Tuesday, September 30, 2014

Supply Chain Management and the Cloud Technology

Traditional business software systems were primarily used to automate the processes within a single enterprise. It did not have the capacity to automate processes that occur between companies working together in a global market. A Supply Chain by definition, is designed with the focus on inter- company collaboration which span networks around the globe. It is the active management of activities to maximize customer value and achieve a sustainable competitive advantage. To achieve such goals, it is vital to have efficient business processes and implement adequate information systems. With the supply chain networks growing globally, it is a challenge to enable massive levels of information sharing and process automation that these networks require. The answer to this challenge is a technology that harnesses the power of the internet to connect and communicate across company boundaries and provide real time data to all the parties involved in the supply chain. Enter the Cloud technology solutions.

How does it work?

A cloud network on a high level can be envisioned as a community of customers and service providers. Shippers, service providers, manufacturers all join the cloud based community and readily connect with each other. The service provider can find its customers, clients, carriers etc. When a provider updates his schedules, services, pricing or any announcements, all the trading partners can see the information at the same time. The platform intends to provide complete end to end visibility in the network like the capacity to provide real time visibility of inventory and shipments and logistics tracking. Cloud computing provides three types of service: Software as a Service (SAAS), Infrastructure as a Service (IAAS) and Platform as a Service (PAAS), which entail different services based on a client’s needs. Software as a Service (SaaS) provides business applications that are delivered as a service. This helps reduce software complexity and costs, enhances accessibility to services and speeds up the time to market
A simple SCM architechture with cloud

What are the advantages?

-       Better forecasting and planning:
The platforms will enable the providers/companies to collaborate with the chain’s retailers, suppliers and distributors who play a major role in demand forecasting. These platforms are capable of performing analytics on data available in the internet and perform more accurate demand forecast for all the partners in the chain. This would help manage the variability problems due to demand providers often face with their inventory.
-       Integrating Inventory management with wireless devices
The technology to integrate the RFID and other bar coding systems with the platform  allows a centralized data management system to deliver the identification or tracking of any good across the entire supply chain.
-       Collaborative design and product development
                           Collaborative product development includes the use of product design and development
                          techniques across multiple branches of same organization or between different organizations.
                          The  development process can be shared between different organizations. These processes
                            include specific information, marketing firm, test result and design changes as well as
                             customer feedback.

 The long term benefits of migrating to such a platform are to have the essential tools to drive the continuous improvement of supply chain reliability and predictability. The main challenge for an organization is however to port from an existing on premise information system style to the cloud. With the technology still in its infancy, it is hard to translate the benefits of the migration into increased revenue or cost savings for the organization. Having said that, will the organizations realize the untapped potential and be prepared to put in the upfront cost or will they stick to their traditional approach?


Reliability, accuracy and security with internet and technology in SCM


In today’s world, there is lot of competition in every industry and every field. To survive and beat the competition, it is important for non – IT sectors of the industry to incorporate information technology in their systems to obtain edge over others. IT is very beneficial for cooperation, interaction and integration within different systems and stakeholders in supply chain system.

Any supply chain management has to take care of flow of products and information between different members of the supply chain network.  The different organizations which are a part of supply chain network are suppliers, producers, service providers and customers. All these organizations work together to make the final product available to the user. Every product has to go through the entire supply network to be available for sale. The organizations are linked together to acquire, purchase, manufacture, assemble, and distribute goods and services from the starting supplier point to user.

The cost and availability of information technology helps expedite the operations and give accurate means to optimize the sales. Organizations can move towards concept of e-commerce which gives the capability of doing the transactions online using technologies such as electronic fund transfer, electronic data interchange, bar codes, CD-ROM catalogs, etc. Almost all the information can be recorded electronically and the transactions are performed with minimum human intervention. The information about orders, transactions, transportation, inventory and other supply chain factors can be stored in databases and can be easily used when it is required. With the use of information technology in supply change management, the need to constantly monitor inventory levels, place orders, track transportation vehicles and expedite the process will become obsolete.

In a supply chain network, there are many parties which need to interact with each other. The suppliers, producers, service providers, and customers need to be in a loop where they are continuously fed with real time information. Realizing the importance of inter organization communication and interaction, the different organizations implementing forms of inter-organization information system. The inter-organization information systems reduces cost, improves productivity and gives efficient insights into product or market strategy.

