard format. Internet at the most basic level, a network of networks, it provides instant and global access to numerous organizations, individuals and information sources. Through systems like the World Wide Web, Internet users are able to conduct organized searches on specific topics as well as browse various web sites. Intranets are networks internal to organization that use the same technology of global internet. Extensible Markup Language (XML) is a language description format that is fast becoming the standard for internet transactions. However, it does not address the issue of terminology in a specific industry. Industry specific initiatives have been taken to address this gap. RosettaNet is one such standard for high-tech industry that enables transaction between manufacturers and suppliers. ebXML is another related standard that defines dictionaries and Partner interface processes, which handle multiple data transactions among partners. It combines message format specifications with business process models, a set of syntax-neutral core components and distributed repositories

IT in Supply Chain Decision Support

Strategic-level planning involves supply-chain network design, which

determines the location, size, and optimal numbers of suppliers, production plants, and distributors to be used in the network. This planning phase can be summarized as determining the nodes and arcs of network and their relationships. Strategic-level planning is long-range planning and is typically performed every few years, when firms need to expand their capabilities. The method most often used is optimization. The tactical level of supply chain management covers the planning of supplies, manufacturing schedules, and the forecasting of demand. It primarily includes the optimization of flow of goods and services through a given network. Decisions at this level include which products must be produced at what plants in what quantity and which suppliers must source raw materials and sub-components. Tactical-level planning is medium-range planning, which is typically performed on a monthly basis. Advanced planning and scheduling (APS) is the key software product for this planning. The method most often used is optimization. The operational level of supply chain management focuses on dayto-day operations and enables efficiencies in production, distribution, inventory, and transportation for short term planning.

The Four Factors in Operation Planning Systems

Demand planning generates demand forecast based on various

historical and other related information. The method used is mostly statistical analysis. Production scheduling at all plants on a day-to-day or hour-to-hour basis based on the tactical plan or demand forecasts. The method used is constraint-based feasibility analysis that satisfies all production constraints. Inventory planning generates inventory plans for the various facilities in the supply chain based on average demand, demand variability, and source material lead times. The methods used are statistical and computational. Transportation planning produces transportation routes and schedules based on availability of transportation on a lane, cost, and customer delivery schedules. Fleet planning, transportation mode selection, routing, and distribution are also part of transportation planning systems. The methods used are mostly heuristic.

Technologies for Effective Supply Chain Management Interface : DSS must have interfaces to get data from other relational databases Scheduling algorithms : Based on the data gathered, schedule can be generated by running operations research algorithm for scheduling. DSS should be able to formulate the operations research model. Direct link should be available to commercial available optimizers. Expert system rules : Once the data have been gathered and a production schedule is produced. Expert system rules can capture some of the expertise of the scheduler and can validate the production schedule feasibility. Business warehouse : To perform pre-defined historical data analysis and status reports, DSS will need a business warehouse where data can be stored after uploading from other systems and customized queries can be written. Visual composer: Visual composer is a strong tool to efficiently represent data into graphs. This will be needed to present the results for DSS Graphical user interface: GUI will be needed for display of results, hierarchical drill down, pull down menus, creation of customized result display

IT in Supply Chain Measurement and Reporting: Key Supply Chain Metrics

Supply chain planning metrics: Forecast accuracy, total inventory, plant utilization, warehouse utilization, fleet utilization, dwell time through supply chain, plan versus actual inventory at stores, and production plan variance Supplier relationship management metrics: Supplier quality, purchase costs, direct material costs, delivery performance, and supplier on-time performance Customer relationship management metrics: Customer lift, customer retention, customer life time value, sales performance, sales off take versus out of stock at stores, product availability compliance, promotions goal compliance, inquiry handling time, and win ratio Enterprise resource planning metrics: Perfect order, supply chain costs, accounts payable, accounts receivable, cash-to-cash cycle times, cost detail, and order cycle time

IT in Supply Chain Measurement and Reporting: Enabling Technologies

Data warehouse Dashboards and Scoreboards : Enterprise performance dashboards: It consolidates data from various divisions and business segments and provide a holistic view of the enterprise for senior management Divisional dashboards: It displays performance metrics and numbers specific to divisional and operational managers Process / activity monitoring dashboards: It monitors specific business processes or widespread activities for example order monitoring dashboards may help monitor live order conditions, open orders, overdue orders, perfect orders etc. Adhoc query capability: Adhoc query is used to report on data that is not covered by standard reports. By selecting selection fields and output fields, stored data is accessed anywhere within the enterprise system. It does not need any programming skills & any pre-defined template to create reports. Interface: Data warehouse and BI tools must have interfaces to get data from other relational databases

Categories of Firms Offering Supply Chain Application Software

ERP Vendors offering comprehensive solution for variety of vertical industries SAP, Oracle Independent vendors offering comprehensive solution for variety of vertical industries solution i2 Technology, Manugistics Niche players offering solution for specific supply chain functionalities Adapta, viewlocity, Demand solutions Niche Players offering solution for specific industries Aspen Technologies , Click Commerce, Adexa

