Integrated Supply Chain

UNIT 11 INTEGRATED SUPPLY CHAIN Management

MANAGEMENT
Structure
11.1 Introduction
Objectives

11.2 Basics of Supply Chain Management

11.3 Integrated Aspect of Supply Chain
11.4 Role of IT and Web or E-enabled Supply Chain
11.4.1 Information Technology in a Supply Chain
11.4.2 Web or E-enabled Supply Chain

11.5 Summary
11.6 Key Words

11.1 INTRODUCTION
In any society, whether, industrialized or non-industrialized, goods must be physically
moved or transported between the place they are produced and the place they are
consumed. “Supply chain management (SCM) is the integration of key business
processes from end user through original suppliers, which provides products, services,
and information that add value for customers and other stakeholders” (Lambert et al.
1998). The supply chain includes not only the manufacturer and supplier, but also
transporters, warehouses, retailers, and customers themselves. In other words, the supply
chain includes all the elements involved in the final fulfillment of the customer demand
or request. Key requirements for successful implementation of supply chain management
are executive support, leadership, commitment to change, and empowerment.
Objectives
After studying this unit, you should be able to
• know about integration aspect of supply chain, and
• understand role of IT and web or E-enabled supply chain.

11.2 BASICS OF SUPPLY CHAIN MANAGEMENT

As most of the processes accountable to the final delivery of the quality product are
counteracting in nature, there comes the need for a system approach that is highly
interactive and complex in nature and requiring simultaneous consideration of much
trade-offs. SCM is an approach spanning over both within and among the organizations,
considering the tradeoffs between key business processes including customer relationship
management, customer service management, demand management, order fulfillment,
manufacturing flow management, procurement, product development and
commercialization, and returns. Figure 11.1 gives an overview of SCM and how it
integrates and manages the business processes across the organizational boundaries.
Many times the term “Supply chains” is often confused with the “Logistics”, but actually
logistics is only one part of the supply chain process that plans, implements, and controls
the efficient, effective flow and storage of goods, services, and related informations from
the point of origin to the point of consumption in order to meet the customer’s
requirement.
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Information Flow

Tier 2 Tier 1 Customer/

Supplier Supplier Customers End-Customer
Manufacture
Scheduling and Control of
Manufacturing Systems

Figure 11.1 : Supply Chain Management

Managing the supply chain is a complicated task and even managing logistics from point
of origin to the point of consumption is not as easy as it seems to write on a piece of
paper. The degree of complexity of this can easily be comprehend if you think of
yourself actually going to manage all the suppliers back to the point of origin and all
products/services out to the point of consumption.
The objective of every supply chain is to maximize the overall value generated. The
value refers to the difference between what the final product is worth to the customer and
the effort the supply chain is putting to fulfill the customer’s demand. It may also be
defined as the difference between the revenue generated from the customer and the
overall cost across the supply chain. More the value generated, more will be the
efficiency of the supply chain. However, most of the time the efficiency of the supply
chain is measured in terms of “Supply Chain Profitability”. Supply chain profitability is
the total profit to be shared across all supply chain stages. The higher the supply chain
profitability, the more successful the supply chain.
Supply chain management employs several decisions relating to the flow of resources,
raw materials, products and informations. Depending upon the frequency of each
decision and the time frame over which it has an impact, these decisions are categorized
into three phases :
Supply Chain Strategy or Design
During this phase, a company decides how to structure the supply chain. Decisions
made during this phase are also referred to as strategic supply chain decisions.
Supply chain design decisions are typically made for the long term. It includes the
decision pertaining to the location and capacities of production and warehousing
facilities, products to be manufactured or stored at various locations, modes of
transportation, and the type of information system to be utilized.

Supply Chain Planning

46
 In this phase, for a particular supply chain’s configuration decided in the previous Integrated Supply Chain
phase, companies define a set of operating policies that govern short-term Management
operations. Planning includes decisions regarding which markets will be supplied
from which locations, the inventories policies, timing and size of marketing
promotions etc. The other factors that are included while planning decisions are
uncertainty in demand, exchange rates, and competition over a specified period of
time.
Supply Chain Operation
The time period specified for this phase is weekly or daily, and companies make
decisions regarding individual customer orders, for a given supply chain
configuration and planning policies. During this phase, firms allocate individual
orders to inventory or production. They also allocate an order to a particular mode
of shipment, set delivery schedules and place replenishment orders.
These decision phases in a supply chain have a strong impact on overall
profitability and success.
Successful implementation of SCM requires identifying the specific supply chain
members, key processes that require integration, or what management must do to
successfully manage the supply chain. Figure 11.2 presents an SCM framework
encompassing the three closely interrelated elements: the structure of the supply
chain, the supply chain business processes, and the supply chain management
components.
Error!
Supply Chain
Business Processes

