Introduction to Supply Chain Management

Supply chain management is concerned with the efficient integration of

suppliers, factories, warehouses and stores so that merchandise is produced and
distributed:
– In the right quantities
– To the right locations
– At the right time

In order to
– Minimize total system cost
– Satisfy customer service requirements
Fierce competition in today’s global markets, the introduction of products with shorter
life cycles, and the heightened expectations of customers have forced business
enterprises to focus attention on, their supply chains.
This has been made easier by the use of software for managing the demand
and supply chain. Using supply chain software, a manufacturer can communicate with
his suppliers constantly about the raw materials required for production. This enables the
supplier to plan and supply the raw materials according to the manufacturer’s demand.
On the other hand, demand chain software provides the channel members and the
employees of a manufacturer with accurate and up-to-date information about the goods
and services available with the manufacturer, their prices, the distributors and the
suppliers in a particular region.
Supply chain management is a set of processes which helps organizations
develop and deliver products. A supply chain comprises of multiple companies working
together as a single entity with complete transparency of information and accountability
between them. Through the supply chain, the flow of information, material and payment
between the business entities takes place. The product flow describes the processes
involved in transforming raw materials into finished goods. The information flow
describes the future requirements (raw material, tools, products etc.) and the order
delivery status.
Supply chain management also involves the integration of ad hoc and
fragmented processes into a consolidated system. Process optimization helps
organizations reduce the total cost of the order to delivery process by trading off
inventory, transportation and distribution costs. Though traditional optimizations
methods help reduce costs, they can’t handle real life interdependencies between
processes. If the business applications are not integrated retailers, manufacturers,
distributors and other business entities will only be able to reduce their direct cost and not
the operational costs.
Till large scale optimization models were developed, the visibility of
information required to synchronize supply chain operations was minimal. Inadequate
information visibility led to excess inventory and huge transportation costs. But now
organizations are well equipped with sophisticated tools like Rhythm from i2
technologies and advanced planning and optimization tool from SAP. These technologies

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 help the organizations predict demand, convey inventory levels and solve transportation
costs.

ProcessView Of SupplyChain
Supply ChainPlanning

InformationFlows

Product Product Product Product

supplier Manufacturing Distribution Retailer
Flows Flows Flows Flows customer

Payment Flows

Supply Chain

Advanced Planning and Scheduling Systems

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 The supply chain influences all aspects of organization. Managing all supply
chain activities efficiently is an important task for an organization. For Long, companies
have been evaluating various ways to meet the delivery promises made to the customers.
For this, they have been using technology systems like MRP, MRPII and ERP. However,
these systems have their own shortcomings. For a given manufacturing scheduled, these
systems could not take into account the actual availability of production resources such
as raw materials. These systems did not take into account the delays that could occur in
procuring the raw material. The forecasts made by these systems were not hundred
percent accurate.
Developed in the early 1990s, Advanced Planning and Scheduling (APS)
systems work on the principles that if the information relating to all the entities in a
supply chain – suppliers, manufacturers, retailers and business partner – is integrated and
made available to all other entities, it will result in the production of the right production
the required quantity with the required number of people and on-time delivery to the
customer. These applications aim to reduce the inventory that a company stocks through
accurate forecasting, near perfect scheduling and reduced cycle times. Customer
satisfaction levels are increased as the good are delivery on-time due to increased
efficiency in the distribution process.
APS consists of information technologies – software and hardware, business
processes, and tools for measuring performance. The information technology allows
communication flow between the manufacturer and the supplier. An APS system is
implemented either as a stand-alone solution or integrated with an enterprise system. The
enterprise system for smaller companies may be accounting packages, while for medium
and large companies they could be ERP systems. An APS systems includes a number of
software solutions for different problems. The price of an APS systems ranges from
US$50,000 to several millions depending on the functionality of the system.