Along with the technology, the internet also plays a pivotal role in today’s world in supply chain management. Online market places reduces cost of supply chain networks. The web based supply chain is available to everyone, increases transparency and increases speed of transaction. Parts of supply chains can rapidly and dependably find the particular data they need to finish a trade of products or benefits, and get quick payment.

Through the internet, the buyer can directly find the item which he is looking for and place the order online with the supplier. The consumer also gets the advantage of tracking the package online. Other services which the consumer receives with online supply chain network are ability to contact the vendors for customer service problems, alterations in the delivery, change in address, etc. The internet allows the supplier to receiver orders from international customer. A popular use of internet in supply chain network is in transportation. Shipment pickups and delivery can be more accurately monitored with the internet and different technologies used together.

The use of internet in SCM is rapidly increasing. The important aspect of successful SCM is accurate and fast information about a wide range of areas such as inventory, transportation, customer service, purchasing, production scheduling, order processing, and vendor operations. The internet gives the supply chain network an ability to react quickly to the market changes and adjust its management in various areas. Thus, the technology and web gives an angel of reliability, accuracy and security to supply chain management.


Monday, September 29, 2014

New Hubs Arrive to Serve “ Just in case” inventory

Major natural calamities and events  like Hurricane Sandy  have forced companies following Just in Time inventory management plan to shift to Just in Case inventory management plan . Companies employ this technique to increase efficiency and decrease waste only as they are required to reduce their inventory levels and cut off the tied up costs. Thus any catastrophic event may halt the manufacturing process, which adversely affects the sale and profits.  A Just in Case inventory management plan however allows to keeps large inventory which reduces the risks of loss of sale, however increases the tied up capital costs.
This shift has led retailers and logistics department to alter supply chains by adding distribution centers. This is creating a growth in the real estate markets outside the traditional seaport hubs too.  Just in Case planning reduces the vulnerability of Just in Time planning by stocking the merchandise in different regions, which can be used as a backup in case any region’s supply chain is disrupted by an event.  For example the Hurricane Sandy which hit New York and New Jersey, and the 2002 lockout of International Longshore and Warehouse Union workers from the West Coast seaports delayed the unloading of container ships.
Ranger Steel, a company based in Houston, the largest privately owned steel plate distributor in the US, used to ship their products from the port of Houston till late 1990’s. The low transportation costs, declared this type of distribution the best solution. However with the increase in the fuel prices and new governmental rules on insurance coverage for truck drivers, the expenses for transportation increased tremendously. Thus the company added distribution centers to its network, cutting down the transportation time for 3 weeks to 24 hours.
The online retail stores too have started to expand their distribution centers as a result of competition and provide rapid shipping in order to cut down on transportation costs and taxes associated. Amazon, for example opened new fulfillment centers in nearly a dozen states across the US.
Thus reduced transportation costs, reduced risks of sales loss and increased customer satisfaction are the pros for the Just in case planning technique. However striking a balance between maintaining minimum inventory yet not running out of stock is the greatest challenge to avoid capital loss.


Just in Case- http://www.investopedia.com/terms/j/jic.asp

From Modular Design to Mass Customization

From Modular Design to Mass Customization

Nowadays, people's living standards continues to improve and the need of people is getting increasingly diversified. Instead of mere consideration on price, most people purchase a product according to their individual preferences. Therefore, manufacturers are competing more and more intensely, not only on price and adaptability but also on the variety of products, which are all driven by customer satisfaction.

Face with a variety of customer’s requirements, customization production is becoming more and more popular for a firm to achieve variety and high customer satisfaction. Traditional view may holds that individual customization must have cost a lot, yet the advent of mass customization address the tradeoffs between cost-saving and customization effectively. Its rapid and low-cost production of goods and services satisfies unique customer desires, accompanying with standardized high volume production. Modular design is one of the most efficient means to facilitate mass customization and I think it is the key to the success of mass customization.