Supply Chain Supply Chain

Management Network Structure
Components

Figure 11.2 : Supply Chain Management Framework

Here, the supply chain structure is the network of members with whom processes
are linked. Business processes are the activities that produce a specific output of
value to the customer. The management components are the managerial variables
by which the business processes are integrated and managed across the supply
chain. These three elements constitute the whole essence of SCM. The broad
descriptions of each of these elements are given below.
Supply Chain Network Structure
The three primary structural aspects of a company’s network structure are the
members of the supply chain, the structural dimensions of the network and the
different types of process links across the supply chain. These aspects are
discussed below :
Identifying Supply Chain Members
The members of a supply chain include all companies/organizations with
whom the focal company interacts directly or indirectly though its supplier
or customers, from the point of origin to the point of consumption.
However, including all types of members may cause the total network to
become highly complex. So, these are divided into primary and supporting
members. Primary members of a supply chain are defined as those who
actually perform operational and/or managerial activities in the business 47
Scheduling and Control of
Manufacturing Systems
Structural Dimensions of the Network
Types of Business Process Link
Supply Chain Business Process
The key supply chain processes are :
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processes designed to produce a specific output. Supporting members are
those who simply provide resources, knowledge, utilities, or assets for the
primary members of the supply chain and thus, do not directly participate in
the value-adding processes of transforming inputs to outputs for the end
customer. The definitions of primary and supporting members make it
possible to define the point of origin and the point of consumption of the
supply chain. The point of origin of the supply chain occurs where no
primary suppliers exist. The point of consumption is where no further value
is added.
The structural dimension of the network may be horizontal, or vertical, or
the horizontal position of the focal company within the end points of supply
chain. The horizontal structure refers to the number of tiers across the
supply chain. The vertical structure refers to the number of suppliers/
customers represented within each tier. The third structural dimension
means that the company can be positioned at any point near the initial
source of supply, or the ultimate customer, or somewhere between these end
points.
Based upon the importance towards focal company, these process links are
divided into three types: managed process links, monitored process link, and
not-managed process links, in the decreasing level of importance. Now, a
company can chose any of these links to integrate and manage the business
processes.
• Customer relationship/service management process – the first step
towards integrated SCM is to identify the key customers or customer
groups that the organization is targeting. New customer interfaces are
established for leading the improved communication and for better
predictions of customer demand and hence eliminating the sources of
demand variability.
• Demand management process – customer demand is by far the largest
source of variability and stems from irregular order pattern.
Marketing requirements and production plans are coordinated on an
enterprise-wide basis. Customer demand and production rates are
synchronized to manage inventory globally.
• Order fulfillment process – the key to effective SCM is to meet
customer need dates. Performing the order fulfillment process
requires integration of the firm’s manufacturing, distribution, and
transporting plans.
• Manufacturing flow management process – manufacturing processes
must be flexible enough to respond to market changes. This requires
the flexibility to perform rapid changeover to accommodate mass
customization. Orders are processed on a Just-In-Time basis in
minimum lot sizes. Production priorities are driven by required
delivery dates.
• Procurement process – long term partnerships are developed with a
small core group of supplier. The key supplier is involved early in the
product development and manufacturing processes to bring the
dramatic reduction in production cost and delivery time by getting the
required coordination between shop floor, customer, and the supplier.
 • Product development and commercialization – responding to the Integrated Supply Chain
Management
changing market demand, new products are developed and
successfully launched in shorter time-frames to ensure the
preservence of existing customers as well as grabbing the new
customers.
• Returns process – effective process management of the return channel
enables identification of productivity-improvement opportunities and
breakthrough projects.
Supply Chain Management Components
These are the third element of the SCM framework, determining how different
business process links are integrated and managed. Following is the brief
description of some of the components that must receive managerial attention
when managing supply relationships :
Physical and Technical Components
Planning and Control Methods : Planning and control are the keys to
moving an organization or supply chain in a desired fashion.
Work Flow Structure : It indicates how the firm performs its tasks and
activities and the level of integration of processes across supply chain.
Product Flow Structure : It refers to the network structure for sourcing,
manufacturing, and distribution across the supply chain. It includes how
new product development is across the supply chain and the product
portfolio.
Information Flow Facility Structure : The kind of information passed
across the members of supply chain and frequency of its updating has a
strong influence on the efficiency of the supply chain.
Managerial and Behavioral Components
Management Methods : It includes the corporate philosophy and
management technique. It is difficult to integrate a top-down organization
structure with a bottom-up structure.
Power and Leadership Structure : One strong leader can drive the
direction of supply chain.
Culture and Attitude : The corporate culture and the attitude of the supply
chain members are the major deciding factor determining the success of
supply chain. It should be compatible with the other elements of the SCM to
ensure its effective application.
SAQ 1
(a) Define supply chain management. How is it different from Logistics?
(b) Discuss business processes in SCM framework.
(c) What are the managerial and behavioral components of a supply chain?

