Professional Documents
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.. Term Report
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Supply Chain
Management Systems
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Preface
This Term Report provide me a great opportunity to learn and discuss the key components of a
Supply Chain Management information system (SCMIS), its interaction with each other within SC
and MIS, and their contribution to improve efficiency and coordination of firm. In this report, I also
try to explore the technical standards or interfaces and potential problems.
In this report, I try my best possible efforts to explore and then deliver the supply chain perspectives
of information functionality and principles. Report will then continue on SCMSIS applications on
the transaction systems, management control, decision analysis and strategic planning application.
We will complement the discussion with SCMIS supporting technologies and applications. The
conclusion will try to extract the major points in this report.
Finally, I would like to express my deep debt of gratitude to our course facilitator, Mr. Mohammed
Faisal, who have enriched us from the stream of his MIS and IT knowledge, and provided a deep
insight in to the technical complexities of the subject.
. . . . . . . . . .
Syed Asad Mehmood
(MEN-2200475)
MBA-Evening Program
What is Supply Chain
Management
Set of linkages between suppliers of materials
and services
Overview
Set of linkages between suppliers of materials and services that span the transformation of raw
materials in products or services and delivers them to a firm’s customers is known as supply chain.
Consultant Keith Oliver, of strategy consulting firm Booz Allen Hamilton in 1982, coined the term
supply chain management. The dictionary meaning of Supply-Chain-Management is:
The basic purpose of supply-chain management is to control inventory by managing the flows of
materials. Inventory is stock of material used to satisfy customer demand or support the production
of goods or services. Inventory exists in three aggregate categories.
An important part of this process is provision of the information needed for planning and managing
the supply chain. This information comes from internal and external sources and is disseminated to
decision makers through ERP (Enterprises Resource Planning) systems, which often contain
supply-chain management systems as a module.
The supply chain for a firm can be very complicated, because many companies have hundreds
suppliers, and hundreds distributors, in which there can be so many layers, therefore, value of supply
chain management system become apparent when the complexity of the supply chain is recognized.
Phase 1:
Independent Suppliers Purchasing Production
Distributio
Customers
Supply-chain n
entities
Phase 2: Distributio
Suppliers Purchasing Production Customers
n
Internal
Integration
Internal Supply Chain
Material management department
During the past decades, globalization, outsourcing and information technology have enabled many
organizations such as Dell and Hewlett Packard, to successfully operate solid collaborative supply
networks in which each specialized business partner focuses on only a few key strategic activities.
Traditionally, companies in a supply network concentrate on the inputs and outputs of the processes,
with little concern for the internal management working of other individual players. Therefore, the
choice of internal management control structure is known to impact local firm performance.
In the 21st century, there have been few but very vital initiative trends in manufacturing business
environment that have significantly contributed to the development of supply chain networks. First,
as an outcome of globalization and proliferation of multi-national companies, joint ventures,
strategic alliances and business partnerships were found to be significant success factors, following
the earlier "Just-In-Time", "Lean Management" and "Agile Manufacturing" practices. Second,
technological changes, particularly the dramatic fall in information communication costs, a
paramount component of transaction costs, has led to changes in coordination among the members
of the supply chain network, that’s make supply chains an essential part of e-business.
Role of Internet
Following figure illustrates how the Internet can ultimately affect safety, the environment, energy,
and economic growth through improved equipment utilization and integrated supply chain
management system.
The revolution of Internet has dramatically changed the way companies serve their customers and
deal with suppliers; it is the actual reason which revolutionized the integration of supply chain. In
following section we tries to explore the impact of the internet based technologies of components of
customer and supplier interfaces:
Order-placement process
It involves the activities required to register the need for a product or service and to confirm the
acceptance of the order.
These activities are initiated by customers but consummated by the firm producing the product or
service, it is generated demand for the supply chain, it is firm’s advantage to make it simple and fast.
