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Role of IT/Computer in SCM Introduction A well managed supply chain links the suppliers, manufacturers, distributers and customers by a suitable information system for controlling across boarder in order to achieve optimum productivity, overall satisfaction and joyful relation at cheaper cost. Quick and effective information system helps manager to understand the customer response, their demands, inventory in the stock, how much to be produced and where to deliver and when? Here comes the role of internet, which is considered as a cheapest inter-organizational information system, which helps in aligning the interdependent strategies to achieve cooperative rather than competitive role of SCM partners. Need of IT Information technology offers many opportunities for companies to cut cost and improve responsiveness to customer’s needs. Some of the positive points of IT enabled services are: IT is comparatively less capital intensive. It is environmental friendly and clean. It is not location specific and can be undertaken from anywhere. It does not require expensive infrastructure facilities. Various IT solutions I. II. III. Communications Electronic mail (e-mail) Electronic data interchange (EDI)
Enterprise resource planning (ERP)
Results of IT solution We have observed that the Indian automobile industry is booming and internet is being utilized in automobile industry in a big way. Internet trying to interlink suppliers, manufacturers, wholesalers and retailers to have: Better control on inventory at various levels of supply chain. Better utilization of manpower.
It keeping track of inventory. But it is fact that internet has influenced the whole business strategy whether it is policy or it is physical implementation. Some of the areas where’s greater effect felt are given below: a) Communication b) Selection of vendors or partners c) Cost saving d) Reduction of lead times e) Improves product promotional activities a) Communication 24 hours communication throughout the year all over the world. Because of internet communication there are saving in manpower, stationary, postage and journey fare. Quick exchange of ideas and expertise, customers’ feedback collection becomes easier b) Selection of vendors or partners Suitable vendor selection from many vendors from any part of the world
Since whole world is connected through internet, it becomes easier to select business partners for the joint ventures c) Cost saving Reduce cost of preparing letters and sending letters, saves postage cost Achieving order and placing order become less costly d) Reduction of lead times Reduce lead time of material supply Reduce retrieval time of documented information e) Improves product promotional activities Reduce the expenditure for market expansion and also reduce market mediation Improve relation with customer and helps in promotion of products in the form of advertisement Limitation There are also some limitations recorded: Lack of manager awareness with the system and lack of management’s full commitments. Development of electronic data interchange is a costly affair Problems of security and privacy Since no face to face contact is there hence, lack of trust Customers also need awareness for effective utilization of internet in the business
BENCHMARKING Benchmarking is the practice of being humble enough to admit that someone else is better at something, and being wise enough to learn how to match them and even surpass them at it. Other definitions Benchmarking is the process of comparing the cost, cycle time, productivity or quality of specific process or method to another that is widely considered to be an industry standard or best practice. It is the process for improving performance by constantly identifying, understanding and adapting best practices and processes followed inside and outside the company and implementing the results. The core of the current interpretation of benchmarking is:
1. Measurement- In the benchmarking, we measure the performance level of own and the benchmarking partner, both for comparison and for registering improvements. 2. Comparison- We compares the performance levels, processes, practices etc.
3. Learning- We can learn from the benchmarking partners to introduce improvements in your own organization. 4. Improvements- It is the ultimate objective of any benchmarking study. Benchmarking model
There are a number of models describing the different steps that constitute a benchmarking study. One such model is the so-called benchmarking wheel (Andersen, 1995)
Choose best practice adapt to the company’s condition and implement changes
Critical factors select a process for benchmarking, document the process and develop performance measures
Identify the gaps in performance and find the root causes for the performance gap
Find benchmarking partners
Understand and document the partners’ process, both performance and practice
Why the benchmarking is required in the business Benchmarking helps in identifying the factors that are critical for success. It also portrays the factors that are less important and thus need a smaller share of resources. Since the business environment is changing rapidly, there is a need for continuously setting new benchmarks. The need for benchmarking arises when a company wishes to improve its operations or supply chain wants to bring about organizational changes Enter into some mergers and acquisitions Types of benchmarking-
1. Internal benchmarking- If one analyses the existing process and practices within various departments of an organization, it is known as internal benchmarking. the benefit of this benchmarking is that it enables an organization to focus on specific functions and processes in order to learn from its own best practices
This is often called the first step in the benchmarking process and is the easiest kind of benchmarking to organize. 2. Competitive benchmarking- If a company analyses how its competitors are performing then its known as competitive benchmarking. It is also done for comparing the processes. The benefit is that it helps organization in strategic decision making by giving them a view of the strengths and weaknesses of its competitors. 3. Industry benchmarking- if one analyses the trends and best practices that are prevalent in the industry and tries to imitate them in one’s organization then it is called industry benchmarking. 4. Generic benchmarking- if one makes comparison between processes and operations with industries from other fields then it is called generic benchmarking. BENCHMARKING METHDOLOGY Benchmarking involves the following steps: Scope and definition Choose benchmark partners Determine measurement method Data collection Analysis of discrepancies Presenting results, discussing improvement areas and making improvement plans Monitoring progress and planning ongoing benchmarking Outsourcing in SCM In order to understand the concept of outsourcing, there is a good example of “Nike”
It is a fact that Nike is a virtual corporation The actual manufacturing is done by Nike sub contractors working out of Taiwan, Hong Kong. The actual manufacturing plants are located in Indonesia, China and Vietnam. The logistics, which involves transportation and storage, is handled by third party companies. Nike is a virtual corporation that has outsourced almost all activities, it has retained two processes in-house “designing and brand management”. And the stores that sell the final products are franchisee outlets. Introduction The decision of a firm to perform its activities internally or get those activities done from an independent firm is known as make vs. buy decisions. This involves the following key decisions: a) What activities should be carried out by the firm and what activities should be outsourced? b) How to select the entities/ partners to carry out outsourced activities and what should be the nature of the relationship with those partners? Should the relationship be transactional in nature or should it be a long term partnership? Decisions in Outsourcing 1. Make vs. Buy decisions 2. Identifying the core process i) The business process route ii) The product architecture route