Impact of Information Technology on Supply Chain Management

7/31/2019 Impact of Information Technology on Supply Chain Management

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Submitted ByAnoop.N

3-rd Semester MBAIMK,TVM

2011-2013(Evening)


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What is Supply chainAsupply chain is a system of organizations, people,

technology, activities, information and resourcesinvolved in moving a product or service from supplierto customer. Supply chain activities transform naturalresources, raw materials and components into afinished product that is delivered to the end customer.In sophisticated supply chain systems, used productsmay re-enter the supply chain at any point whereresidual value is recyclable. Supply chains linkvalue
http://en.wikipedia.org/wiki/Vendor_%28supply_chain%29http://en.wikipedia.org/wiki/Customerhttp://en.wikipedia.org/wiki/Raw_materialhttp://en.wikipedia.org/wiki/Value_chainhttp://en.wikipedia.org/wiki/Value_chainhttp://en.wikipedia.org/wiki/Raw_materialhttp://en.wikipedia.org/wiki/Customerhttp://en.wikipedia.org/wiki/Vendor_%28supply_chain%29


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A typical supply chain begins with ecological andbiological and political regulation of natural resources,followed by the human extraction of raw material, andincludes several production links (e.g., componentconstruction, assembly, and merging) before movingon to several layers of storage facilities of ever-decreasing size and ever more remote geographicallocations, and finally reaching the consumer.


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Supply Chain Management (SCM)

Systems SCM is the process of effectively managing the

components of an extended value chain--fromsuppliers, through manufacturing and distributionchain, and to the consumers.

SCM information systems use technology to moreeffectively manage supply chains


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Why Supply Chain Management?Parts $5,000

Labor 4000

Overhead 2000

Management

Marketing 3000

Total Cost $14,000

1950-1980s Manufacturing

50 years ago, U.S. is the only countrythat can manufacture cars.

You buy a car from GM, all the moneywill go to the GM.

1980-2000s Supply ChainManagement

Today, foreign parts and labors aremuch cheaper than that in US.

You buy a car from GM, only a portionof money will go to the GM.


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Value Chain Analysis


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Benefits of Value Chain Analysis -

Disintermediation to the Consumer

Manufacturer

Manufacturer

Manufacturer

Distributor Retailer

Retailer

Customer

Customer

Customer

Cost/Sweate

r

$48.50

$40.34

$20.45


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Stockless Inventory Compared to Traditional andJust-in-time Supply Methods


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Information Technology for Supply

Chain Management Software Systems

Electronic Data Interchange (EDI)

Material Requirements Planning (MRP)

Manufacturing Resource Planning (MRP II) Enterprise Resource Planning (ERP)

Supply Chain Management Systems (SCM)

Customer Relationship Management (CRM)

Internet-based Software

Network Infrastructure Wide Area Network

Internet (for E-commerce: B2B, B2C)


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Role of Information Technology

in a Supply Chain Information is the driver that serves as the glue to create a

coordinated supply chain

Information must have the following characteristics to beuseful:

Accurate Accessible in a timely manner

Information must be of the right kind

Information provides the basis for supply chainmanagement decisions

Inventory

Transportation

Facility


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Characteristics of Useful

Supply Chain InformationAccurateAccessible in a timely manner

The right kind

Provides supply chain visibility


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Use of Information

in a Supply Chain Information used at all phases of decision making:strategic, planning, operational

Examples:

Strategic: location decisions Operational: what products will be produced during

todays production run


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Use of Information

in a Supply Chain Inventory: demand patterns, carrying costs,stockout costs, ordering costs

Transportation: costs, customer locations,

shipment sizes Facility: location, capacity, schedules of a facility;

need information about trade-offs betweenflexibility and efficiency, demand, exchange rates,

taxes, etc.


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Role of Information Technology

in a Supply Chain Information technology (IT) Hardware and software used throughout the supply

chain to gather and analyze information

Captures and delivers information needed to makegood decisions

Effective use of IT in the supply chain can have asignificant impact on supply chain performance


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The Importance of Information

in a Supply Chain Relevant information available throughout thesupply chain allows managers to make decisionsthat take into account all stages of the supply chain

Allows performance to be optimized for the entiresupply chain, not just for one stage leads tohigher performance for each individual firm in thesupply chain


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The Supply Chain IT Framework The Supply Chain Macro Processes Customer Relationship Management (CRM)

Internal Supply Chain Management (ISCM)

Supplier Relationship Management (SRM) Plus: Transaction Management Foundation

Figure 16.1

Why Focus on the Macro Processes?