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Scheduling and Control of
Manufacturing Systems
11.3 INTEGRATED ASPECT OF SUPPLY CHAIN
In the customer relationship management process, sales and marketing provide the
account management expertise, engineering provides the specifications that define the
requirements, logistics provide knowledge of customer service requirement,
manufacturing provides the manufacturing strategy, and finance and accounting provides
customer profitability reports.
If the proper integration/coordination mechanisms are not in place across the various
functions, the process will neither be effective nor efficient. It means that all functions
that touch the product or provide information must work together. For example,
purchasing depends on sales/marketing data fed through a production schedule that are
used to assess specific order levels and timing of requirements. These orders drive
production requirements, which in turn are transmitted to the suppliers.
Talking in the true words, supply chain management refers to the integrated planning.
First, it is concerned with functional integration of purchasing, manufacturing,
transportation, and warehousing activities. Then, it also refers to the spatial integration
of these activities across geographically dispersed vendors, facilities, and markets.
Finally, it refers to the intertemporal integration of these activities over strategic, tactical,
and operational planning horizons. Strategic planning involves resource acquisition
decision to be taken over long term planning horizons, tactical planning involves
resource allocation decisions over medium term planning horizons, and operational
planning involves decision affecting the short term execution of the company’s business.

Intertemporal integration, though, yet not fully appreciated, yet, is critical to the firm’s
sustained competitive advantage. It is also called hierarchical planning, and requires
consistency and coherence among overlapping supply chain decisions at the various
levels of planning.
Improved integration of activities across multiple companies sharing components of a
supply chain is of growing concern nowadays. Such integration is obviously relevant to
the efficient operations of two companies after a merger or acquisition. It is also relevant
for two companies wishing to tighten their working arrangements, such as a manufacturer
of consumer durables and a major distributor of these durables or a manufacturer of food
products and a wholesale grocery distributor. In such instances, integration is
complicated as both the companies have other vendors and customers; that is, their
supply chain overlap significantly but are far from identical. Moreover, enhanced
integration implies greater sharing of confidential information about costs and capacities
as well as integrative management of business processes.
Integration of supply chain and demand management decisions is a matter of prime
concern for any profit maximizing firm. But, in many companies, barriers inhibiting this
integration have not yet been fully recognized. Table 11.1 provides the contrast between
complaints of supply chain and marketing managers.
Models can play an important role in resolving these conflicts by allowing managers on
both sides to objectively evaluate and reconcile their differences. The first step in using
data and models to reconcile is to agree with the quantitative methods for constructing
descriptive models that forecast or project future demand for finished products. Along
with this, are required other descriptive data such as manufacturing capacities,
transformation activities, and so on. Once this has been accomplished, the descriptive
model should be embedded in optimization models that analyze how to link supply chain
decisions with marketing and sales decisions. An effective integrated strategy will
emerge only after many scenarios have been optimized and their results examined and
interpreted.

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 Table 11.1 : Contrasting Complaints of Supply Chain and Marketing Managers Integrated Supply Chain
Management
Supply Chain Complaints Marketing Complaints
• Inaccurate long-term sales forecasts. • Insufficient manufacturing capacity.
• Mercurial short-term forecasts. • Excessive manufacturing and distribution lead
time.
• Excessive inventory requirements for • Insufficient inventory of finished product.
finished products.

• Too broad a range of product offerings • Insufficient product variety.

necessitating short, uneconomical
production runs.
• Unrealistic requirements for customer • Excessive supply chain costs.
service, delivery time performance,
quality.
• Needless and/or costly product • Resistance to and inefficient implementation
customization and engineering changes. of product customization and design changes
that enhance competitiveness.

Developments in integrated supply chain planning have been facilitated much by

advances in Information Technology (IT). The role of IT in field of successful
implementation of integrated SCM is discussed in next section.
SAQ 2
(a) Discuss intertemporal integration aspect of SCM.
(b) Discuss advantages of integration of SCM activities.
(c) What do you understand by hierarchical planning?

11.4 ROLE OF IT AND WEB OR E-ENABLED SUPPLY

CHAIN

11.3.1 Information Technology in a Supply Chain

Information is crucial to the performance of a supply chain because it provides the basis
upon which supply chain managers make decisions. The informations, which correspond
to the different stages of the supply chain, can be broadly divided into the following
components :
Supplier Information
What products can be purchased, at what price, with what lead time, and where
they can be delivered. Supplier information also includes order status,
modification, and payment arrangements.
Manufacturing Information
What products can be made, how many, by what facilities, with what lead time,
with what trade-offs, at what costs, and in what batch size.
Distribution and Retailing Information
What is to be transported where, in what quantity, by what mode, at what price,
how much is stored at each site, and with what lead time.
Demand Information
Who is buying what and where, at what price and in what quantity. Demand
information includes forecasting and demand distribution information.