Modular products refer to products assemblies and components that fulfil functions through the combination of distinct building blocks or modules. To put it simply, modular design is a form of standardization in which component parts are subdivided into modules that are easily replaced or interchanged. Due to standardization, it allows easier diagnosis and remedy of failures, easier replacement and simplifier manufacturing and assembly. Taking Dell as an example, Dell's competitive advantage is in its process strategy, which is mass customization. It spends most of its research budget on efficient installation and configuration of PCs, rather than on new computer parts. Based on its existing sourcing and production of components, Dell uses the component sharing modularity. By using modules, the product can be quickly assembled. With customized and order-based assembling, Dell not only meet the need of different customers but also enjoys a reduction on its total cost. Another case for modular design is Lego. With its simple products that consist of small colored bricks, Lego provides children not only the real toy but also the unique experience of fitting the parts together and make their own customized toy. Looking at the operation of IKEA, it is even more evident when you walk through the pickup district to find the components of your favorite furniture and then go home to construct products by yourself. Many people are fond of IKEA just because they love this kind of lifestyle, which develop an attachment or sense of pride to the finished furniture.

In such a rapidly growing society, advanced technologies is emerging at leaps and bounds. New and creative products almost springs out every day. As a result, there are increasing uncertainties for the companies to forecast the need of customers. Companies can suffer from correspondingly sales decline if there occurs a changing market trend. Therefore, using a different combination of modules allows for quick and easy customization, as well as high volume of production.

Technology in Supply Chain Management

Supply Chain Management involves the management of several interconnected business entities like the manufacturer and distributor in order to ensure that the end product reaches the customer in time without the quality of the product being compromised. Throughout the process, the exchange of information between every step is important for effective decision making. Many years back, supply chain management was something that was not given due importance. Even the customers were less demanding and more patient. Therefore, customer satisfaction was not a huge challenge. But now, with the increasing use of technology and changing times, using technology in supply chain management has become inevitable.

Now, technology in supply chain management is much more than the use of computers. Companies use speech recognition, digital imaging, radio frequency identification (RFID), real-time location systems (RTLS), bar coding, GPS communication etc. to improve their processes. Even factories use technology in the form of automated processes, data recognition equipment etc. These updated processes help in increasing the efficiency and reduce time such as reduction in cycle time due to automated factory process (1).This also ensures that the customers receive their goods on time, building on the reputation of the company and thereby maintaining customer loyalty.

Companies use technology in broadly three areas: transaction processing, supply chain management and order tracking and delivery (1). In transaction processing, technology helps in order processing, billing, tracking delivery status etc. For supply chain management, it helps in planning and collaboration thereby increasing efficiency. It helps in processes like analyzing customer feedback, maintaining inventory levels, demand forecasting, determining production capacity etc. This kind of data also helps in the implementation of lean management techniques. For order tracking and delivery, it helps in tracking shipments and ensuring that the order reaches the customer in a fixed stipulated time. Organizations are also using a technology called Electronic Commerce, where transactions are completed using electronic media like electronic data interchange (EDI), electronic funds transfer (EFT), CD-ROM catalogs etc. All required information is recorded electronically with minimal human intervention (2).

It’s very natural for companies to implement technology and upgrade their processes to stay in the market and to be competitive. However, there are some concerns regarding the use of IT and technology such as implementation costs and user-friendliness for their optimum use. A lot of companies going through mergers and acquisitions have to collaborate their internal processes. How do they deal with the change? And more importantly, how do they manage and train their employees to use technology?

2.    2.   Importance of information technology for effective supply chain management - http://www.ijmer.com/papers/vol%201%20issue%202/BU012747751.pdf

Technology An Underused Tool In Emerging Market Supply Chains

We humans always use technology to do things easily and efficiently. Technology improves efficiency as it follows certain rules set by us, which are not easily over ruled. Thus operating at a point where optimal result can be achieved. In fact, businesses that operate at a large scale will have a hard time managing with out the use of these technologies. However, a recent study by Accenture has concluded that technology is an underused tool in emerging market supply chains.

The study has identified the leaders and non-leaders in the market to observe what traits are followed, that have set them in the position they are in. As expected, Market leaders are more inclined towards implementing technologies that support their emerging market presence. It is found that nearly three quarters of the leaders made heavy investments on automation tools such as manufacturing systems, ERP and supply chain systems. This supports the argument that use of technology in supply chains improves efficiency that helps businesses to remain as leaders.

Integrating to collaborate is one key point that every business needs to keep in mind before implementing new technologies. The use of technology should only help all the departments to reduce the amount of work they do and maintain the flow. This is important as otherwise it would instead increase the time taken in performing tasks related to reporting to the system.