The Internet has enabled firms to reengineer their order placement process to benefit both the
customer and the firm. It provides following advantages for a firm:
Order-fulfillment process
The activities required to deliver a product or service to a customer. Here, we have separated the
order-placement process from the order-fulfillment process however, in many instances, they occur
simultaneously.
Due to involvement of various manual aspects, that process is directly liked with firm’s competitive
priorities falling under the categories of cost, quality, time or flexibility. However, Internet has
played a pivotal role, which is discussed in following:
Vendor Management
Supply chain management supports full vendor profiling, order status and history, notes, activities,
product associations and item specific vendor item codes, descriptions, and costing. Its attribution
system enables the definition and storage of any number of aspects of each vendor item in inventory
for use in profiling and negotiation
Procurement process
Strategic plans are developed with suppliers to support the manufacturing flow management process
and development of new products. In firms where operations extend globally, sourcing should be
managed on a global basis. The desired outcome is a win-win relationship, where both parties
benefit, and reduction times in the design cycle and product development is achieved. Also, the
purchasing function develops rapid communication systems, such as electronic data interchange
(EDI) and Internet linkages to transfer possible requirements more rapidly. Activities related to
obtaining products and materials from outside suppliers. This requires performing resource planning,
supply sourcing, negotiation, order placement, inbound transportation, storage, handling, and quality
assurance. Also, includes the responsibility to coordinate with suppliers in scheduling, supply
continuity, hedging, and research to new sources or programs.
Also, changes in the manufacturing flow process lead to shorter cycle times, meaning improved
responsiveness and efficiency of demand to customers. Activities related to planning, scheduling and
supporting manufacturing operations, such as work-in-process storage, handling, transportation, and
time phasing of components, inventory at manufacturing sites and maximum flexibility in the
coordination of geographic and final assemblies postponement of physical distribution operations
Outsourcing/Partnerships
This is not just outsourcing the procurement of materials and components, but also outsourcing of
services that traditionally have been provided in-house. The logic of this trend is that the company
will increasingly focus on those activities in the value chain where it has a distinctive advantage and
everything else it will outsource. This movement has been particularly evident in logistics where the
provision of transport, warehousing and inventory control is increasingly subcontracted to specialists
or logistics partners.
Also, to manage and control this network of partners and suppliers requires a blend of both central
and local involvement. Hence, strategic decisions need to be taken centrally with the monitoring and
control of supplier performance and day-to-day liaison with logistics partners being best managed at
a local level.
Performance Measurement
Experts found a strong relationship from the largest arcs of supplier and customer integration to
market share and profitability. By taking advantage of supplier capabilities and emphasizing, a long-
term supply chain perspective in customer relationships can be both correlated with firm
performance. As logistics competency becomes a more critical factor in creating and maintaining
competitive advantage, logistics measurement becomes increasingly important because the
difference between profitable and unprofitable operations becomes more narrow.
A.T. Kearney Consultants (1985) noted that firms engaging in comprehensive performance
measurement realized improvements in overall productivity. According to experts internal measures
are generally collected and analyzed by the firm including
Cost
Customer Service
Productivity Measures
Asset Measurement
Quality
There are two main types of SCM software: planning applications and execution applications.
Planning applications use advanced algorithms to determine the best way to fill an order. Execution
applications track the physical status of goods, the management of materials, and financial
information involving all parties.
Increasing numbers of companies are turning to Web sites and Web-based applications as part of the
SCM solution. A number of major Web sites offer e-procurement marketplaces where manufacturers
can trade and even make auction bids with suppliers.
Customer’s order will be processed. If the desired product is available in the inventory, the product
will be shipped accordingly. But if the product is not available, a schedule for production has to be
made, which later may trigger procurement process. Not those other modules, which sometimes
considered external to SCIS such as MRP (Manufacturing Requirement Plan) module, will definitely
be affected by the SCIS.
One of the concerns of this application is to measure whether the customer service level established
by the management has been achieved or not. Naturally, it involves measuring other modules as well
such as inventory level, turn over and productivity level. In some implementation, the control system
application may involve some low level decision support system, forecasting, or planning features.