Macro Processes Applied to the Evolution of Software

l h


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Macro Processes in a Supply Chain

(Figure 16.1)

SupplierRelationship

Management(SRM)

InternalSupply

ChainManagement (ISCM)

CustomerRelationshi

pManagement (CRM)

Transaction Management Foundation(TFM)

C t R l ti hi


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Customer Relationship

Management

The processes that take place between an enterpriseand its customers downstream in the supply chain

Key processes:

Marketing Selling

Order management

Call/Service center


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Internal Supply Chain Management

Includes all processes involved in planning for andfulfilling a customer order

ISCM processes:

Strategic Planning Demand Planning

Supply Planning

Fulfillment

Field Service

There must be strong integration between the ISCM andCRM macro processes


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Supplier Relationship Management

Those processes focused on the interaction between theenterprise and suppliers that are upstream in the supplychain

Key processes: Design Collaboration

Source

Negotiate

Buy

Supply Collaboration

There is a natural fit between ISCM and SRM processes


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The Future of IT in the Supply Chain

At the highest level, the three SCM macro processeswill continue to drive the evolution of enterprisesoftware

Software focused on the macro processes will become alarger share of the total enterprise software market andthe firms producing this software will become moresuccessful

Functionality, the ability to integrate across macro

processes, and the strength of their ecosystems, will bekeys to success


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Systems


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SystemsWith the advent of the Internet, e-businesses

began to demand different things from their SCMsystems

Most importantly, SCM systems vendors (largelythe same vendors that provide ERP systemssoftware) had to modify their products to include a

Web-based interface

The ultimate goal of a business ERP system iscomplete optimization of internal businessprocesses


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Systems The two basic types of SCM system software are:

Supply Chain Planning software (SCP): usesmathematical models to predict inventory levels based on

the efficient flow of resources into the supply chain Supply Chain Execution software (SCE): is used to

automate different steps in the supply chain such asautomatically sending purchase orders to vendors when

inventories reach specified levels


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Major Supply Chain Planning (SCP)

Players i2 Technologies

i2s strength began with its powerful Advanced Planningand Scheduling (APS)

Manugistics

Oracle

SAP

Advanced Planner and Optimizer (APO)


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SAP Advanced Planner and

Optimizer (APO)


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Supply Network Design (SND)

The Supply Chain Cockpit (SCC)

Demand Planning (DP)

Supply Network Planning (SND)

Collaborative Planning,Forecasting, and Replenishment(CPFR)

Levels of SAP APO

SAP R/3


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Oracle Supply Chain Planning Oracle Supply Chain Planning is part of the Oracle

E-Business Suite's family of Supply ChainManagement solutions

It includes

Demand Planning

Collaborative Planning

Inventory Optimization Manufacturing Scheduling, and

Global Order Promising


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Customer Relationship

Management (CRM) Systems Customer relationship management (CRM)

systems, sometimes called e-CRM systems, usetechnology to help an e-business manage itscustomer base

CRM allows an e-business to match customerneeds with product plans and offerings, remind

customers of service requirements, and determinewhat products a customer has purchased


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Relationship among SCM, ERP, CRM

SCM ERP CRM

Broader SCM


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E-Business and ERP Systems An e-business must keep track of and process a

tremendous amount of information

Businesses realized that much of the information they

needed to run an e-business stock levels at variouswarehouses, cost of parts, projected shipping dates could already be found in their ERP system databases

A major part of the online efforts of many e-businesses

involved adding Web access to an existing ERP system


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Outsourcing ERP Systems One response to the challenge of managing a complex

ERP system is to outsource it

Some businesses choose to outsource not only theinstallation but also the ERP system software

The Transaction Management


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The Transaction Management

Foundation

Enterprise software systems (ERP)

Earlier systems focused on automation of simpletransactions and the creation of an integrated method

of storing and viewing data across the enterprise Real value of the TMF exists only if decision making is

improved

The extent to which the TMF enables integration across

the three macro processes determines its value


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Intranet vs. Extranet Intranet is to use Internet technology and protocol

(TCP/IP) for the internal communications

Extranet is to use Internet technology and protocol forthe internal and suppliers communications


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Network Infrastructure: Wide Area

Networks (WANs) WAN Technologies

Ordinary telephone line and telephone modem.

Point-to-Point Leased lines (such as T1 line)

Public switched data network (PSDN)

Such as ATM, Frame Relay

Send your data over the Internet securely, using VirtualPrivate Network (VPN) technology

PSDN

VPN


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Global Considerations in Using

SCM/ERP Systems Time differences

Language issues

Currency exchange rates Tax

Different accounting systems

Internet and security restrictions

Culture and religion holidays

Impact of Information Technology on Supply Chain Management

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