Future Trends
Increased polarization of the SCM application software market New technologies will be judged on their business benefits: Collaborative planning forecasting and replenishment (CPFR), and Radio-frequency identification (RFID) The emergence of supply chain event management (SCEM) applications, enabled by the Internet make it possible to sense changes in the supply chain environment in near realtime Emergence of on demand-hosted supply chain software SOA ( Service oriented architecture)-based collaboration

Purchasing
Procurement

Communication with Vendors Checking Vendor Quotes Negotiating Price and Term Agreements Purchasing
Processing Applications Order placement Order status Reduced costs Reduced errors

Operations Inventory Management

Inventory Management is one of the costliest and tiresome aspects of SCM.
Most popular use of IT in Inventory Management is the communication of stock outs by customers to vendors or the notification of stock outs by companies to their customers. Enabled companies to more quickly institute EDI information programs with their customers. Helps firms be proactive in terms of inventory management. Keeps customers informed regarding shipping delays, inventory emergencies and change in lead times.

Operations Production Scheduling

Production scheduling has typically been the most difficult part of SCM. IT enables firms to minimize problems in their production scheduling . Improves communication between customers, vendors and firms. Facilitates the application of concepts like Just in Time to coordinate better with vendors. Helps simulate shop floor operations and identify and remove bottle necks.

Operations Production Scheduling

Production scheduling has typically been the most difficult part of SCM. IT enables firms to minimize problems in their production scheduling . Improves communication between customers, vendors and firms. Facilitates the application of concepts like Just in Time to coordinate better with vendors. Helps simulate shop floor operations and identify and remove bottle necks.

Logistics
Transport typically contributes the highest cost component in Supply Chain. Most popular IT application: Monitoring of pickups at regional distribution centers. Tracking shipments gives data about the reliability performance of the carriers being used. Provides managers with the information needed to inform carriers of shipment delays.

Claims reporting, processing and settlement are more easily handled through IT tracking applications.
Helps reduce cycle time, inventory of parts, WIP, and finished goods in pipeline and accelerate the payment and billing of delivered items.

Customer & Vendor Relationships

Customer Relationships
Customer Satisfaction is the next step beyond Total Quality Management (TQM). In the past customer involvement in improving a firms services was limited. Recent advancements in IT has provided the firms with the ability to let customers contact the firm regarding service issues and integrate customer information. Vendor Relationships Closer buyer supplier relationships. Increased trust between vendors and firms.

Rise in relation specific investments and commitment.

Leads to open and collaborative information sharing.

Internal To Firms
5 Fold Benefits 1.Long Term Reduced Costs of Operations

1.Standardized Procedures.
1.Better resource management.

1.Increased flexibility.
1.Responsive and Adaptive Organization.

Electronic Data Interchange (EDI) Bar Coding and Scanner Enterprise Resource Planning (ERP) Systems Warehouse Management Systems Transportation Management Systems Inventory Management Systems

SCM: EXISTING IT TOOLS AND APPLICATIONS

Electronic Data Interchange (EDI)

Computer to computer exchange of structured data Structural links setup between organizations having a long-term trading relationship Advantages include speeding up transactions and reduce cost and error rates Other benefits include quick process to information, better customer service, reduced paperwork, increased productivity, improved tracing and expediting, cost efficiency and improved billing.

Bar Coding and Scanner

Representation of a number or code in a form suitable for reading by machines. Identify and track goods at all stages in the process. Horizontal Order - Ladder Orientation. Vertical Order - Picket Fence Orientation. Use of bar codes can speed up operations significantly. Problems occur if bar codes are defaced or the labels fall off in transit. Most visible in the check out counter of super markets and hyper markets. Code specifies name of product and its manufacturer. Other applications are tracking the moving items such as components in PC assembly operations, automobiles in assembly plants.

Enterprise Resource Planning (ERP) Systems

Enterprise-wide Information Systems used for automating all activities and functions of a business. Transaction-based information systems that are integrated across the whole business. Data captured for the whole business into a single computer package which gives a single source for all the key business information activities, such as customer orders, inventory and financials. Implications in terms of Business Process Reengineering (BPR), changes in organizational structure, people and change management. Vendors include SAP, Baan and People Soft.

Warehouse Management Systems

Control traditional activities of warehouse operations. Areas covered usually include receipt of goods, allocation or recording of storage locations, replenishment of picking locations, production of picking instructions or lists, order picking, order assembly and stock rotation. Automated storage and retrieval systems automated guided vehicles (AGVs), and the many other devices that are relatively common in todays modern warehouse such as conveyors, carousels, sortation systems.

A Laser Guided Vehicle in Operation

Transportation Management Systems

Provide more visibility into shipments and orders. Scheduling issues are also addressed on time. Multiple transportation options can be explored as a result of earlier visibility into the supply chain. Timely communication and status reports can also be obtained. By having control on its supply chain, businesses can make efficient routing decisions. An example of such a system is developed by Target Corporation and NTE.

Inventory Management Systems

The systems work in a circular process, from purchase tracking to inventory monitoring to reordering and back around again. Ability to track sales and available inventory, communicate with suppliers in near real-time and receive and incorporate other data, such as seasonal demand. Must be flexible, allowing for a merchant's intuition and must be able to tell a storeowner when its time to reorder and how much to purchase.