The division stated in this paper is not meant to be rigid.
The model is tested using known facts. By utilizing expert system, modeling & simulation tools,
DSS can forecast and predict appropriate inventory level, procurement, or distribution strategies.
Internet
The Internet enhances the communications capabilities both within organization and between the
organizations. Using the Internet is simply another step in the long path to seamlessly connecting
every process in the business operation to integrate operations better. Whether by the web, EDI,
satellite communications or cell phone, information that is available in real time and in advance
allows synchronization of operations and advanced planning. The Web's impact however is changing
competitive relationships. For example, smaller firms frequently cannot afford to invest in EDI, but
the threshold cost of entry into the Web is relatively inexpensive and can be rapidly implemented
and access is nearly universal. Access to technology via application service providers (ASP) makes
sophisticated supply chain software more accessible to small as well as large companies. The
threshold cost of adopting modern technology is lowered encouraging adoption of technology and
again, there is easier access to technology to smaller business, increasing their competitiveness with
larger competitors. EDI is currently being used for all of the most common business transactions
such as purchase
Bar Coding
Everyday we use bar codes in our daily life. When we buy any product from supermarket they will
put the bar codes and scan it and on the operating side, the scanning of the bar codes will reduce the
stock and it will trigger the ordering tick. These bar codes will help a lot in logistic and supply. Bar
It was a concept developed by Gartner Group describing the next generation of manufacturing
business systems and manufacturing resource planning (MRP II) software. Beyond the standard
functionality that is offered, other features are included, e.g., quality, process operations
management, and regulatory reporting. In addition, the base technology used in ERP will give users
both software and hardware independence as well as an easy upgrade path. Key to ERP is the way in
which users can tailor the application behavior so it is intrinsically easy to use.
The ERP management methodology builds on the theory that an enterprise can maximize its returns
by maximizing the utilization of its fixed supply of resources. And information technology, with its
increasing computer power and the ability to correlate pieces of information, has proven to be the
best tool to do so.
o i2 Technologies RHYTHM
o Manugistics
o Baan
o J.D. Edwards
o Oracle
o PeopleSoft
o SAP
assemble to order or build to order, result in postponing the production of the product or holding
inventories as upstream in the supply chain as possible. Pull systems are more responsive to actual
customer demand and result in the movement of smaller quantities more frequently. Quick response
in retailing, efficient consumer response in grocery, stockless inventory in health care, JIT in
manufacturing is examples of pull strategies.
The visibility of inventory while it is in transit also improves distribution efficiency and reduces
inventories. For example, there is a demand for a product that is not in stock at a warehouse location.
That location orders additional inventory even though there is inventory in transit that would meet
the need. Knowing that there is inventory in transit and whether it would arrive in time to be used
can reduce the safety stock held in a specific location, reduce unnecessary inventory ordered and
reduce expediting of product.
Manufacturers gain significant operational benefits from information sharing and collaborative
forecasting. Knowledge of actual sales and better forecasts of actual consumer sales enables the
manufacturer to reduce the "bullwhip" effect, level their production of finished goods and plan their
With companies rushing to try to implement the latest and greatest technology in order to get one-
step ahead of the competition, many are finding that selling the employees and others involved in the
change on the project is more difficult than actually putting the software in place. This has been
especially true in regards to supply chain software; particularly, the part that helps streamlines and
track procurement more effectively.
The bottom line is that companies who expect instant miracles from supply chain software are not
only disappointed but they set the stage for technology resistance in their employees and possibly
their vendors. Businesses need to have realistic expectations of their anticipated cost-savings, and
they need to implement the supply chain software slowly instead of immediately trying to save
money on their most important purchases. With these suggestions, companies are more likely to find
success with their new software
Another big issue is the technology required to bring supply chains onto the Internet. While some
companies have been at the forefront of adapting integrated, Internet-based supply chains, others
have been reluctant to take the next step. As a result, it can be difficult to get all vendors and
suppliers on board. There are many good reasons why vendors may shy away from the new
technology. After all, the installation of the necessary hardware is costly and time-consuming.
