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Role of Information
Technology in SCM
The Supply Chain
 The Components of Supply
Chain
Upstream Internal Downstream
Manufacturing Process The Generic Process

22ndnd Tier
Tier
Suppliers
Suppliers 11stst Tier
Tier
22ndnd Tier Suppliers
Suppliers Assembly/
Assembly/
Tier Manufacturing Distributio
Distributio Retailer
Retailer Customer
Customer
Suppliers
Suppliers Manufacturing and
and nn ss ss
11stst Tier
Tier Packaging
Packaging Centers
Suppliers Centers
22ndnd Tier
Tier Suppliers
Suppliers
Suppliers
Packaged
Grain Cereal Cereal
Grain
Grain Processing
Processing Packagin
Packagin Distributio
Distributio Stores Customer
Customer
Producer
Producer Facility
Facility gg nn Stores ss
Centers
The Cereal

Centers
Lumber Corrugate
Lumber Corrugate Box
Company Paper Co.
Company Paper Co. Paperboard

Label
Label
Manufacturing
Manufacturing Labels
 Supply Chain Problems

Consumer Retailer
Demand Distributor Wholesaler Manufacturer

Poor demand Price Price Rationing of

forecasts fluctuations fluctuations supply

Demand Order Order

fluctuations batching batching

Special Rationing of Rationing

sales supply of supply
 The Bullwhip Effect

Occurs when slight demand variability is magnified as

information moves back
 Some Solutions to
the Supply Chain Problems

 Vertical integration - building inventories

 Coordination of all different activities
 Use outsourcing rather than do-it-yourself
during demand peaks
 ‘Buy’ rather than ‘make’ production inputs
whenever appropriate
 Configure optimal shipping plans
 Create strategic partnerships with suppliers
 Use just-in-time approach to purchasing
 Use fewer suppliers
 Use IT to support the above
 The Evaluation of
Computerized Aids
Inventory
Production Production Managemen
196

+ scheduling MRP
Purchasing
0

Finance, Major Manufacturing Reso

197

MRP + labor
MRP II
0

Coordinated Manufacturing and Serv

All internal
198

MRP II + resources
ERP
0

Internal customers Internal

199

ERP + Internal
and suppliers SCM ERP/SCM
0

Internal External suppliers Extended

200

+ Extended
ERP/SCM and customers SCM ERP/SCM
0
Supply Chain Management

To plan, organize, and coordinate all the

supply chain’s activities
 Supply Chain Management
Organizational Benefits

reduce uncertainty and

risks in the supply
chain
positively affecting inventory
levels, cycle time, business
processes, and customer service

increase profitability
and competitiveness
Role of Information
Technology in SCM
 Information Technology:
A Supply Chain Enabler

Information links all aspects of supply



chain
 E-business
 replacement of physical business
processes with electronic ones
 Electronic data interchange (EDI)
 a computer-to-computer exchange of
business documents
 Bar code and point-of-sale
 data creates an instantaneous
computer record of a sale
 Enterprise Resource
Planning (ERP)

 Objective
 to integrate all departments and
functions across a company onto a
single computer system that can
serve all of the enterprise’s needs
 Results
 productivity improvement
 increases customer satisfaction
 SAP was first ERP software
 mySAP.com
 web enabled modules that allow
collaboration between
Linking Supply Chain with
ERP
RFID Capabilities
RFID Capabilities
Build-to-order cars over
the Internet
 2009: Top 20 supply chain
management software
suppliers

http://www.mmh.com/article/356221-2009_Top_20_supply_chain_management_software_suppliers.php
VARIOUS INFORMATION
SYSTEMS USED TO
IMPROVE SCM
 Wal-Mart's Best of Breed
practice on SCM

 Wal-Mart was one of the first retailers that

seriously invest in it's IT infrastructure. This
gave Wal-Mart stronger foundation in
information technology comparing to
competitors.
 Initially developed its own information system
(Retail Link), then later outsourced it to third
party. Wal-Mart understands it needs best.
Develop what they want first, after
everything is on the track, outsource it to
third party.
 The system itself is relatively user-friendly. Wal-
Mart's partner doesn't need time to learn to
use new application. Data can be easily
exported to standard formats like Excel or
 WAL-MART SUPPLY CHAIN
FLOW CHAT
Radio,
headphone
Retail
Manufacture Store
r