Radio Frequency Identification Detector Software Agents Decision Support Systems E Commerce Electronic Supply Chain

EMERGING SOLUTIONS FOR IT IN SCM

Radio frequency identification detector (RFID)

RFID vs Barcodes Barcodes are line-of-sight technology. RFID tag can read as long as they are within the radar of a reader Can identify only manufacturer and product. Barcode for one juice carton is same as every other making it impossible to identify which one might pass its expiration date earlier. RFID can store more information like physical attributes (colour, size) making it more useful for SKUs

RFID Working Structure Apparel Industry

Advantages of RFID in SCM

Asset management RFID tags can be automatically read by a gate reader for any outbound and inbound logistics By matching the reading with specific shipment information in a database, manufacturers could automatically build a record of what specific shipping containers were sent to each customer This information can be useful to document cycle time and optimize it. Tracking and visibility By applying RFID tags company can gain accurate, real time visibility of the moving goods. It is also used in subassemblies of production line to track the progress of work-in-progress items. This helps manufacturers to change from PUSH system to PULL system of JIT.

Advantages of RFID in SCM

Regulatory Compliance Companies that transport or process hazardous materials, food, pharmaceuticals and other regulated materials could record the time they received and transferred the material on an RFID tag that travels with the material. Updating the tag with real-time handling data creates a chain-ofcustody record that could be used to satisfy FDA, OSHA and other regulatory reporting requirements. Service and Warranty Authorizations Upon completion of repairs or service, a record of the activity performed could be encoded on the tag to provide a complete maintenance history that travels with the item. Returns & Recall Management In the event of a recall, companies could trace specific shipments to specific customers, which would enable a highly targeted notification and return operation and avoid a costly general recall

Software agents
A computer system or a program that is characterized by the properties of autonomy, social ability, reactivity and proactiveness can be denoted as an agent. Buyer agents or shopping bots Buyer agents travel around network (i.e. the internet) retrieving information about goods and services.

Software agents

Observe and report on equipment, usually computer systems. Keep track of company inventory levels, observe competitors price level etc.

Find trends and patterns in an abundance of information from many different sources. Classification is one of the most common types of data mining.

Examples of use of agents in SCM

Agent that monitors inventory, planning, and scheduling equipment ordering to keep costs down, as well as food storage facilities Proctor and Gamble used agents to transform its supply chain network into a network of software agents whose behaviors are programmed based on consumer patterns Merck, a leading researchdriven pharmaceutical company used agents to help it find more efficient ways to distribute antiHIV drugs

Decision Support System

A decision support system (DSS) is a specified class of computer-based information system that supports business or organizational decision-making activities SCM problems are not rigid and require not just computer but human knowledge to effectively manage the systems DSS systems ensures that analysis is easily understood with the help of computers Also called Advanced Planning and Scheduling (APS) systems

DSS Scope in SCM & Components

Demand planning - determine accurate forecasts based on historical data, help understand buying patterns of customers Supply planning - these are sometimes known as Distribution Resource Planning (DRP) and help in inventory planning, transportation planning, procurement planning Manufacturing planning and scheduling - these incorporate the traditional Material Requirement Planning (MRP) system. It helps to efficiently allocate manufacturing resources to meet demand

Web Services

Application Web Services @ Sun Microsystems

E Commerce
Tools and techniques to conduct business in a paper-free environment. Common Examples : Electronic Data Interchange Electronic Fund Transfers Shared Databases Magnetic/Optical Data Capture Electronic Publishing Electronic Bulletin Boards

Electronic Supply Chains

Electronically facilitated among firms. Links trading partners to allow them to buy, sell and move products, services and cash. Two Types Electronic Data Interchange (EDI) Based Internet Based Low Implementation Cost. Applications to exchange information. Intels Goal : Become 100% e Corporation Combine Internet Tech & Critical Businesses

Suzlon Energy

CASE STUDY

About Suzlon Energy

Global wind power company based in India 5th largest wind turbine manufacturer Presence in 33 countries across 6 continents Several manufacturing units at remote locations in India

Problems faced by Suzlon Energy

Integration of information across the energy generating sites is complex. Large turnaround time in case of failure. Existing systems doesnt integrate information. Unavailablity of real time data. Cumbersome manual processes. Inaccuracies in the data resulted in delay.

ERP The Solution

To overcome the challenges mentioned Suzlon energy felt a strong push towards adopting a standardized ERP package ERP provided the much needed integration and a connect between different sites, corporate offices and branches ERP had the power to provide the real time data Growth without an ERP system that gave sufficient impetus and drive to all concerns was very slow

Advantages with SAP ERP

Implementation Snapshot

SAP Sales Module

Various tabs to control sales

Outcomes
Complete information integration and availability in real time Improved financial processes Better planned projects Immediate error detection Heightened information exchange across functions Ability to analyze the impact of strategic decision Better inventory management and invoicing Ability to perform simulation analysis of business processes Single window interface