Information Technology in Supply Chain-Ch 16

7/31/2019 Information Technology in Supply Chain-Ch 16

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Information Technology In

Supply Chain

Ch 16

Ayushi KakwaniRiddhi Patel


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Role of IT in supply chain

Information is crucial to supply chain

performance and provide foundation for the

same

Information serves as a glue that allows other

supply chain drivers to work together with the

goal of creating an integrated, coordinated

supply chain


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Role of IT in supply chain

IT consists of hardware, software and peoplethroughout a supply chain that gather, analyze andexecute upon information

IT captures and analyze information necessary to makea good decision

IT is also used to analyze the information and

recommend an action

IT can set production schedules and inventory levels


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Example

IT system at a PC manufacturer

May tell a manager how many processors are

currently in stock, IT system can take number

of processors in inventory, look at demand

forecasts, determine whether to order more

processors or not etc


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Example

Walmart

Walmart collects data in real time on what products arebeing purchased at each of its stores and then sends these

data to the manufacturers

Walmart analyzes this demand information to determinehow much inventory to hold at each store and to decidewhen to order new loads of product from manufacturer

Manufacturers uses this information to set its productionschedules to meet Wal-Marts demand on time


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Information must have the following

characteristics

Information must be accurate

Information must be accessible in a timely

manner

Information must be of right kind

Information must be shared


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Information used in following supply

chain drivers

1. Facality

Wal-Mart suppliers use the demand

information from Wal-Marts stores to set

their production schedules.Wal-Mart uses

this information to determine where to place

its new store and cross docking facalities


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chain drivers

2. Inventory

Wal-Mart collects detailed demand, cost,

margin, and supplier information to

determine cost of carrying inventory, cost of

stocking out, cost of ordering and demand

patterns


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chain drivers

3. Transportation

Walmart uses information to tightly integrate

its operating with its suppliers. This

integration allows it to implement cross-

docking in its transportation network , saving

both inventory and transportation costs


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chain drivers

4. Sourcing

Information on product margins, prices

,quality, delivery lead time etc is very

important in making sourcing decisions

Eg:Dell has started to outsource its retail

function to firms like Walmart


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chain drivers

5.Pricing and revenue management

Information on demand-(its volume and

various customer segments), willingness to

pay , product margin , lead time , availability


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The Supply Chain Macro Processes

Customer Realtionship Management

Internal Supply Chain Management

Supplier Relationship Management


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Customer Relationship Management

Consists of processes that take place between

enterprise and its customers downstream in

the supply chain

Goal of CRM is to generate customer demand

and facilitate transmission and tracking of

orders


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Key processes under CRM

1. Marketing

Decisions regarding which customers to

target, how to target, what products to offer ,

how to price products , how to manage

campaigns


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2. Sell

Providing the sales force the information it

needs to make a sale and then execute the

actual sale

Includes Sales force automation, configuration

and personalization


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3.Order management:

This process ties together demand from the

customer with supply from the enterprise

Process of managing customer order and

execute order fulfilment


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4.Call/service center:

Primary point of contact between company

and customer

Helps customer place order, suggest products

,solve problems , provides information on

order status


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Advantages of CRM

Address customers needs when using onlineor Web based applications.

Enable businesses to make informed decisions

using intelligence reaped from customers. Provide records of works in progress and

reporting on customer service functions.

Help organization manage customerperformance and take steps to improveperformance.


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Advantages of CRM

Enable organizations to forecast customerresponse rates and retention

Allow managers to collect and organize customerinformation and disburse to appropriatedepartments like marketing or sales

Helps organizations schedule environments thatenable better customer service delivery.

Allows organization to create closer and moreintimate customer relationships.

Builds greater overall customer satisfaction andloyalty, which in turn boosts customer retention.


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Advantages of CRM

Helps manage sales force functions andeliminates time wasting tasks includingscheduling and setting appointments withcustomers.

Allows sales and marketing teams to collectcustomer information and plan enhancements ofservice delivery.

Enables a central resource for business

communications regarding customertransactions.


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Internal Supply Chain Management

Includes all processes involved in planning for

and fulfilling a customer order

Focused on operations internal to the

enterprise


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Various processes included in ISCM

1.Strategic Planning:

Focuses on network design in supply chain

2.Demand Planning:

Forecasting Demand and analyzing the impact

on demand of demand management toolssuch as pricing and promotions


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3.Supply planning:

It takes demand forecasts produced by demandplanning and the resources made available bystrategic planning as input and produce optimalplan to meet this demand

4.Fulfillment:

Links each order to a specific supply source andmeans of transportation. Sees that the demand isexecuted


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5.Field service : Finally after the product has

been delivered to the customer, It eventually

needs to be serviced. Service processes

involves setting inventory levels for spareparts as well as scheduling service calls


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Supplier Relationship Management

Includes those processes that are focused on

the interaction between the enterprise and

suppliers that are upstream in the supply

chain


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Macro Processes and their processes

SRM ISCM CRM

Design Collaboration Strategic Planning Market

Source Demand Planning Sell

Negotiate Supply Planning Call Center

Buy Fulfillment Order Management

Supply Collaboration Field Service


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Risks in IT

Process of adding new supply chain capabilities withexisting IT system is fraught with dander

The larger the change in the IT system , the greater is the

risk of a negative impact on operations

The major risk is the risk involved in installing the new ITsystem

During the process of installing new IT system, trouble canbe found in both business processes and technical issues


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Risks In IT

New IT systems often require employees to operateaccording to new processes

These may be difficult to learn, take training to execute

correctly, or even be outright resisted by employees

Getting entire organization on board with changesbrought by IT , is very difficult

Technical hurdles to overcome in getting the new ITsystem operational is another issue to be addresed


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Supply Chain IT In Practice

1.Select an IT system that addresses the companys key

success factors:

Two or three elements that determine whether the

company is going to be successful or not Eg: ability to set inventory levels optimally is crucial

in PC business, where product life cycles are short

and inventory becomes obsolete quickly. This is not

the case with chemical industry

Thus, PC company might pick a package that is strong

in setting inventory levels even if it is weak in

maximizing utilization of production capacity


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2.Take incremental steps and measure value

Instead of installing a complete supply chainsystem across the company all at once , start by

getting the demand planning and then graduallymove to supply planning

The incremental approach does not mean that

one should not take big picture perspective, butrather the big picture perspective should beimplemented in digestible pieces


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3.Align the level of sophistication with the need forsophistication:

Management should consider the depth to which an

IT system deals with firms key success factors

Trade off between the ease of implementation of

system and systems level of complexity


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4.Use IT system to support decision making , not

to make decisions

A mistake companies can make is installing a

supply chain system and then reducing the

amount of managerial effort it spends on

supply chain issues


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5.Think about the future

Make sure that IT choices take future trends in

mind

How flexible the IT system can be

Viability of supply chain software developer itself

Software should not only fulfill companies

current needs but also future needs


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Information Technology in Supply Chain-Ch 16

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