SCM and IT

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Information Technologyand the Supply Chain

Dr.T.V.Subramanian

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Role of Information Technologyin a Supply Chain

Information is the driver that serves as the glue tocreate a coordinated supply chain

Information must have the following characteristics tobe useful:

Accurate Accessible in a timely manner

Information must be of the right kind

Provides supply chain visibility

Information provides the basis for supply chainmanagement decisions Inventory

Transportation

Facility

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Information Systemclassification

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

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The Supply Chain ITFramework

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

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Macro Processes in a SupplyChain

Supplier

Relationship

Management(SRM)

Internal

Supply Chain

Management(ISCM)

Customer

Relationship

Management(CRM)

Transaction Management Foundation (TFM)

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Customer RelationshipManagement

The processes that take place between anenterprise and its customers downstream in thesupply chain

Key processes:

Marketing

Selling

Order management Call/Service center

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Internal Supply ChainManagement

Includes all processes involved in planning forand fulfilling a customer order

ISCM processes:

Strategic Planning Demand Planning

Supply Planning

Fulfillment

Field Service

There must be strong integration between theISCM and CRM macro processes

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Supplier RelationshipManagement

Those processes focused on the interactionbetween the enterprise and suppliers that areupstream in the supply chain

Key processes: Design Collaboration

Source

Negotiate

Buy Supply Collaboration

There is a natural fit between ISCM and SRMprocesses

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The Transaction ManagementFoundation

Enterprise software systems (ERP)

Earlier systems focused on automation of simpletransactions and the creation of an integrated

method of storing and viewing data across theenterprise

Real value of the TMF exists only if decisionmaking is improved

The extent to which the TMF enables integrationacross the three macro processes determines itsvalue

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The Future of IT in the SupplyChain

At the highest level, the three SCM macroprocesses will continue to drive the evolution ofenterprise software

Software focused on the macro processes willbecome a larger share of the total enterprisesoftware market and the firms producing thissoftware will become more successful

Functionality, the ability to integrate acrossmacro processes, and the strength of theirecosystems, will be keys to success

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E-Business and the Supply Chain

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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

Th I t f E B i

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The Impact of E-Business onSupply 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 companyscosts)

I t f E B i

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Impact of E-Businesson 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 (forcustomers who require a short response time)

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Impact of E-Business on Cost

Inventory

Facilities

Transportation

Information

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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

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Five Dimensions of Commerce Competing on Internet Time

Overcoming DistanceBarriers

Altering the Structure of Relationships

New Forms of Interaction

Developing Entirely New Products& Services

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Eliminate

Information

Float

Accelerate

User

Tasks

Establish 24X7

Customer

Service

Time

Efficiency Effectiveness Strategic

Value Creation

Present

Single GatewayAccess

Improve

Scale toLook Large

Achieve

GlobalPresenceDistance

Engage in

Personalization

to Look Small

Alter

Role of

Intermediaries

Create

Dependency to

Lock-in UserRelationships

User Controls Detailof Information

Accessed

Make Useof Extensive

User Feedback

Users Interactvia Online

CommunityInteraction

Provide Online

Decision Support

Tools

Automate

Tasks Using

Software Agents

Bundle Diverse

Content with

Rich Multimedia

Product

Electronic Commerce Value Grid

Dimension

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Applying the E-BusinessFramework

PC Industry

Book Industry

Grocery Industry

MRO Supplies Industry

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The B2B Addition to theE-Business Framework

The wide variety of factors potentially importantin B2C transactions can be reduced to threeprincipal categories:

Reduced transaction costs

Improved market efficiencies

Supply chain benefits

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Transaction Costs: When E-BusinessWill Have a Positive Impact

Transactions are frequent and small in size

Phone and fax are the current method oftransmitting orders

A lot of effort is spent reconciling product andfinancial flows

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Improved Market Efficiencies: When

E-Business Will Have a Positive Impact

Limited buyer/seller qualification is required

A fragmented market exists with manycompeting players either on the buy or sell side

A large number of buyers/sellers can beattracted to the online site

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Supply Chain Benefits: When

E-Business Will Have a Positive Impact

The bullwhip effect is quite significant due toinformation 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 productintroduction

Product life cycles are short

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B2B E-Business ValueProposition

Reduced Transaction Charges

Market Efficiencies

Supply Chain Benefits

E

aseofImplementation

Easy

Hard

Value Created

Low High

How General Motors Is

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How General Motors IsCollaborating Online

The Problem

Information regarding a new car design has to be

shared among a pool of approximately 20,000designers and engineers in hundreds of divisionsand departments at 14 GM design labs, some ofwhich are located in different countries


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How General Motors IsCollaborating Online (cont.)

Communication and collaboration with the designengineers of the more than 1,000 key suppliers

could mean 4 years to completion of a model


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The Solution

GM began by examining over 7,000 existing

legacy IT systems, reducing that number to about3,000 and making them Web enabled

A computer-aided design (CAD) program thatallows 3D design documents to be shared onlineby both the designers (internal and external) andengineers

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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 morenew car models more quickly, providing the

company with a competitive edge


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What we can learn

Applications of EC that help reduce costs and

increase profits collaborative commerce

improvements along the supply chain

B2E

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E-Supply Chains (cont.)

Major infrastructure elements and tools of e-supply chains are:

Extranets Intranets

Corporate portals

Workflow systems and tools

Groupware and other collaborative tools

EDI and EDI/Internet

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Supply Chain Problems

Bullwhip effect:Erratic shifts in orders up anddown supply chains

Creates production and inventory problems

Stockpiling can lead to large inventories

Effect is handled by information sharing

collaborative commerce

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Supply Chain Problems (cont.)

Need for information sharing along thesupply chain including issues on:

product pricing

inventory

shipping status

credit and financial information technology news

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Collaborative Commerce

Collaborative commerce

(c-commerce):The use of digitaltechnologies that enable companies tocollaboratively plan, design, develop,manage, and research products, services,

and innovative EC applications

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Collaborative Commerce (cont.)

Information sharing between retailers andsuppliers: P&G and Wal-Mart

Wal-Mart provides P&G access to salesinformation on every item P&G makes for Wal-Mart

Accomplished done electronically

P&G has accurate demand information

Wal-Mart has adequate inventory

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Collaborative Commerce(cont.)

Collaborative commerce and knowledgemanagement

Knowledge management: the process ofcapturing or creating knowledge

Gathering and making available experts

opinions, as well as providing them to partners

Learning is also facilitated by KM

Collaborative Planning

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Collaborative Planningand CPFR

In collaborative planning, business partnersall have real-time access to point-of-sale

order information manufacturers

suppliers

distribution partners

other partners

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Collaborative Planning: APS

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

constraints

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Collaborative Planning: PLM

Product lifecycle management (PLM):Business strategy that enables

manufacturers to control and share product-related data as part of product design anddevelopment efforts

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SCM and IT

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