Forecasting and Inventory Management

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 Manufacturers invest substantial amount on maintaining inventory which
consists of raw materials and finished goods. Thus managing inventory forms an integral
part for any organization. Inventory management can be defined as the process of
planning and controlling inventories in the supply chain of an organization. In other
words it is about maintaining a preferred stock of certain specified products. The
objective behind inventory management is to optimize inventory investment,
manufacturing, profitability, distribution, operations and return on investment.
Forecasting of inventory is another problem that the companies face which leads to
excess or insufficient inventory. Hence, forecasting inventory is requirements accurately
forms the core of an efficient inventory management system.

It is important for a company to make appropriate decisions as far as its

inventory is concerned. This affects the company’s strategic goals i.e. its profitability and
competitiveness. A company which has good inventory management system can utilize
opportunities to improve its bottom line.

A number of inventory forecasting software’s are available in the market

which enable a manufacturer to forecast, plan and optimize inventory quickly accurately.

Inventory forecasting softwares:

1. Valogix

VALOGIX® Inventory Planner is a next generation inventory forecasting and planning

tool that will forever change the way you plan your inventory. VALOGIX Inventory
Planner is a PC-based inventory planning software solution. It enables you to forecast,
plan, and optimize inventory with less effort and more accuracy. And the application is
affordable, fast, and easy to use. It is a smart system and does the complex computations
for you. VALOGIX Inventory Planner determines which items to stock, which items to
order, and which items are excess or overstocked. It manages an unlimited number of
items and locations, and provides flexibility while different planning parameters allow
more precise planning. VALOGIX Inventory Planner helps you manage by exception.
The software’s intelligence provides “Alerts” of potential problems, before they occur...
saving you valuable time and assisting you to avoid potentially serious Customer
Satisfaction problems.

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VALOGIX Inventory Planner works on Windows based systems.
VALOGIX Inventory Planner’s automated installation tool makes it fast and simple to
install. Installations are scripted and supported by our professional staff.

2. Smart Forecasts

SmartForecasts delivers accurate sales and demand forecasts, improved demand

planning, and optimized safety stock and inventory levels for thousands of managers
and planners in a wide variety of industries. Manufacturers, distributors, and retailers
can easily create accurate demand forecasts for each product item they produce and
sell. They can also optimize their inventories with accurate reports of item-specific
safety stock requirements necessary to hit the inventory “sweet spot” –the amount of
inventory which minimizes costs while satisfying service level goals.

SmartForecasts accomplishes all this at processing speeds exceeding 250,000 items

per hour on a standard Windows workstation. You can integrate SmartForecasts
directly with all major ERP and SCM systems, as well as host databases such as
Oracle, SQL Server and IBM DB2.

Two editions of Smart Forecasts software:

Smart Forecasts Enterprise

Smart Forecasts Commercial

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 Visibility across Supply Chain

Typically supply chain partners do not share their business information with
other partners. For example a manufacture does not share his production details with
his suppliers. This leads to difficulty for the supplier to plan his production process.
Visibility across supply chain means integrating information on the suppliers’ rate of
productio0n, lead times and the manufacturers’ requirements of raw materials to
optimize the business processes and increase overall efficiency of the supply chain.
From manufacturers point of view visibility refers to his ability to track the
performance of suppliers.

Distrust between supply chain partners, cost of integration and technology

limitations of supply chain partners are some of the reasons for reduced visibility
across the supply chain. Increase in visibility helps in cutting down growing
competition. It also helps in better inventory management and cost savings. A
manufacture can respond to sudden changes in the supply and demand change in the
market if proper visibility is maintained. It provides a centralized control and
visibility across orders, shipment and inventory processes. It also helps the customers
with online tracking of their order status.