51
Scheduling and Control of However, what is required for the information is that it must be accurate, reliable, and
Manufacturing Systems accessible in a timely manner.
Information technology provides the necessary tool in terms of hardware and software,
which enables the rapid transfer and analysis of information across managers, making
them come out with the best decisions of the supply chain. IT systems can be used to
make strategic, planning, or operational decisions within a supply chain:
Strategic Decisions
It spans over the several years in which managers must determine what products to
make, how many plants to have, where they should be located, what type of
distribution system have, what functions to perform in house or outsource, and
what type of demand to target. IT systems used at this level are highly analytical
because they focus on analyzing rather than gathering information.
Planning Decisions
It spans over several months to a year and involves decisions facilitating proper
allocation of available resources to best meet anticipated demand. Information
requirements at this stage include costs, capacities, and demand at an aggregate
level over the planning horizon. IT systems used at this level also focus on
analyzing information rather than just gathering it.
Operational Decisions
At this level, IT systems aim to execute the plans and policies defined earlier and
record transactions at the time frame all the way down to the second. Operational
IT systems are involved with setting weekly production and delivery schedules.
This phase requires less analytical work, especially once the schedules are set, and
focuses more on executing and recording transactions.
The evolution of IT applications in the supply chain has made it go along the long
way from the past- legacy systems to the present- enterprise resource planning
(ERP) and Analytical Applications (AA).
These systems are elaborated below :
Legacy Systems
Legacy systems are older IT systems based on mainframe technology that usually
work, at an operational level, only on a particular stage or even a particular
function within that stage of the supply chain. For instance, a legacy system might
deal only with inventory levels in particular warehouses in a distributor’s network.
Although, this system would monitor inventory levels in that warehouses but
would likely to have difficulty in communicating with the legacy system that
handled transportation for the same distributor. Thus, we can say that the
communication between systems is lacking in such case, and therefore visibility
across functions and supply chain stages is very limited. Legacy systems also have
very limited analytical capabilities because they focus more on gathering
information rather than analyzing information to make decisions. Most were built
to keep track of transactions instead of determining what transactions ought to be
occurring. With such limitations, companies using legacy systems often make
decisions that have a very narrow scope and hurt the supply chain’s total profits.
So, the need raises of an efficient IT system capable of making better supply chain
decisions. The enterprise resource planning (ERP) systems come up as a solution
to this raised need.
Enterprise Resource Planning (ERP)
ERP systems are operational IT systems that gather information from across all of
a company’s functions, resulting in the enterprise having a broader scope. An ERP
systems monitor materials, orders, schedules, finished goods inventory, and other
information throughout the entire organization. ERP systems typically have many
52
modules, each covering different functions within a company. These modules are Integrated Supply Chain
linked together so that users in each function can see what is happening in other Management
areas of the company. There are several key modules to an ERP system, each of
which can be installed on its own or with a combination of other modules :
Finance
This module tracks financial information such as revenue and cost data
through various areas within the company.
Logistics
This module is often broken into several sub modules covering different
logistics functions such as transportation, inventory management, and
warehouse management.
Manufacturing
This module tracks the flow of products through the manufacturing process,
coordinating what is done to what part at what time.
Order Fulfillment
This module monitors the entire order fulfillment cycle; keeping track of the
progress the company has made in satisfying demand.
Human Resources
This module handles all sorts of human resources tasks, such as the
scheduling of workers.
Supplier Management
This module monitors supplier performance and tracks the delivery of
supplier’s product.
All of these modules and even other more are integrated in uniform system
environment that accesses a centralized database residing on a common platform.
Common and compatible data fields and formats are used across the entire