Firms have been implementing software’s like Access delta and KPI technology, which perform different tasks in the warehouse. But collaborating these software’s results in a better efficiency. Access delta provides a graphical warehouse map that enables real time inventory management whereas KPI manages warehouses and wider supply chain performance. So, it is important to have a holistic approach in implementing technology in supply chains to be successful in the market.

Though implementation of technology has many benefits, the cost of implementing has always stopped small businesses from automating completely. In most of the cases, the big companies that implement these software’s have maximum benefit and the small businesses tend to use them later. In some cases, these software’s are so expensive that it never allows the small business to afford such software’s. Can we have software companies pricing them according to the business size so everyone can afford it?




ModCloth – Social Media and Customer Engagement as Drivers of Online Retail

Over the course of the last few weeks, we have continually learned how variability is bad, yet can be a driver of innovation. Rettig’s article highlights this dichotomy quite well. On one hand, technological advances bring the hope of endless possibility and revenue, while the reality of incorporating change or superimposition of new systems on obsolete ones results in added expenses, human error and long lead times. While Rettig’s tone is on the negative side, I feel that she fails to take stock of companies such as ModCloth, who came to the table after the tech boom, and who seem to have harnessed the power of technological innovation.

ModCloth is an online retailer akin to Starbucks – they not only sell clothing, they sell a user experience. Not only do they allow the user to dictate what wares they stock, they have also created a sense of community and social responsibility (Adamzcyk) that caters to their target end-users:

Casserly’s article, “ModCloth Hits $100 Million In Revenue, Gives Social All The Credit” highlights how leveraging social internet communities and analytics can translate into revenue. In part, this sense of community comes through peer quality assessment and sharing (photos of users wearing said merchandise), which ModCloth in terms monitors.

Using analytics to predict user behavior is, simply put, ingenious. Using the user input on what they want to purchase – ModCloth has an option where you can add out-of-stock merchandise to your cart, and subsequently be alerted when it is available - most likely cuts down on over-stock and the sense of stock-out. Similarly, keeping costs low by not having a physical location and having a pretty bare bones staff, probably keeps revenue high.

Clearly, tapping into the social media and user interaction/crowd-sourcing can be effective as Gandhi mentions.  However, from my own experience I still feel that Rettig’s concerns are well grounded, especially for companies who have been around for a while.

For example, Kaplan is a rather well-established test-prep company and one I used to work for. When I began as a front desk clerk in 2005, they had just begun transitioning over their DOS based purchasing System (DK Web) to a newer, simple interface system (Kaplan Business System or KBS), where purchasing  and class scheduling were integrated. The full transition took more than 5 years, with the first few years being quite bumpy, as employees were using both systems simultaneously. By the end of the changeover, KBS ran slowly a lot of the time and felt like it was due for an overhaul. Maybe it would have been cheaper and less frustrating to look at alternatives, which involved just starting over.

This brings me to the question week’s reading left me with. My question is whether the real problem is not that of mitigating technological obsolescence, but rather recognizing upfront when technology change will likely become obsolete at the end of the implementation phase and deciding to start over – a tabula rasa - even if the upfront cost is greater?   

Adamczyk, Alicia. "Not A Size 2? ModCloth Wants Your #FashionTruth." Forbes. Forbes Magazine, 4 Sept. 2014. Web. 28 Sept. 2014. <http://www.forbes.com/sites/aliciaadamczyk/2014/09/04/not-a-size-2-modcloth-wants-your-fashiontruth/>.

Casserly, Meghan. "ModCloth Hits $100 Million In Revenue, Gives Social All The Credit." Forbes. Forbes Magazine, 23 July 2013. Web. 28 Sept. 2014. <http://www.forbes.com/sites/meghancasserly/2013/07/23/modcloth-hits-100-million-in-revenue-gives-social-all-the-credit/>.

Gandhi, Anshuk et al. "How technology can drive the next wave of mass customization." McKinsey & Company. McKinsey & Company, 1 Feb. 2014. Web. 28 Sept. 2014. <http://www.mckinsey.com/insights/business_technology/how_technology_can_drive_the_next_wave_of_mass_customization>.

