Information Technology in Supply

Chain Management

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.

IT in Supply Chain Collaboration

and Coordination

Supply chain management needs information technology applications that are integrated beyond the individual company to include the neighbouring enterprises as well. integration should result in data that flows seamlessly

throughout the supply chain, enabling all enterprises part of the supply chain to work better.

Collaboration with suppliers Supplier relationship management (SRM)

Collaboration with Customers Customer relationship management (CRM)

collaborative planning, forecasting, and replenishment (CPFR), ERP systems have evolved in to ERP-II : Systems which can mange electronic collaborations

with partners

Major Differences Between ERP and ERPII

Optimization:Traditional ERP was concerned with optimizing an enterprise (Internal optimization). ERP II systems are about optimizing the supply chain through collaboration with trading partners.

Domain: ERP systems focused on manufacturing and distribution. ERP II systems cross all sectors and segments of business, including service industries, government, and asset-based industries like mining.

Process: In ERP systems, the processes were focused on the four walls of the enterprise. ERP II systems connect with trading partners to take those processes beyond the boundaries of the enterprise.

Architecture: Old ERP systems were monolithic and closed. ERP II systems are Web-based, open to integrate and interoperate with other systems, and built around modules or components that allow users to choose just the functionality they need.

Data: Information in ERP systems is generated and consumed within the enterprise. In an ERP II system, that same information will be available across the supply chain to authorized participants.

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 managementfocuses on day-to-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.

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.

Strategic Management Framework for IT

Adoption in SCM

Strategic Management Framework For IT

Adoption in SCM Strategy formulation: : SCM IT applications should be linked to

corporate visions, goals and strategies. Before implementing IT in SCM , organizations formulate a suitable set of missions, objectives, strategies and policies .

Business process design: should include ``re-engineering'' stage comprising two studies named ``as-is' processes, and ``to-be' processes.

Determination of functional requirements:This step involves: Identification of alternate IT configurations for the system to enable to-be business processes. Using to-be business processes, conceptual modes are developed through prototyping, story boarding, data flow diagramming, flow charting and other similar techniques. Finally, functional use cases are derived to define the functional scope and configuration of the IT system.

Business case preparation: Justification for IT Investments: Typically, there are many factors with many characteristics to consider in an evaluation -tangible, intangible, financial/quantitative and qualitative.

IT Implementation: IT Implementation is treated as project. Depending upon how much time and cost is available, and how much risk the company is willing to take, company can choose the most appropriate implementation methodology.

Post-implementation audits:This last ``feedback'' stage helps in ``closing the loop'' for future development of the system. It is also the primary step required for the inclusion of the concept of continuous improvemen

IT Implementation Methodologies

Parallel Approach: The existing system and the new system operate simultaneously until there is confidence that the new system is working properly.

Big bang or cold turkey approach: The old system is removed totally and the new system takes over

Phased approach: Modules of the new system are gradually introduced one at a time using either big bang or parallel approach.

Pilot approach: The new system is fully implemented on a pilot basis in one segment of the organization.

Depending upon how much time and cost is available, and how much risk the company is willing to take, company can choose the most appropriate implementation methodology.

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 real-time

Emergence of on demand-hosted supply chain software SOA ( Service oriented architecture)-based collaboration

Support: +ve

Counter:-ve

RFID and Barcode: A Comparison

RFID Technology

Radio-frequency Identification (RFID) can be used to identify, track, sort, or detect a wide variety of objects. It is evolving as a major technology enabler for tracking goods and assets.

RFID system exchanges information between the tagged object and a reader/writer in wireless medium.

An RFID system transmits the identity of a physical item in the form of a unique serial number wirelessly, using radio waves. Communication takes place between a reader or interrogator and a transponder or a tag: a silicon chip connected to an antenna. RFID tags are attached on items to be tracked, which could be individual items, boxes, or even consignments.

The major components of RFID system are: One or more tags or transponders comprised of semiconductor chips and

antennae. Reader/Writer devices or Interrogators Two or more antennae, one on the transponder and another with the

interrogator. A host computer system and the application software.