enterprise. Moreover, data are entered once and only once, ensuring that all
applications make consistent use of these data.
ERP systems, because of its broad scope of visibility enables the company and
supply chain managers to make much better decisions, and so have experienced a
wide acceptability. However, although ERP systems are good at monitoring
transactions but generally lack the analytical capability to determine what
transactions ought to happen. Therefore, they reside more in the operational area of
the IT map than in the planning and strategic areas. They are great at telling
managers what is going on but not good at telling them what should be going on.
Similar to legacy systems, an ERP system can tell a manager what current
inventory levels are for a product in a particular warehouse, for instance, but are
weak when it comes to determining how much inventory there should be to meet a
certain service level. However, given the relatively unsophisticated optimization
techniques used, such as material requirement planning (MRP), they tend to arrive
at a feasible rather than an optimal solution. Despite ERP’s weakness in analytics,
they still do have improved analytical capabilities compared with legacy systems.
In recent years, the ERP companies have put forth great efforts in developing
analytical capabilities to add to their ERP packages. This analytical capability is
delivered to customers in the form of add-on modules that bolt onto existing ERP
systems.
There are five major ERP players in the marketplace delivering their services to
different companies. These are described below :
SAP
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Scheduling and Control of The clear ERP market leader with around 30 percent share of the market.
Manufacturing Systems They have their roots in writing software for manufacturing environments.
The firm has a strong tradition of building capabilities in-house, and they are
expanding their product offerings vertically by developing more analytical
functions to be used in supply chain planning.
Oracle
The second largest player with about 15-20 percent share of the market.
They write database software for financial applications. Oracle has had the
most success with consumer packaged goods companies, although they have
successfully expanded into other industries.
People Soft
Whereas SAP started with manufacturing applications and Oracle with
finance, People soft started with human resource applications. It has
acquired an analytical software firm in the supply chain realm (Red Pepper)
in order to push its product up the vertical scale.
J. D. Edwards
This firm started out building cross-functional systems that were targeted
towards mid-sized firms. It has purchased Numetrix, a supply chain software
company, in an effort to increase its offering in the analytical applications
realm.
Baan
It also focuses on midsize companies. In order to improve its supply chain
analytics, Baan has purchased CAPS Logistics.
Analytical Applications (AA)
Whereas an ERP system’s greatest advantage is the broad scope it provides, an
Analytical Applications’ advantage lies in the fact that it can be used for both
planning and strategic decisions. Analytical systems are not focused at an
operating level but rather on planning and strategic decisions. They analyze
information supplied to them by legacy or ERP systems in order to help supply
chain managers make good decisions. Analytical applications rely on sophisticated
algorithms developed by software programmers using linear programming (LP),
mixed integer programming (MIP), genetic algorithms (GA), theory of constraints
(TOC), and many other types of heuristics. Due to the level of sophistication, this
technology is relatively hard to develop if a firm has not much experience in this
area. The following is discussed some of the systems with significant analytical
capabilities.
Advanced Planning and Scheduling (APS)
Advanced planning and scheduling has been one of the fastest growing areas
in analytical applications. APS systems produce schedules for what to make,
where and when to make it, how to make it while taking into account the
material availability, plant capacity, and other business objectives. APS also
encompasses the functions of strategic supply chain planning, inventory
planning, and available to promise (ATP). These systems are highly
analytical and use sophisticated algorithms such as linear programming and
genetic algorithms. APS systems require inputs of transaction-level data
that are collected by ERP or legacy system. Supply chain software
developer i2 Technology is the leading developer of APS systems.
Customer Relationship Management (CRM)
The customer relationship management (CRM) applications allow for the
54 detailed customer and product information to be available in the real time so
 as to direct the efforts fulfilling the customer’s growing demands. Siebal Integrated Supply Chain
Systems has been the clear leader in developing CRM applications. Management