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Collaborative Planning, Forecasting and Replenishment
Developed by the voluntary Inter-industry Commerce Standards Organization
(VICS), Collaborative planning, forecasting and replenishment (CPFR) is the sharing of
business information such as promotional planning and merchandising planning among
the business chain partners for errorless forecasting and automatic replenishment of
goods. CPFR aims to improve the flow of goods from the suppliers to the manufacturer
and finally to the retailer. It identifies errors in the forecasts relating to the ordering and
inventory management functions of the organization.
Under CPFR, the manufacturer’s business information such as sales history
and planned sales is collated with the suppliers’ information such as availability of raw
materials and lead times. Both are integrated and the information is used to draw up an
efficient plan of raw material supply, thus improving the profitability of all supply chin
partners. Once deployed, the CPFR system allows both the manufacturer and the supplier
to access information through the internet. The supplier can constantly monitor the
manufacturer’s inventory levels and whenever the stick with the manufacturer falls below
a certain fixed level, the CPFR system signals the supplier by sending an automatic e-
mail. The supplier then suppliers the required stock and thus an efficient replenishment
system is put in place.
In the 1990s, the global communications leader Motorola faced problems in
meeting customer demand during year-end shopping seasons. Distributors regularly over-
order for the shopping season, and therefore Motorola had to maintain huge inventories,
just to handle these large orders. This left Motorola with a lot of inventory after the
season. To avoid this, Motorola deployed a CPFR system in its personal communications
division in August 2003. The system was developed by Manugistics Group Inc., an SCM
specialist. The system helped Motorola to collaborate with its suppliers and customers to
improve the efficiency of the forecasts, reduce excess inventory and improve customer
service. The collaboration was further extended to other areas like designing and
managing sales promotions and developing new products.

CPFR Model
The CPFR model presents the aspects in which industries focus. The model
provides a basic framework for the flow of information, goods, and services. In the retail
industry the “retailer typically fills the buyer role, a manufacturer fills the seller role, and
the consumer is the end customer.” The center of the model is represented as the
consumer, followed by the middle ring of the retailer, and finally the outside ring being
the manufacturer. Each ring of the model represents different functions within the CPFR
model. The consumer drives demand for goods and services while the retailer is the
provider of goods and services. The manufacturer supplies the retailer stores with product
as demand for product is pulled through the supply chain by the end user, being the
consumer.

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 Some of the main processes shown in the model can be found in the second
ring that has arrows in a circular pattern. This is displayed with collaboration
arrangement, joint business plan, sales forecasting, order fulfillment etc. This stage will
be described in detail below:

“Strategy & Planning, Collaboration Arrangement is the process of setting the business
goals for the relationship, defining the scope of collaboration and assigning roles,
responsibilities, checkpoints and escalation procedures. The Joint Business Plan then
identifies the significant events that affect supply and demand in the planning period,
such as promotions, inventory policy changes, store openings/closings, and product
introductions.”

“Demand & Supply Management is broken into Sales Forecasting, which projects
consumer demand at the point of sale, and Order Planning/Forecasting, which determines
future product ordering and delivery requirements based upon the sales forecast,
inventory positions, transit lead times, and other factors.”

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“Execution consists of Order Generation, which transitions forecasts to firm demand, and
Order Fulfillment, the process of producing, shipping, delivering, and stocking products
for consumer purchase.”

“Analysis tasks include Exception Management, the active monitoring of planning and
operations for out-of-bounds conditions, and Performance Assessment, the calculation of
key metrics to evaluate the achievement of business goals, uncover trends or develop
alternative strategies”. Eg. Wall-mart supply chain and logistics management.

VICS CPFR Model:

Establish the ground rules for the collaborative relationship. Determine

product mix and placement, and develop event plans for the period.

• Collaboration Arrangement
o Setting the business goals and defining the scope for the relationship
o Assigning roles, responsibilities, checkpoints and escalation procedures

• Joint Business Plan:

o Identifies the significant events that affect supply and demand, such as
promotions, inventory policy changes, store openings / closings, and
product introductions.

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 Collaborative Design
For the purpose of reducing product cycle time and lead times of new product,
companies are looking at new ways of designing products. Under collaborative
designing, product development teams and individuals spread across different
geographical locations collaborate with each other through internet to arrive at a product
design.
Collaboration in business can be found both inter- and intra-organization and
ranges from the simplicity of a partnership to the complexity of a multinational
corporation. Collaboration between team members allows for better communication
within the organization and throughout the supply chains. It is a way of coordinating
different ideas from numerous people to generate a wide variety of knowledge. The
recent improvement in technology has provided the world with high speed internet,
wireless connection, and web-based collaboration tools like blogs, and wikis, and has as
such created a "mass collaboration." People from all over the world are efficiently able to
communicate and share ideas through the internet, or even conferences, without any
geographical barriers.
For example: we can take the example of Wal-Mart, the communication is
such like that if one store lacks in some product or fall of sales of some product occurs
then the nearest shop where that product has high sales , the second will call for that
product to the first shop.