"ModCloth YouTube Case Study." YouTube. YouTube, 27 July 2012. Web. 28 Sept. 2014. <http://www.youtube.com/watch?v=05HcERLr98Q>.

Rettig, Cynthia. "The Trouble With Enterprise Software | MIT Sloan Management Review." MIT Sloan Management Review RSS. N.p., 1 Oct. 2007. Web. 28 Sept. 2014. <http://sloanreview.mit.edu/article/the-trouble-with-enterprise-software/>.

Technology and Supply Chains – Current Trends and Future Predictions

Sarah Foster
Blog Post #5 -Connection to Week 6: The Role of Technology and the Web on Global Supply Chains

Technology and Supply Chains – Current Trends and Future Predictions

This week’s readings focused on the increasing role of technology in supply chains.  To learn more about technology’s current and predicted influence I read two articles: Supply Chain Matters’ “Trends that Will Shape the Supply Chain in 2014,” and Forbes’ “Supply Chain and Logistics Predictions for 2014.”

“Trends that Will Shape the Supply Chain in 2014,” Supply Chain Matters, Supply Chain 24/7, January 28, 2014, http://www.supplychain247.com/article/trends_that_will_shape_the_supply_chain_in_2014.

Steve Banker, “Supply Chain and Logistics Predictions for 2014,” Forbes, January 10, 2014, http://www.forbes.com/sites/stevebanker/2014/01/10/supply-chain-and-logistics-predictions-for-2014/

Key trends highlighted in Supply Chain Matters are: the predicted growth of e-commerce; the growing importance of social media; the technological advancements of 3D printing; the increased applicability of big data; cloud computing to improve resiliency; the importance of emerging markets; and the increased complexity of urban deliveries. I will elaborate on two of these trends: e-commerce and urban deliveries.

Companies are relying more and more on e-commerce to maintain and increase revenue. Companies will need to revamp supply chains so that they can account for “more items going to homes and fewer to stores.”[1] This relates to the Home Depot article that delineates the retailer’s strategy to manage e-commerce growth. Home Depot is offering additional products online that so “associates at Home Depot stores will be able help customers find and buy items by offering them a broader array of merchandise through access to the retailer’s extensive online inventory.”[2] I think that Home Depot’s strategy will work, so long as they have a sufficient number of knowledgeable employees in stores to ensure that customers that do find what they want in the physical store will find what they want on the website.
  •          What strategies would you propose to a company that needs to manage an increased online demand?

Cities are becoming more congested and setting higher environmental standards.  The article states that “retailers, manufacturers, and logistics companies therefor need to work together to make their delivers more environmentally friendly: through using alternative vehicles, load sharing or other innovative solutions.”[3]  This makes me think of Amazon’s experiments with drone delivery, and I think that in the emerging markets, where air traffic regulation is at a minimum, numerous companies may implement drone delivery strategies in the future.  I think that if a company is a leader in this innovation (like Amazon) then that company will have a huge competitive advantage in regards to emerging markets in developing countries. I think this because developing countries do not have the extensive, maintained road and highway infrastructure that is present in developed nations. 
  •          Do you think companies will begin to build distribution centers and warehouses close to emerging markets? Under what circumstances would this result in a substantial competitive advantage?

The second article, Supply Chain and Logistics Predictions for 2014, forecasts: the growth of natural gas fleets; an increase in the use of robots; the rise of Omni-channel courier companies; and supply chain software becoming more user friendly.  One reason the author predicts a high return on investment for running natural gas fleets is that “the price of this domestically generated fuel going forward will be much less volatile than oil and gas products that are sources from some very unstable regions of the world.”[4]  I wonder if exporting natural gas will cause prices to increase in the United Sates.

The article mentions Kiva Systems, which was discussed in class, and predicts the eventual omission of people in warehouses.  I think that the prevalence of robots combined with 3D printing technology will cause huge disruptions in the future in regards to a decreased number of jobs.  The article also discusses Omni-channel courier companies, claiming “to achieve higher volumes, multiparty retailer/courier collaboration would be very helpful… if one courier was delivering orders for several retailers in a metropolitan area, route forecasts would be more accurate while the cost per delivery would go down.”[5]
  •          Do you think some retailers and/or industries would benefit more so that others from Omni-channel courier companies and e-fulfillment warehousing specialists? Why?