Distribution Retail Store

Manufacturer center
Bar code, RFID
Point of
sale
terminal

Retail Store
Manufacturer Satellite system

Company Headquarter
 Distribution Center

 108 centers in USA

 Place that various goods are gathered,
sorted and delivered to different
store
 About 80% of merchandises shipped
from centers
 24 hours operation

 Bar Code System

 Standardized bar code system

 applied by every supplier
 Helps facilitating large scale operation
 Product codes are transferred to centralized
computer system
 Matching with the computer database and
generate useful information
 What it is. What quantity it is. Which
packing compartment and truck to
go. Which store to go
 Smooth logistic processes

 Radio Frequency
Identification(rfid)
POINT-OF-SALE TERMINALS

In ve ste d in
1983
Electronic scanning of
uniform product code
(UPC) at the POS
«Ensure accurate pricing
«Improve efficiency
«Reduce Shrinkage
«Improve communications
Large-scale satellite
system

In sta lle d in 1 9 8 7

Satellite system
«Data collected and analyzed
«Observing Merchandise flow,
overstock, discount
«Video transmissions, credit
card authorizations, and
inventory control
Retail link
edi
 Collaborative Planning, Forecasting, and
Replenishment

YES

Manufacturer Manufacture
Retailer r
Decision - Is
MRP System
exception within
tolerance?
Exception analysis
process Order
Forecast
Retailer &
Manufacturer
generate forecast &
special event Retailer
calendar at item Replenishme
level, and maintain nt
it on the Internet System
Manufacturer

Request and
Retrieval
of event calendar
and/or detail Retailer
information
Manual Collaboration

YES
Decision - Does
message, event NO
calendar and/or
detail information
Adjust Item
explain discrepancy?
Forecast
Benefit of SCM to Wal-Mart

Benefit of SCM to Wal-Mart



v Increasing visibility into all business

transaction on a timely basis
v Streamlining the physical pick pack process
leading to reduced errors and redundant
labor
v Eliminating charge backs and fines by retailer
compliance and permitting access to all
data from EDI through shipping
v Keeps inventory costs down
v Quickly and effectively predict the needs of
customers in different areas and from
different backgrounds
 Benefits of SCM to others

 Benefits of SCM to other businesses and organizations

can be viewed as
ØStreamlined inventories and
reduced costs
C o st a n d ØReduced errors and redundant
F in a n cia l labor
ØIncreased visibility of all
business transaction
vRetailers ØImproved return on inventory
vManufacturers investment
Improvements ØOptimized transportation
vDistributors costs, routes, and load times
ØIncrease cost savings from
outsourcing for low cost
materials
ØE.g. Dell and Intel have
created an increasingly
streamlined supply chain model
with mass-customization and
customer-direct capabilities.
 31 Benefits of SCM to others

 Benefits of SCM to other businesses and organizations

can be viewed as

ØImproved forecast accuracy as

well as resource and
P ro ce sse s distribution planning
ØImproved manufacturing and
replenishment cycle time
vManufacturers ØEnhanced manufacturing
scheduling
vConstruction
companies Improvements
ØIncreased effectiveness of
planning and decision making
vAutomotive industry
ØImproved overall efficiency in
v production
ØEnhanced a seamless multi-
channel shopping
ØReduced supplier base
ØE.g. Cisco uses the Internet to
enable deep process integration
of all levels of the extended
supply chain.
Ø
 Benefits of SCM to others

 Benefits of SCM to other businesses and organizations

can be viewed as

ØReduced out-of-stock situations

S e rv ice s ØImproved order fill rates
ØIncreased ship-complete and on-
time percentages
vRetailers ØE.g. Wal-Mart uses the replenish
vService companies model to keep their shelves full
and penalize their suppliers for
v Improvements late shipment.
Ø
 Business analytics in scm

Source: www.analytics4.co.uk/en/about.php
 Impact of analytics

Source: Davenport, 2006

THANK YOU…