Supplier relationship Management

The efficiency of a company depends on its ability to communicate with its
suppliers and other channel partners. In the industry, different components and materials
holds varying levels of importance in the production process. Also the relation with
suppliers and different channel partners also varies. There are two types of relationship
between supply chain partners:
1. Commodity based relationship
2. Strategic relationship

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 Commodity Based Supplier Relationship
Companies are often negligent in maintaining relationship with the supplier of
Commodities .Price is the major factor that influences the purchasing decision for
commodity products. Other factors include the physical proximity of the supplier
customer services offered by him the level of quality required and the quality maintained
by the supplier .Most of Commodities required by the companies are available several
suppliers. Thus the companies can easily switch from one supplier to another supplier in
case of any problems with the existing suppliers. Therefore companies do not pay much
attention to relation with commodity suppliers, so that they can retain their flexibility.
However Companies can obtain consistent quality and reliable delivery of
commodities through strong relationship with the commodity suppliers. They can also
reduce costs by choosing different procurement methods for purchasing direct material
and indirect material.

Traditional direct commodity relationships

Purchasing department often focus more on the procurement of direct material
than indirect material. They consider cost as well as the ability of the supplier to deliver
product on time in their commodity purchasing decision .they also have agreements with
the supplier to ship the commodities on consignment enabling them to pay only for the
amount of material actually used in production .The department purchase from a
particulars as long as the he deliver the commodity at a price agreeable to the former.
That is the supplier of Commodities and supplier of indirect material are treated alike
.Long term relationship are not maintained by companies with either of them.

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 Companies require their supplier to deliver the right product at the right time.
This means that they should not have insufficient inventory at certain times and the
surplus inventory at other times. However often for various technician and non technician
reason, companies are unable to communicate information about last minute changes in
production schedules and material requirement to the suppliers. Sometimes the supplier
fail to ship the material on time .To accommodate such contingencies companies and
suppliers tent to maintain inventory levels higher than the required levels, leading to
accumulation of inventory.

Enabled direct commodity relationship:

Product scheduling and purchasing of direct commodities can be significantly
improved through E- business .It enables companies to share forecasts inventory.
Information and production schedules electronically with the supplier .Instead
of stacking up inventory, information flows help maintaining just adequate inventory.
The real time exchange of information between the suppliers and the company allows
them to Co-ordinate their activities respond to current changes in demand and supply
effectively and plan or possible changes in the future.
Companies can improve the efficiency of their material management system
by collaborating with key suppliers. They may adopt an E-nabbed Vendor Managed
Inventory (VIM) system to allow the key suppliers to determined inventory requirement
replenish the inventory from time to time and send shipment notices VIM reduces the
cost and cycle time of commodity purchase minimize the need of human interference
and chance of wrong or missed deliveries .however the success of VIM depends on
company willingness to share information such as demand forecasts current inventory
level and logistic information with its suppliers.
An important force in the micro environment of company is the supplier i.e.
those who supply the input like raw material and components of the company.
Eg: NIRMA & TATA MOTOR
Because the sensitivity of suppliers companies like NIRMA & TATA
MOTOR goes for Backward Integration .In Backward Integration Company expand its
actives towards the supply of raw material or components.

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 Strategic Supplier Relationships
To run a good business, company should always be act as a good
communication unit. As we know company deals its business not for their purposely only
but for the welfare of the other companies to. Many companies focus on maintaining
relationships with the suppliers of key components critical in their manufacturing
process. Maintaining good relationship with suppliers gives various advantages to
manufacturing company also and to the supplier to. Advantages like,

Maintaining long term contract would enable the supplier to invest more and
more in plants and machinery and other fixed assets and such investment leads to cost
reduction for the manufacturer. It also helps in sharing risk, cost cutting and joint
technology development. To obtain the right quantity and quality of parts at the right time
manufacture therefore should be in regular touch with the supplier.