One of the biggest problems many supply chain management systems face is a lack of quality data.
Many businesses simply fail to realize that the supply chain results can only be as good as the data
the system or software is using.
Cost Involved
To take advantage of so many benefits of supply chain systems, companies must be willing to foot
the costly bill that goes with implementing the technology. The combined costs of the software, the
hardware, the consultations, and the training for some companies could cost millions to put in place.
Even though that amount of expenditure may seem high when the economy is in uncertain waters,
companies who have completed the implementation successfully are generally pleased with the
effects it has had on their bottom lines.
Bullwhip effect is also attributed to the separate ownership of different stages of the supply chain.
Each stage in such a structured supply chain tries to amplify the profit of the respective stages,
thereby decreasing the overall profitability of the supply chain.
Conclusion
Information is the key to successful supply chain management because “no product flows until
information flows”. The inventory manager needs direct access to the organization’s information
system to properly administer materials flow into and within the organization. Information
technology should be used to improve the management of the supply chain. Accurate and timely
information allows a firm to minimize inventories, improve routing and scheduling of transpiration
vehicles, and generally improve customer service levels. The types of information needed include
demand forecasts for production, names of suppliers and supplier characteristics, pricing data,
inventory levels, production schedules, transportation routing and scheduling data and other
financial and marketing facts.
Companies today know that competition is increasing and buyers have more power than ever so they
recognize the need to achieve a greater advantage in the market. The only way to accomplish this is
by adding additional value to their product or service. That is where the value chain comes in.
In order to examine the value chain and to determine how best to position a company for success in
the market, an organization must look at its functional components: the supply chain, and its
logistics, procurement, product development, and customer order management specifically. In this
way, companies can get an idea of what changes to make in order to add value, increase profits,
boost revenue, and decrease costs.
Finally, most of today's companies have already made at least one change in order to meet the
demands of their customers. Part of the value chain is logistics and that includes the time a
customer's order is delivered. Shorter delivery times make customers happier; it is that simple. While
almost some organizations three years ago took twenty days or more to deliver their goods, today
that number has dropped almost in half. Moreover, the number of companies that are able to deliver
their products in less than 5 days has increased from just over a third to almost half. Part of these
changes can be attributed to better outsourcing choices and a more collaborative approach to
logistics, which is the core attributes of effective supply chain management system.
Developing an effective supply chain is not easy task. A company must have the right technology
and the support of the best suppliers for it to work. However even once that obstacle has been
Overall supply chains can be tremendous assets to companies and their vendors, but they often come
with a price. Businesses must be willing to change their attitudes, their routines, and their ideas of
how things need to run. A failure to do this means that not only will the supply chain fail, but the
businesses involved will likely lose a great deal of money in the process.
The scope of SCM keeps growing within a company and across enterprises, and the demand for
effective planning and execution makes it extremely difficult to dismiss new technology and cling to
traditional solutions over the long term. Operations research provides excellent procedures for
planning at strategic, tactical and operational levels, and supply chain software companies contribute
to further adoption of Operation Research procedures. We need to understand and benefit from the
lessons companies learned in the past five years and keep pushing for a ssuccessful collaboration of
the fields of IT and Operation Research and their joint contribution to supply chain management.
Because the supply chain is so wide reaching, its success depends on nearly all departments within a
company. However, the effort to improve supply-chain performance must be driven by top senior
management. Since the supply chain has become the key opportunity to gain competitive advantage,
senior management needs to constantly remind their organizations that an improved SCMIS
performance is a business issue, not a logistics or computer systems issue.
4. Supply Chain Management by By Yasemin Aksoy and Ana Derbezy. The Institute for
Operations Research and the Management Sciences URL: http://www.lionhrtpub.com