BBA IV : Logistics and SCM

UNIT V : Information Technology In Supply Chain

Management and coordination inSCM.

Q. What is the role of Information Technology In Supply Chain

Optimization
The use of information technology (IT) is considered a
prerequisite for the effective control of today’s complex
supply chains. Because, today companies are often not
considered independent entities, but parts of multi-company,
multi-echelon networks, i.e. supply chains, delivering goods
and services to the final customer.

Companies today are under pressure to better manage the

supply chain and to improve efficiency and logistics
operations while remaining responsive to changing market
conditions and customer demands. As a result, organizations
need to adopt IT to support their supply chains and increase
their efficiency by achieving tighter cooperation over the
supply-chain.
Importers and exporters need to know where their product
is. Lenders need to know when and how to pay for it.
Innovative companies have sprung up to harness the power
of the IT, making it easier than ever for logistics managers to
track and manage international shipments, and to serve their
changing needs as they reach ever further across the globe to
source goods. All Companies such as (Future Group) Big Bazar
, Patanjali, HUL, Amajon, Flipkart, Home Depot, Xerox and
Sears already use on-demand, Web-based data hubs to
identify where their goods are in real time, and if delays
along the way should be corrected to avoid broader supply
chain disruptions and expensive recovery work.

TYPE OF ‘IT’ USE FOR OPTIMIZING SCM

The use of IT for optimizing SCM can be divided into (Ref.

Figure 1):
Transaction processing
Supply chain planning and collaboration
Order tracking and delivery coordination
Transaction processing stands for the use of IT for increasing
the efficiency of repetitive information exchanges between
supply chain partners. In this type of IT use the exchanged
information is typically related to such tasks as order
processing, billing, delivery verification, generating and
sending dispatch advices, and producing order quotes.

Supply chain planning and collaboration represents the use

of IT for sharing planning-related information such as
demand forecasts and other demand information, inventory
information, and production capacity information, with the
intention of increasing the effectiveness of the supply chain.

Order tracking and delivery coordination refers to the

monitoring of individual orders or shipments, which may
consist of components or final products, with the aim of
coordinating their delivery or conveying timely information of
their location.

Q. HOW ‘IT’ HAS OPTIMIZED THE SCM ?

IT plays instrumental role in bringing together multiple

technologies and integrating them to optimize various
scenarios in SCM. For instance when “Radio Frequency
Identification” (RFID) is used with IT, the combination
promises to enable an automatic collection of supply chain
data for optimization purposes. The above combination
makes it possible to implement a finely grained and
immediate collection of data, which in turn enables more
detailed and precise analyses on the “Business Intelligence”
(BI) side.
A connection of RFID, IT & BI has powerful business potential
that goes well beyond incremental operational
improvements. The combination for tracking & tracing, and
sensor technologies additionally enables the identification
and localization of root causes for quality issues. Sensor data
such as abrasion, temperature, humidity, or brightness can be
measured automatically for each transport unit and stored on
the RFID chip. Later this data is made readily available by IT
for aligning the flow of goods with the actual demand.

The pursued objectives are reducing storage space at the

“Global Distribution Centres” (GDC) while curbing the risk of
out-of-stock situations. In an optimal scenario, goods arriving
at the GDC can be directly forwarded to the retailers without
stocking (Cross-Docking).
The benefits of a combination of IT, RFID and BI on the
manufacturer’s side lead to efficiency gains within production
environments.  Overall, the results indicate that it has
powerful business potential that goes well beyond
incremental operational improvements.

CASE STUDY
Q. How 'IT' AS AN ENABLER FOR A ‘GREEN SUPPLY CHAIN' ?

The focus on optimization and sustainability has resulted in a

growing need for integrating environmentally sound choices
into supply chain management research and practice.
Patrick Penfield of the Whiteman School of Management
defines Green Supply Chain Management (GSCM) as "the
process of using environmentally friendly inputs and
transforming these inputs into outputs that can be reclaimed
and re-used at the end of their lifecycle thus, creating a
sustainable supply chain.”

IT Enables Green Initiatives :-

In most new initiatives adopted by organizations, IT has
played a pivotal role in ensuring the chances of success and
reaping the expected benefits.
Contributions of IT in GSCM can be viewed from two different
perspectives.
Hardware Perspective - Optimizing hardware resources to
support the business.
Technology providers are innovating and developing energy
efficient solutions that have a more favourable impact on the
environment. Few solutions are:
Right-Sizing IT infrastructure
Re-architecting Data processing and Storage operations
Leveraging shared infrastructure
Adopting a lifecycle approach to the retiring of IT waste
Software perspective - Streamlining / Transforming Business
Processes.
IT can enable more effective supply chain planning, execution
and collaboration, thereby reducing resource requirements.
Green Supply Chain Planning: IT can optimize transportation
planning routes and ensure that goods/services are
delivered in the most energy efficient and cost- effective
manner.
Green Supply Chain Collaboration: Collaborative Transport
Management (CTM) goes hand-in-hand with GSCM. IT
facilitates the involvement of all partners in supply-chain
and help organizations achieve better utilization of
transportation assets and reduce overall energy
requirements
PROMINENT CHANGES IN ‘IT’ ENABLED TRADE SCENARIOS
As globalization of trade gets a firmer foothold, the tendency
to rely on ‘Letters Of Credit’ (LOC) is waning and other forms
of cross-border payments and financing are starting to
emerge in place of LOC, with open account payment terms
becoming much more common. In the absence of LOC, banks
need other kinds of information to gain greater visibility into
their collective risk.
Banks will now accept document substitutes, such as an
“acknowledged purchase order” as part of an overall picture
that also includes the bank’s relationship with the importer,
delivery performance history and the general trade
relationship between the seller and importer. One way of
establishing and monitoring all of this information is through
an online system that allows banks to see this data
immediately and securely via the Web. Moving to “IT-
enabled” open account terms better reflects the movement
in international trade payments.
Yet another improvement offered by reliable, real-time IT
enabled supply chain is that it provides the basis for in-transit
inventory financing, by providing access to electronic trade
documents and on-line visibility to the actual movement of
inventory.
BENEFITS OF INTEGRATING THE SUPPLY CHAIN
Standardised production, including improved quality
control, shorter production time, greater efficiency.
Simplified supply chain process, including control over
suppliers, improved process cycle time, close cooperation
relationships, improved supply chain efficiency, raw
materials on time for suppliers.
Process automation, including reduced errors, capability to
obtain and exchange real time information.
Improved purchasing process, including reduced
arrangement and handling times, shortened response time
for purchasing, improved order process speed, reduced
labour costs.
Reduced stocking including reduced risk, reduced stock
capital costs, reduced unused raw material stock.
Improved payment process including faster payment
operation, lower interest rate, and lower credit risk.
Improved distribution process, including delivering on time,
reduced delivery enquiring time, improved distribution
management.
Improved global competitiveness including global order
opportunities.
CONCLUSION
A competitive firm has to have the ability to acquire the
goods and services it needs just when and where it needs
them, at a favourable price, and with acceptable payment
and delivery terms. A competitive firm needs to directly
manage the flow of goods through its distribution networks
in a cost-effective manner. Organizations have come to realize
that they can achieve this by integrating their supply chains.
The adoption of IT to support the supply chain management
can be seen either as a way to provide efficiency savings, or
as a strategic response either driven by necessity or due to
competitive pressure. Therefore, IT implementations deliver
many benefits like standardized production, optimized supply
chain process, and automated process.