Inventory Management System (IMS)

These systems observe demand patterns; take inputs on forecasting, costs,
margins, and service levels; and then produce a recommended stocking
policy. They are best used to achieve an optimal balance between inventory
costs and stock out costs.
Demand Planning and Revenue Management (DPRM)
The demand planning and revenue management applications help companies
forecast their demand using proprietary analytical tools. These systems take
as inputs historical data, demand trends, any information regarding future
demand and come up with models to help explain past sales and forecast
future demands. Revenue management deals with using price discrimination
to maximize the amount of customer surplus out of the product sales. i2 is a
leading provider of demand planning solutions, and Talus is a leading
provider of revenue management.
There are several other systems like Manufacturing Execution System
(MES), Warehouse Management System, Transportation Planning System,
etc. working at the various stages or at the interface of different stages of the
supply chain at the planning level.
Analytical applications, although enjoys sophisticated analytical capabilities
and generate solutions that are far superior to what could be arrived at
without them, generally suffers a downfall in terms of not having broad
scope of an ERP system. They must rely on data from either legacy or ERP
systems, and when supply chain-wide data are not available, they resort to
estimates. In any case, integrating the analytical applications with a good
data system is essential.
In summarizing our discussions of the types of IT systems, it is important
for supply chain managers to understand the interaction between ERP
systems and analytical applications. Although, they are sometimes viewed
as competitors, but in actual, they are complement of each other. The full
value of an ERP system cannot be realized without the problem-solving
ability of analytical solutions. Conversely, for analytical solutions to be
productive, they need accurate data from a variety of functions that can be
efficiently obtained from ERP system. Therefore, managers now often
combine these two applications to produce the best supply chain.
11.3.2 Web or E-enabled Supply Chain
Supply chain management (SCM) shifts the unit of analysis from a plant, a warehouse or
a company to the entire supply chain. Since a supply chain typically spans over multiple
companies, SCM particularly highlights the importance of cross-enterprise
coordination- in the name of supply chain integration. But supply chain integration
requires a cost-effective information system that links multiple companies. This need can
now be met by the Internet. This marriage between supply chain integration and the
Internet is termed as “e-Business” or “Web-enabled Supply Chain”. Thus, e-Business is
defined as executing front-end and back-end operations in a supply chain using the
Internet. In a sense, e-Business is on the natural growth path of enterprise information
systems that started with material procurement (MRP, material requirement planning),
expanding to manufacturing (MRPII, manufacturing resource planning) and to
intra-enterprise integration (ERP, enterprise resource planning). In general, e-Business
applications are divided into three categories – e-Commerce, e-Procurement, and
e-Collaboration. e-Commerce helps a network of supply chain partners to identify and
respond quickly to changing customer demand captured over the Internet. e-Procurement
allows companies to use the Internet for procuring direct or indirect materials, as well as
handling value-added services like transportation, warehousing, customs clearing,
payment, quality validation, and documentation. e-Collaboration facilitates coordination 55
Scheduling and Control of of various decisions and activities beyond transactions among the supply chain partners
Manufacturing Systems over the Internet. The elaborate discussions of these e-Business applications are
presented as follows :
e-Commerce
The definition of e-Commerce goes beyond the business-to-consumer (B2C)
interface to include the backend processing of transactions in the supply chain as
well. When a customer places an order on the web, the order triggers a series of
transactions throughout the supply chain. A speedy and accurate execution of a
transaction is perhaps the most fundamental form of interaction among supply
chain partners. Indeed, the Internet provides a natural setting to link supply chain
partners for delivering a product or service in tight coordination. Examples of
e-Commerce include Amazon.com, eToys, eBay and E*trade. The example of
Cisco serves as a case in point demonstrating the activity and its advantage.
Cisco Connection Online (CCO) is the largest e-business site in the world,
generating 80 percent of Cisco’s revenue. CCO provides customers with almost
everything they need to transact business with Cisco. Through CCO’s self-service
configuration and order placement system, customers can research pricing,
estimate lead times, configure order status, access invoicing and account receivable
information, and sign up for service. On the backend side, Cisco streamlined
internal operations of order fulfillment in full integration with its front-end order
capture by extending its communication to roughly 100 contract manufactures and
suppliers. Once an order is placed through CCO, the backend operations are via
the second hub SupplyWeb. More than 65 percent of the orders are directly
delivered to the customers without Cisco employees ever physically touching
them. The internet-enabled capabilities have reduced order entry cycle time from 1
week to less than 3 days and order-acknowledgement cycle-time from 12 hours to
2 hours. In addition, customer self-service enables Cisco’s sales force to focus
more on the relationship aspect, rather than the administrative aspect, of its
customer relationship. Since, implementing CCO, Cisco’s customer retention rate
is a record 87 percent and they have experienced a 52 percent improvement in
customer satisfaction. Cisco’s estimates of annual savings exceeded $800 million
last year.
Another cross-enterprise activity related to e-commerce is order tracking. Supply
chain partners report their order status to the database at the information hub, so
that the status is kept current no matter who is handling it at the moment. Several
companies market technologies (e.g. Savi Technology) or services (e.g. Descartes)
to track and trace orders and resources throughout the supply chain. Data are
entered into the system by scanners using bar-code or radio-frequency
technologies at numerous checkpoints, forwarded to the hub and made available to
authorized users. The information hub has cut administrative and inventory costs
by avoiding miscommunication, while delivering enhanced service to customers.
Remote sensing, testing and diagnosis are additional examples of the e-commerce
activity. Software companies like Norton offer a remote maintenance service on
