IT in Supply Chain Management

The Supply Chain

Suppliers Manufacturers Warehouses & Distribution Centers Customers

Transportation Costs Material Costs

Transportation Costs

Manufacturing Costs

Transportation Costs Inventory Costs

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

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

A legendary technological breakthrough : Wal-marts SCM

IT Application in SCM

Wal-Marts legendary supply chain technology has allowed them to break

the three-day barrier that some economists in the eighties felt was largely unbreakable.

Wal-Mart is often able to replenish items on the Wal-Mart shelf in less than
three days not from the central warehouse to the shelf, but from the manufacturer to the shelf.

With quick and reliable 2-day turn around, Wal-Mart is able to maintain
lower levels of inventory and still meet customer demand.

These lower inventory levels result in either a reduced floor plan with lower
carrying costs and lower interest expense or a greater diversity of products on the store shelves. (ie: With faster replenishment, Wal-Mart can get away with carrying just 5 toasters instead of 10, thereby freeing up more shelf space for those George Foreman Hamburger cookers.)

IT Application in SCM

Employees at the Wal-Mart stores had a magic wand, a handheld computer which was linked to in store computers through radio frequency network. These helped them to track inventories in store, deliveries and back up in stock at the distribution centers.

IT Application in SCM

How it works?
Lets assume that you purchase a flashlight at Wal-Mart.
1.The cash register reads the bar code price tag. 1.Within 14 seconds, the Wal-Mart central warehouse is notified that the Wal-Mart retail store needs a new flashlight for the shelf to replenish the purchased item. 1.Instantaneously, the manufacturer is also notified that the Wal-Mart central warehouse needs a new flashlight. 1.Even the raw material suppliers are notified that the manufacturer now needs a little more raw materials (plastic housing, switch, light bulb, etc), and so it goes all the way up the supply chain.

IT APPLICATIONS FOR DECISION MAKING & BRAND PROTECTION IN SCM

IT Application in SCM

IT applications provide a powerful system to tackle and integrate the many aspects of logistics planning.

Integrated Brand Protection Model

Conclusion

IT Application in SCM

With advancement in technology, companies will find that their conventional

supply chain integration will have to be expanded beyond their peripheries in order to meet growing customer demands.

The strategic and technological innovations in supply chain will impact on

how organizations buy and sell in the future.

Clear vision, strong planning and technical insight into the Internet's
capabilities would be necessary to ensure that companies maximize the Internet's potential for better supply chain management and ultimately improved competitiveness.

Internet technology, World Wide Web, electronic commerce etc. will change
the way a company is required to do business. These companies must realize that they must harness the power of technology to collaborate with their business partners. That means using a new breed of SCM application, the Internet and other networking links to observe past performance and historical trends to determine how much product should be made as well as the best and cost effective method for warehousing it or shipping it to