Information Technology and the Supply Chain

Dr.T.V.Subramanian

Role of Information Technology in a Supply Chain

Information is the driver that serves as the glue to create a coordinated supply chain Information must have the following characteristics to be useful:
Accurate Accessible in a timely manner Information must be of the right kind

Provides supply chain visibility Information provides the basis for supply chain management decisions
Inventory Transportation Facility

Information System classification

By Application (Usage)
Transaction Processing System (TPS) Office automation system (OAS) Management Information System (MIS)

Decision support system(DSS)-Model-based Expert System-Knowledge-based Neural Networking applications-Case-basedf Data warehousing and mining techniques

The Supply Chain IT Framework

The Supply Chain Macro Processes
Customer Relationship Management (CRM) Internal Supply Chain Management (ISCM) Supplier Relationship Management (SRM)

Plus: Transaction Management Foundation

Macro Processes Applied to the Evolution of Software

Macro Processes in a Supply Chain

Supplier Relationship Management (SRM) Internal Supply Chain Management (ISCM) Customer Relationship Management (CRM)

Transaction Management Foundation (TFM)

Customer Relationship Management

The processes that take place between an enterprise and its customers downstream in the supply chain Key processes:
Marketing Selling Order management Call/Service center

Internal Supply Chain Management

Includes all processes involved in planning for and fulfilling a customer order ISCM processes:
Strategic Planning Demand Planning Supply Planning Fulfillment Field Service

There must be strong integration between the ISCM and CRM macro processes

Supplier Relationship Management

Those processes focused on the interaction between the enterprise and suppliers that are upstream in the supply chain Key processes:
Design Collaboration Source Negotiate Buy Supply Collaboration

There is a natural fit between ISCM and SRM processes

The Transaction Management Foundation

Enterprise software systems (ERP) Earlier systems focused on automation of simple transactions and the creation of an integrated method of storing and viewing data across the enterprise Real value of the TMF exists only if decision making is improved The extent to which the TMF enables integration across the three macro processes determines its value

The Future of IT in the Supply Chain

At the highest level, the three SCM macro processes will continue to drive the evolution of enterprise software Software focused on the macro processes will become a larger share of the total enterprise software market and the firms producing this software will become more successful Functionality, the ability to integrate across macro processes, and the strength of their ecosystems, will be keys to success

E-Business and the Supply Chain

E-Business Transactions
Providing information across the supply chain

Negotiating prices and contracts Allowing customers to place orders Allowing customers to track orders Filling and delivering orders to customers Receiving payment from customers Placing orders with suppliers Paying suppliers These transactions were previously done through other channels

The Impact of E-Business on Supply Chain Performance

Impact of E-Business on Responsiveness (which primarily affects a companys ability to grow and protect revenue) Impact of E-Business on Efficiency (which primarily affects a companys costs)

Impact of E-Business on Responsiveness

Offering direct sales to consumers 24-hour access from any location Wider product portfolio and information aggregation Personalization/customization Faster time to market Flexible pricing, product portfolio, and promotions Price and service discrimination Efficient funds transfer Lower stockout levels Convenience/automated processes Potential revenue disadvantage of e-business (for customers who require a short response time)

Impact of E-Business on Cost

Inventory Facilities Transportation Information

The B2C E-Business Scorecard

Area
Direct sales 24-hour access Product portfolio Personalization Time to market Flexible pricing Price discrimination

Impact

Area
Efficient funds transfer Lower stockouts Convenience Inventory Facilities Transportation Information

Impact

++ Very positive; + Positive; = Neutral; - Negative; -- Very negative

Value Creation to Justify IT Investments

Efficiency Benefits
traditional productivity improvements

Effectiveness Benefits
deliver information to decision maker

Strategic Benefits
achieve competitive advantage over rivals

Five Dimensions of Commerce

Competing on Internet Time
Overcoming Distance Barriers

Altering the Structure of Relationships

New Forms of Interaction Developing Entirely New Products & Services

Electronic Commerce Value Grid

Value Creation Dimension
Time Distance Relationships Interaction Product

Efficiency
Accelerate User Tasks Improve Scale to Look Large Alter Role of Intermediaries Make Use of Extensive User Feedback Automate Tasks Using Software Agents

Effectiveness
Eliminate Information Float Present Single Gateway Access Engage in Personalization to Look Small User Controls Detail of Information Accessed Provide Online Decision Support Tools