Sometimes company outsourcers some components to external manufactures.

These manufacture or out sources manage many operations of the company s value chain
and thus become important business partners. Certain outsourcers may manage the same
operations for other companies also.

Many a time’s manufacture and supplier relationship doesn’t work because of the reasons
like

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 • Mostly in the trading market industry if the supplier is the leader in that industry
then he is not inclined to develop a long - term relationship with the buyer due to
his status.
• The efficiency of the supplier plays an important role in building a long term
relationship. If the supplier is not capable of providing better equipment or
technology, manufactures shift to others suppliers terminating the relationship.

Traditional strategic component supplier relationship

In the traditional set up, the company sends its agent to discuss details with
the supplier and finalize design specification, price and delivery schedules before the
production of a critical component begins. As production gets under way too, the
company needs to contact with supplier every now and then because so that necessary
changes can be done in manufacturing process.

If cases where suppliers reside far away from the manufactures,

manufacturing companies need to acquire the technology of facilitate real-time
communication with the suppliers. These two parties have to communicate regularly
whether there are obstacles in demand forecast and production. it will be dangerous if the
company doesn’t inform the changes in demand the supplier will not able to serve the
company effectively

E-enabled strategic component supplier relationship:

To launch their product ahead in market against their competitors they need to
contain product development cost and maintain low prices.

E-business technology brings easier to process the components and bring

down their cost. It also collaborate with the strategic components suppliers so that new
and improved components can be designed .through these new technologies , the
company can be in constant contact with the supplier regarding product specification ,
changes in design , inventory , pricing , demand forecast and production schedules , but
at much lower cost than the traditional communication methods.

Modern supply chain tools provide a number of features that enables a

company to manage supplier relationship, multi-organizations collaboration and
inventory cost. They automate much of the negotiation process and, make online bidding
much easier for the both the parties. Such technology is necessary in developing long-
term relationships, since locating strategic components suppliers and especially those
who meet high standards of quality is difficult.
For the better communication and proper delivery and acceptance of goods
and materials many companies nowadays using software’s and different kind of system.
In olden days during 80’s and 90,s many firm used old and traditional technique to

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communicate with the intermediaries, but now the scenario has changed many
organization run their business in proper format as well as use easy technology.

Examples of Strategic Supplier Relationship

Bose Corporation: Bose Corporation has attempted to eliminate both purchasers and
sales people by bringing suppliers into the manufacturing process. Suppliers have access
to Bose’s data, employees and processes. They work with Bose’s engineers on present
and future products. The reduction in personnel reduces costs for both sides, and a direct
contact between the user and producer enhances quality and innovation.

JC Penny and Levi Strauss: JC Penny and Levi Strauss (Levi’s) are linked with an
electronic Data interchange (EDI) that allows Levi Strauss to obtain sales data. Levi
Strauss obtains data on the exact size of jeans sold in individual stores. This data allows
Levi Strauss to better plan the production process as well as better control inventory and
delivery. This saving leads to a reduction in costs and prices benefiting both JC Penny
and Levi Strauss.

Integration of SCM with Legacy Application

Supply chain solution typically integrates planning and execution capabilities.
But creating infrastructure for a real time supply chain has become increasingly difficult
because of continuous improvement in technology and the increases in the number of
partner for any given firm. Supply chain application should be designed in such way
that they are compatible with the existing .ERP system at other business functions and
other legacy system existing in a firm .The supply chain solution need to use the ERP
system integrated the function and information in more than one organization at time .An
important decision in SCM is the choice of new technologies by predicting the
capabilities that are likely to be required to service customer in the future.
The supply chain enables a company to provide its suppliers real time access
the demand information .When the company headquarter its forecasts the demand the
statistics are made available to all the partner and suppliers across the global along with
the production schedule and customer order information. Any subsequent changes are
updated so that the activities are synchronized. Thus the supply chain achieves complete
integration of partner and suppliers and enables the company to more receptive to
changes in customer preferences and to manufacture and to manufacture and deliver the
product on time.