PC products. A subscriber of the service would allow the service center to
remotely collect data on her computer. The service center (operating as the
information hub) will electronically check her computer for computer viruses and
terminate them if contamination is detected. They may also advise and help the
subscriber to install software upgrades, hardware drivers, and program add-ons
specific to her computer.
e-Procurement
e-Procurement is the set of Internet applications by which buyers and sellers find
each other and transact according to some pre-specified protocols, and involves
private or/and public marketplace. Since a typical manufacturing company needs
to procure thousands of products from hundreds of suppliers, the Internet can help
56
 such a company manage the complexity of the procurement process. Numerous Integrated Supply Chain
companies including Ariba and CommerceOne offer web-based enterprise Management
procurement solutions that dynamically link the buyer into real-time trading
communities over the Internet. They also automate the internal procurement
process from requisition to order, as well as the supplier interactions from order to
payment. The solutions enable their client companies to reduce operational costs
and increase efficiency by automating the entire indirect goods and services supply
chain. In the electronic and high tech (EHT) industry, Converge, e2open and
eConnections operate electronic marketplaces for trading direct parts and
components. As another example, Chemdex (now renamed Ventro) operates a
marketplace for biological and chemical reagents for life sciences research needs.
Instill corporation, a Silicon Valley startup company, employs an e-Buyer model
for order capture and processing for the foodservice industry. The company
improves upon the traditional time-consuming, error-prone purchasing systems,
and helps lower costs for the industry’s entire supply chain. Its secure and user-
friendly client program allows retail customers (i.e. restaurants and other
foodservice operators) to place purchase orders on the web. The orders are
forwarded to distributors and manufacturers, according to the rules specified by the
retailers. Thus, Instill’s server serves as the information hub that links buyers and
suppliers in the food service market. The web also offers a purchase tracking
service for multi-unit foodservice operators, by allowing operator executives to
view up-to-the minute unit purchasing activity for better control.
e-Collaboration
By e-Collaboration, we mean the use of Internet among business partners beyond
the transactional purpose. Supply chain integration implies more than the
traditional arm’s length relationship based on market transactions among its
partners. It often involves sharing of information and knowledge that used to be
thought as proprietary or even strategic. Moreover, other functional areas are like
collaborative decision-making, product change management etc. where
e-Collaboration exists. They are discussed below:
Information Sharing
An information hub serves as an efficient platform to share information
among supply chain partners. For example, Baker Street Technologies, a
Toronto-based startup, offers a web-based platform that provides a real time
link among supply chain partners. Its information hub technology offers
cross-enterprise visibility of supply chain activities. In one implementation,
partners share and view purchase orders, sales orders, invoices, checks and
other business documents over the Internet. Only the directory and high-
level data are kept at the hub, while detailed information and documents are
stored at the local sites. By double-clicking on a data item, one can drill
down to the document level and access the local data. In this way, an
integrated view of supply chain status is collected from disparate
information sources and projected on the websites.
Collaborative Planning
The Internet provides a system architecture to implement collaborative
decision-making in a cost effective way. Several companies (e.g. American
Software and Syncra) have developed an information hub that facilitates
knowledge sharing and collaborative decision-making in the spirit of
Collaborative Planning, Forecasting and Replenishment (CPFR). Supply
chain partners first exchange product forecasts and replenishment plans.
Then, its technology synchronizes and develops new agreed-upon plans that
closely match supply with market demand. As a result, they can jointly
reduce inventory costs and raise customer service level. Several companies
like Nabisco and Wegmans have successfully implemented a pilot of CPFR
and experienced encouraging results. A similar idea is being used in
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Scheduling and Control of resource planning too. Extracting data from multiple partners, their system
Manufacturing Systems allows comparative cost analysis on the supply chain level- including
tradeoffs between lead time versus reliability, and decreased assets versus
increased throughput. It also facilitates demand and supply analysis, so the
OEMs can understand final demand and supply constraints. It additionally
analyzes target inventories and safety capacities to meet customer
commitments and achieve targeted profitability.
New Product Development
The information hub can also be used to deliver the efficiency and speed
demanded in new product development and product change management.
Agile Software for example, facilitates collaborative product development
using the Internet. As product life cycles became shorter and shorter,
managing product rollover is now a routine challenge faced by many high
tech companies. Product rollover means the transition from one version of a
product to its successor. One of the major risks in product rollover is the
time taken to have all the new parts ready for the rollover. Engineering
changes involved in rollovers may require new suppliers, new bills of
material, etc. Agile Software has been able to help companies like Dell,
Lucent Technologies, WebTV, Flextronics to use its Internet-based software
systems so that engineering changes can be made effortless and ultimately
leading to improved profitability.
In retrospect, it can be concluded that the first generation of e-Business
applications has improved the supply chain efficiency through the ability to
access extensive information, automate workflows, open a direct channel,
and link multiple suppliers and customers. Such applications, in the areas of
e-Commerce, e-Procurement, and e-Collaboration have reduced the
operating costs, shortened lead-time, improved customer service, and
eliminated transaction errors in a supply chain. As such, significant values
have been achieved.
SAQ 2
(a) Discuss the role of IT in decision making process of supply chain.
(b) Discuss the advantages of Analytical Applications over ERP.
(c) Name any three ERP players and their functional areas.
(d) What is e-Commerce?