Strategic
Establish 24X7 Customer Service Achieve Global Presence Create Dependency to Lock-in User Users Interact via Online Community Bundle Diverse Content with Rich Multimedia

Applying the E-Business Framework

PC Industry Book Industry Grocery Industry MRO Supplies Industry

The B2B Addition to the E-Business Framework

The wide variety of factors potentially important in B2C transactions can be reduced to three principal categories:
Reduced transaction costs

Improved market efficiencies Supply chain benefits

Transaction Costs: When E-Business Will Have a Positive Impact

Transactions are frequent and small in size Phone and fax are the current method of transmitting orders A lot of effort is spent reconciling product and financial flows

Improved Market Efficiencies: When E-Business Will Have a Positive Impact

Limited buyer/seller qualification is required A fragmented market exists with many competing players either on the buy or sell side A large number of buyers/sellers can be attracted to the online site

Supply Chain Benefits: When E-Business Will Have a Positive Impact

The bullwhip effect is quite significant due to information distortion in the supply chain The supply chain as a whole achieves low inventory turns and poor product availability Each stage has little visibility into either the customer or supplier stage There is little collaboration in the supply chain in terms of promotions and new product introduction Product life cycles are short

B2B E-Business Value Proposition

Hard
Ease of Implementation
Supply Chain Benefits

Market Efficiencies

Easy

Reduced Transaction Charges

Low Value Created

High

How General Motors Is Collaborating Online

The Problem
Information regarding a new car design has to be shared among a pool of approximately 20,000 designers and engineers in hundreds of divisions and departments at 14 GM design labs, some of which are located in different countries

How General Motors Is Collaborating Online (cont.)

Communication and collaboration with the design engineers of the more than 1,000 key suppliers could mean 4 years to completion of a model

How General Motors Is Collaborating Online (cont.)

The Solution
GM began by examining over 7,000 existing legacy IT systems, reducing that number to about 3,000 and making them Web enabled A computer-aided design (CAD) program that allows 3D design documents to be shared online by both the designers (internal and external) and engineers

How General Motors Is Collaborating Online (cont.)

Collaborative and Web conferencing software tools have radically changed the vehicle review process GM electronically sends its specifications for the seat to the vendors product data system allowing:
Searching Designing Tooling Testing in real time

This expedites the process and cuts costs by more than 10%

How General Motors Is Collaborating Online (cont.)

The Results
It now takes less than 18 months to bring a new car to market The change has produced enormous savings Shorter cycle time enables GM to bring out more new car models more quickly, providing the company with a competitive edge

How General Motors Is Collaborating Online (cont.)

What we can learn
Applications of EC that help reduce costs and increase profits
collaborative commerce improvements along the supply chain B2E

E-Supply Chains (cont.)

E-supply chain consists of six processes:
1. 2. 3. 4. 5. 6. Supply chain replenishment E-procurement Collaborative planning Collaborative design and product development E-logistics Use of B2B exchanges and supply webs

E-Supply Chains (cont.)

Major infrastructure elements and tools of esupply chains are:
Extranets Intranets Corporate portals Workflow systems and tools Groupware and other collaborative tools EDI and EDI/Internet

Supply Chain Problems

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

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

Collaborative Commerce
Collaborative commerce (c-commerce): The use of digital technologies that enable companies to collaboratively plan, design, develop, manage, and research products, services, and innovative EC applications

Collaborative Commerce (cont.)

Information sharing between retailers and suppliers: P&G and Wal-Mart
Wal-Mart provides P&G access to sales information on every item P&G makes for WalMart Accomplished done electronically
P&G has accurate demand information Wal-Mart has adequate inventory

Collaborative Commerce (cont.)

Collaborative commerce and knowledge management
Knowledge management : the process of capturing or creating knowledge Gathering and making available experts opinions, as well as providing them to partners

Learning is also facilitated by KM

Collaborative Planning and CPFR

In collaborative planning, business partners all have real-time access to point-of-sale order information
manufacturers suppliers distribution partners other partners

Collaborative Planning: APS

Advanced planning and scheduling (APS) systems: Programs that use algorithms to identify optimal solutions to complex planning problems that are bound by constraints

Collaborative Planning: PLM

Product lifecycle management (PLM): Business strategy that enables manufacturers to control and share productrelated data as part of product design and development efforts

Corporate (Enterprise) Portals

Corporate (enterprise) portal: A gateway for entering a corporate Web site, enabling communication, collaboration, and access to company information

Corporate portals offer employees, business partners, and customers an organized focal point for their interactions with the firm