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 For successful supply chain management it is essential that organizations shift
from an enterprise-centric to a partnership-centric business model. For this organization
need to integrated their operations and strategies with inventory increase those of their
trading partner suppliers and customers. Excess the cost of production and this made
many organizations such as Wal-Mart and Intel streamlines their supply chain. The
distribution and retailers are the closest to customer and hence they get accurate
consumption information .If this information is used with the appropriate replenishment
optimization software manufacturing organizations can estimate future demand and plan
their production accordingly .Moreover with growing customer awareness about buying
options companies have to meet the challenges of product customization. As the
customer order cycle has become unpredictable companies such as Dell have developed a
build to order strategy using e- business technology

Types of Inter-Enterprise Integration

The extent supply chain integration affects the performance of an
organization. For high performance and efficiency, a tightly-coupled chain needs to be
designed. Inter-enterprise integration is possible through three types of supply chain
responsive, enterprising, and intelligent.

Responsive supply chains enable quick response to customer requirement.

This is also called available-to-promise (ATP) as the commitment to deliver is made on
the basis of the available of the inputs .Hence, companies’ adoption the build-to –order.
ATP tracking monitors material availability in the enter supply chain and thus facilitates
checking material availability, assigning delivery dates and finally meeting the delivery
schedule.

Enterprising supply chain aim to bring about changes in the supply chain in
response to changes in customer demand as quickly as possible. To compete effectively,
companies should respond quickly to changing market condition and customer
preference. This requires two ways integration (up and down) in the supply chain

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 Intelligent supply keep fine-turning the weak links (to make them strong) in
the supply chain on the basis of changing market condition to gain competitive advantage
over other. Eg. Banking Industry.

The following situations are indications of lack of integration between planning and
execution:

• Inconsistent customer service because of too high and too inventory levels
• No demand forecast or analysis of the impact of demand on production due to
lack of trust between production and marketing department
• Too many stock-outs because improper inventory management

The major problem that companies face in supply chain management is the
lack of integration between different processes. Hence, companies should ensure
efficient, collection, structuring and sharing of information in the supply chain. They
should also make use of enterprise-level software application for collaboration planning
and execution.

ERP provides the necessary support for the SCP (supply chain planning)
modules. With the help of ERP, SCP processes can determine the demand for a product,
the raw materials required, the time taken to manufacture and deliver the product and the
inventory stock of the finished goods and raw materials. SCP application should be
flexible enough to accommodate multiple planning strategies like profitable-to-promise,
available-to-promise, etc. several variable like pricing, production schedules, and
transportation schedules are affected whenever a customer requires a few changes in the
order placed.. An SCP application records these changes and makes them visible to all
the people involved in the process. This makes it possible to coordinate the delivery
schedules, promotion schedule, etc since it acts as a single information source, different
department can coordinate their activities optimally.

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 RFID Technology
Technologies changes are occurring faster than ever in this decade. Supply
chain applications affected by these changes. For instance, the introduction of barcodes
enabled retailers to track customer demand by using point -of -scale scanners which
capture information accurately at a lower cost. The same information can be shared and
provided to supply chain partners on a real-time basis bringing down the cost of
providing such information drastically.

Radio frequency identification (RFID) is a technology through which stored

data can be remotely retrieved. The use of RFID technology to track the movements of
goods started in the 1980s and quickly became popular. RFID technology uses a small
device called a tag which contains a microchip and an antenna. There are several
methods of identification, but the most common is to store a serial number that identifies
a person or object, and perhaps other information, on a microchip that is attached to an
antenna (the chip and the antenna together are called an RFID transponder or an RFID
tag). The antenna enables the chip to transmit the identification information to a reader.
The reader converts the radio waves reflected back from the RFID tag into digital
information that can then be passed on to computers that can make use of it.

Key components of RFID:

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 • An RFID tag consists of a microchip attached to an antenna. RFID tags are
developed using a frequency according to the needs of the system including read
range and the environment in which the tag will be read. Tags are either active
(integrating a battery) or passive (having no battery). Passive tags derive the
power to operate from the field generated by the reader.
• An RFID reader, usually connected to a Personal Computer, serves the same
purpose as a barcode scanner. It can also be battery-powered to allow mobile
transactions with RFID tags. The RFID reader handles the communication
between the Information System and the RFID tag.
• An RFID antenna connected to the RFID reader can be of various sizes and
structures, depending on the communication distance required for a given
system's performance. The antenna activates the RFID tag and transfers data by
emitting wireless pulses.