11.5 SUMMARY
Supply chain management (SCM) is an approach spanning over both within and among
the organizations, integrating all key business processes that provide products, services,
and informations to the system that add value for customers and other stakeholders.
However, if the proper integration/coordination mechanisms are not in place across the
various functions, the process will be neither effective nor efficient. It means that all the
functions that touch the product or provide information must work together or be
integrated in a proper manner. Advances in IT has provided the necessary tool in terms of
hardware and software that enables the efficient and rapid transfer and analysis of
information across managers making them come out with best decisions for the supply
chain. But supply chain integration requires a cost-effective information system that links
multiple companies with multiple objectives. This need is met in terms of
Web-enabled supply chain or e-Business that executes front-end and back-end operations
in a supply chain using the Internet. The next few years is going to experience
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exploration of new paradigms in field of e-business. In the present unit, all these issues
are discussed.
11.6 KEY WORDS
Supply Chain Management
Demand Planning and
Revenue Management
Enterprise Resource Planning
FURTHER READINGS
Baker, K. R., (1984), Sequencing Rules and Due Dates Assignment in a Job Shop, Mgmt
Sci., 30, pp. 1093-1104.
Integrated Supply Chain
Management
: Supply chain management (SCM) is the
integration of key business processes from end
user through original suppliers that provides
products, services, and information that add value
for customers and other stakeholders Supply Chain
Management.
: The demand planning and revenue management
(DPRM) applications help companies forecast
their demand using proprietary analytical tools.
: ERP systems are operational IT systems that
gather information from across all of a company’s
functions, resulting in the enterprise having a
broader scope.
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Scheduling and Control of Bock, G. E., (1998), Coordinating the Web of Inter-Enterprise Relationships : The
Manufacturing Systems Business Benefits of Real-Time Customer Service Solutions from Service Track, Patricia
Seybold Group.
Brachman, R. J. and Schmolze, J., (1985), An Overview of the KL-ONE Knowledge
Representation System, Cognitive Science 9(2), 171-216.
Chang T. C., Wysk R. A., and Wang H. P., Computer Aided Manufacturing, Prentice
Hall, New Jersey.
Engell, S., (1992), Heirarchical Decentralized Scheduling using Min-max Algebra,
IFAC- Symposium Large Scale Systems 92, Beijing, Preprints 567-572.
Engell S. and Moser, M., (1992), A Benchmark Problem in On Line Sceduling, Proc.
IEEE Int. Conference on Decision and Control, Tucson, pp. 386-91.
Gaines, B. R., (1993(b)), Representation, Discourse, Logic and Truth : Situating
Knowledge Technology, JCC’ 93, Conceptual Graphs Conference, Quebec City, Canada.
Morgan Kaufman, San Mateo, CA.
Groover, M. P., (2001), Automation, Production Systems, and Computer-Integrated
Manufacturing, 2nd Ed., Pearson Education : Singapore.
Lambert, D. M., Cooper M. C. and Pagh J. D., (1998), Supply Chain Management :
Implementation Issues and Research Opportunities, International Journal of Logistics
Management, Vol. 9, No. 2, p. 1-19.
Meindl, P., Chopra. S., (2001), Supply Chain Management- Strategy, Planning, and
Operation, Pearson Education (Singapore) Pte. Ltd.
Ranky P., (1989), Computer Integrated Manufacturing, Englewood Cliffs., NJ : Prentice
Hall.
Reinhart, T. J., Engineering Material’s Handbook, ASM International.
Rumelhart, D. E., Hinton, G. E. and Williams, R. J., (1986), Learning Internal
Representation by Error Propagation, Parallel Distributed Processing : Exploration in
the Microcomputers of Cognition. Vol 1, MIT Press, Cambridge, MA.
SHIUE, Y. R. and SU, C. T., (2003), An enhanced knowledge representation for decision
tree based learning adaptive scheduling. International Journal of Computer Integrated
Manufacturing, 16, 48-60.
Solot, Ph., and Bostos, J. M., (1987), Choosing a Queuing Model for an FMS. Brown
Boveri Forshungszentrum, Report CRB 87-40 C, Baden, Switzerland.
Wang, J. and Kusiak, A., (2000), Computational Intelligence in Manufacturing
Handbook, CRC Press, London.

SCHEDULING AND CONTROL OF

MANUFACTURING SYSTEMS
This block, comprising four units, deals with the characteristics of computerised
scheduling and control of manufacturing systems, computer algorithm for on line
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scheduling for automated manufacturing systems, knowledge based scheduling and Integrated Supply Chain
integrated supply chain management. Management

Unit 8 deals with the characteristics of computerised scheduling and control of

manufacturing systems. This unit describes the classical job shop scheduling problem,
characteristics of computer controlled scheduling dynamic machine routing, and
short-term scheduling and control.
Unit 9 discusses computer algorithms for on line scheduling for automated
manufacturing systems that includes aspects of scheduling, conventional priority rules,
newer approaches to on line scheduling, and scheduling of automated guided vehicles for
materials handling systems.
In Unit 10, the knowledge based scheduling is discussed. In this unit, general issues of
knowledge representations, inside detail of computational agent, and few knowledge
based scheduling technique on a manufacturing systems have been discussed in detail.
Unit 11 deals with integrated supply chain management. Under this heading, reader will
learn about basics of supply chain management, integration aspects of supply chain, and
role of IT and Web or E-enabled supply chain.

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