[1] “Trends that Will Shape the Supply Chain in 2014,” Supply Chain Matters, Supply Chain 24/7, January 28, 2014, http://www.supplychain247.com/article/trends_that_will_shape_the_supply_chain_in_2014.
[2] William B. Cassidy, “Home Depot’s New Strategy Tied to E-Commerce Growth,” Journal of
Commerce, August 18, 2014, http://www.joc.com/international-logistics/distributioncenters/home-depot’s-new-strategy-tied-e-commerce-growth_20140307.html
[3] “Trends that Will Shape the Supply Chain in 2014,” Supply Chain Matters, Supply Chain 24/7, January 28, 2014, http://www.supplychain247.com/article/trends_that_will_shape_the_supply_chain_in_2014.
[4] Steve Banker, “Supply Chain and Logistics Predictions for 2014,” Forbes, January 10, 2014, http://www.forbes.com/sites/stevebanker/2014/01/10/supply-chain-and-logistics-predictions-for-2014/
[5] Ibid. 

Technology and SCM in Small Businesses

My parents own a small business here in Pittsburgh called Extended Day Services (EDS), which is before and after-school child care service that runs directly in conjunction with the school districts it serves. So, instead of driving your kid to another location for after-school activities while you finish off your shift at work, the child remains within the confines of the school he or she normally attends, but is entertained by employees - often also certified teachers - of my parents' company. Here's a little shameless self-promotion :) - http://www.extendedday.com/

Anyway, EDS started before I was born when my parents were newly-weds, and the number of clients was puny. We're talking 25 kids in one school district. Since then, however, the company has expanded tremendously to include 20 different schools in 8 districts spanning from Upper St. Clair, PA to Beaver, PA. My dad is the tech geek behind this operation, and as you might imagine, his job has become increasingly more complicated as my mom writes to other school districts about how EDS can help their families - and obtains their business.

Now, the Forbes article that we had to read for this week only talks about the role of cloud computing in the supply chain of huge, international businesses like Samsung, P&G. My parents' company will surely never be that big, but I think it's important to emphasize that cloud computing and other technology is just an important for smaller businesses when it comes to managing supply chain functions.

EDS ultimately offers services, not products, but in order to provide children with an enriching after-school experience, my parents have to keep track of a million things that they order, receive, and then send out to the different school districts - paper, markers, snacks, etc. My dad's job is essential to keeping all of that organized. He built (and now maintains) a central database for these different transactions that keeps track of how many boxes from the latest order of Oreo cookies go to Eisenhower Elementary School, for example, or how many bottles of green paint were delivered to EDS's administrative office. This information ensures that each EDS location has ample supplies for each week. Data like this is also stored in a cloud and analyzed at EDS as branches of the company grow. For instance, if 50 boxes of colored pencils were delivered to Peters Township Middle School in 2013, and that particular EDS location has seen growth in the last year, then EDS staff in charge of ordering goods knows to purchase more the next time an order in placed.

The Forbes article also mentioned that "only 12% of enterprises have "extensive" communications with their network, while a quarter are still relying on e-mails, phone calls, and faxes." Here is where a small business excels in terms of communication within a supply chain. Since there are fewer people with whom to communicate in a smaller company, "agile, real-time communication," as the article calls it, is much more sustainable. At EDS, one central administrative office houses everyone, making communication really easy. My parents are always talking business, even when they aren't at work; for EDS in particular, this is a strength and a potential reason why it has expanded. My dad's nifty database is nice too, since it shares analytical information with everyone in the office. Collaboration is also mentioned in the article as being key to solving supply chain problems faster. Again, small business have a higher tendency to promote more collaboration among employees simply because it's easy. Giant corporations, like some highlighted in the article, have a hard time coordinating meeting times among many employees, making collaboration and real-time communication difficult.

With a combination of technological infrastructure - like the database and the cloud - and the compact size of EDS's central office, I like to think that my parents are doing something right (they're both CMU alumni, by the way!). Do you think that enough small businesses are using technology to their advantage? Is there a way to make these advancements more accessible to smaller companies who don't have technologically savvy employees so that these business can grow too?

Sources: http://www.forbes.com/sites/louiscolumbus/2014/02/12/where-cloud-computing-is-improving-supply-chain-performance-lessons-learned-from-scm-world/