A collection of resources and commentary providing an introduction to supply chain management and related systems for students, practitioners, and anyone else interested in learning more about how to design, manufacture, transport, store, deliver, and manage products.
Tuesday, February 28, 2012
IT and Supply Chains
Supply chain management (SCM) is concerned with the flow of products and
information between supply chain members' organizations. Recent developments in
technology enable the organizations to avail information easily in their
premises. These technologies are helpful to coordinate the activities required
to manage the supply chain. The cost of information transmission has decreased
due to the increase in available technologies. In the below integrated supply
chain model (Fig.1) the bi-directional arrows represent the flow of materials
and information (feedback). The thing that we need to understand most is that
information technology is more than just computers. It includes data
recognition equipment, communication technologies, factory automation and other
hardware and services are included to interface between the various facets of a
Integrated supply chain model
The importance of information in an integrated supply chain management
Prior to the 1980s the information flow between functional areas within
an organization and between supply chain member organizations was paper based.
The paper based transactions and communication was time consuming and prone to
more errors. During this period, information was often over looked at as a
critical competitive resource because its value to supply chain members was not
clearly understood. IT infrastructure capabilities provided a competitive
positioning of business initiatives like cycle time reduction, implementation,
implementing redesigned cross-functional processes etc. Three factors that strongly
impacted this change in the importance of information include: - First,
satisfying in fact pleasing customer has become something of a corporate
obsession. Serving the customer in the best, most efficient and effective
manner has become critical. Second information is a crucial factor in the
managers' abilities to reduce inventory and human resource requirement to a
competitive level. Information flows plays a crucial role in this form of strategic
Wal-Mart & P&G experiences demonstrate how information sharing
can be utilized for mutual advantage. Through sound information technologies
Wal-Mart shares point of sale information from its many retail outlets directly
with P&G and other major suppliers.
The fast fashion brand Zara uses IT for immediate sharing of user needs and trend changes to
its headquarters with the help of the internet and mailing servers and other
ERP tools. They also use computers RFID tags and software for tracking their
inventory like most stores and super markets.
Information and Technology Applications in Supply Chains:
In the development and maintenance of Supply chain's information systems
both software and hardware must be addressed. Hardware includes computer's
input/output devices and storage media. Software includes the entire system and
application programme used for processing transactions management control,
decision-making and strategic planning.
It is the term used to describe the wide range of tools and techniques
utilized to conduct business in a paperless environment. Electronic commerce
therefore includes electronic data interchange, e-mail, electronic fund
transfers, electronic publishing, image processing, electronic bulletin boards,
shared databases and magnetic/optical data capture. Companies are able to
automate the process of moving documents electronically between suppliers and
Electronic Data Interchange:
Electronic Data Interchange (EDI) refers to computer-to-computer
exchange of business documents in a standard format. EDI describe both the
capability and practice of communicating information between two organizations
electronically instead of traditional form of mail, courier, & fax. The
benefits of EDI are:
1. Quick processing of information.
2. Better customer service.
3. Reduced paper work.
4. Increased productivity.
5. Improved tracing and expediting.
6. Cost efficiency.
7. Competitive advantage.
8. Improved billing.
Though the use of EDI supply chain partners can overcome the distortions
and exaggerations in supply and demand information by improving technologies to
facilitate real time sharing of actual demand and supply information.
Bar coding and Scanner:
Bar code scanners are most visible at the checkout counters of super
markets. This code specifies name of product and its manufacturer. Other
applications are tracking the moving items such as components in PC assembly
operations, automobiles in assembly plants etc.
Data warehousing and Data Mining:
Data warehouse is a consolidated database maintained separately from an
organization's production system database. Many organizations have multiple
databases. A data warehouse is organized around informational subjects rather
than specific business processes. This information can then be mined to
generate information about patterns, trends etc. These help to streamline the
supply chain and related processes.
Many companies now view ERP systems (eg. Baan, SAP, People soft, etc.)
as the core of their IT infrastructure. ERP systems have become enterprise wide
transaction processing tools which capture the data and reduce the manual
activities and tasks associated with processing financial, inventory and
customer order information. ERP system achieve a high level of integration by
utilizing a single data model, developing a common understanding of what the
shared data represents and establishing a set of rules for accessing data.
Other CRM tools help to keep track of customers and their interactions with the
organization. This helps with trend analysis and collecting data about the
customers’ needs and demands.
The world is shrinking day by day with advancement of technology.
Customers' expectations are also increasing and companies are prone to more and
more uncertain environments. Companies will find that their conventional supply
chain integration will have to be expanded beyond their peripheries. The
strategic and technological innovations in supply chain will impact how
organizations buy and sell in the future. However 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 does 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
applications, 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 most cost effective method for warehousing it or
shipping it to retailer.
In a previous blog I had talked about how the
Dabbawalas on Mumbai have also started using IT in their supply chains, for
expanding their business (http://cmuscm.blogspot.com.au/2012/02/mumbais-dabbawalas-go-hi-tech.html).
They are already using Mobile phones and the internet to publicise and register
more customers. The main hindrance to their adopting more sophisticated forms
of technologies is due to their lack of literacy and computer knowledge and
skills. Are there some more ways that they can harness the power of IT to
improve and expand their supply chain further without having to force them to
become computer literate?