Frequency Band Description Range

125 - 134 KHz Low Frequency To 18 inches

13.553 - 13.567 MHz * High Frequency 3 - 10 Feet

400 - 1000 MHz Ultra-high Frequency 10 - 30 Feet

2.45 GHz Microwave 10+ Feet

• An RFID station, made up of an RFID reader and an antenna. It can read

information stored into the RFID tag and also update this RFID tag with new
information. It generally holds application software specifically designed for the
required task. RFID stations may be mounted in arrays around transfer points in
industrial processes to automatically track assets as they are moving through the
process.

RFID tags are attached to manufactured products. The tags emit signals that
are read using transmitters. These transmitters are connected to the ERP systems in the
company. When the product with the RFID tag passes through an electro-magnetic zone,
the tag responds to the reader’s signal and transmits the information back to the reader.
Thus, accurate information reading the movement of goods from the suppliers’ plants to
the distribution centers and finally to retail stores, is captured in real time.

RFID is most commonly used in retail businesses. RFID provides benefits to

both retailers and their suppliers by tracking the movement of a product from the time of
production stage to the stocking stage, to the point where the end-customers purchases it.
By keeping products with RFID tags on shelves with built-in readers, the movement of
the tagged product is monitored and communicated to the computers in the stores. Thus
the stock situation is brought to the notice of the concerned department constantly and

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replenished accordingly. This reduces the amount time the employees put into monitoring
stock levels.

Applications of RFID
• Asset management

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 RFID tags can be permanently attached to capital equipment and fixed assets.
Fixed position readers placed at strategic points within the facility can
automatically track the movement and location of tagged assets with 100 percent
accuracy. This information can be used to quickly locate expensive tools or
equipment when workers need them, eliminating labor-wasting manual searches.
Readers can be set to alert supervisors or sound alarms if there is an attempt to
remove tagged items from an authorized area.

By tracking pallets, totes and other containers with RFID, and building a record
of what is stored in the container as items are loaded, users can have full visibility
into inventory levels and locations. With visibility and control, manufacturers can
easily locate items necessary to fill orders and fulfill rush orders without incurring
undue managerial or labor time.

• Production Tracking

Manufacturers can reduce their working capital needs by taking advantage of

RFID to provide greater visibility into work-in-process tracking and materials
inventory. By applying RFID tags to subassemblies in the production process,
rather than to finished goods, manufacturers can gain accurate, real-time visibility
into work-in-process in environments where bar codes are unusable. Industrial
control and material handling systems can integrate with RFID readers to identify
materials moving down a production line and automatically route the items to the
appropriate assembly or testing station.

• Inventory Control

The main benefits to using RFID in the supply chain come from improved
inventory tracking. Manufacturers, distributors, logistics providers and retailers
can all use RFID for inventory applications, and in carefully planned systems,
may share the same tags to reduce implementation costs. By using the highly
accurate, real-time and unattended monitoring capability of RFID to track raw
materials, work-in-process and finished goods inventory manufacturers can
improve visibility and confidence into their inventory to enable overall inventory
levels, labor costs and safety stocks to be reduced. To secure inventory from theft
and diversion, readers could be set to sound alarms or send notification if items
are placed in unauthorized areas of the facility or removed from storage without
prior approval.

• Pricing and Promotion

Demand and Revenue Management solutions track point-of-sale, on-shelf, and

inbound inventory information to support real-time, store-level pricing and

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 promotion optimization. These solutions provide vendors running programs in
stores with the ability to optimally price and promote their products according to
inventory position and sell-through rates. Through RFID, manufacturers and
retailers have real-time visibility to what items are selling versus those that are
not. Also, product-specific attributes can be monitored in real time, including: -

o Product spoilage
o Product expiration
o Product obsolescence

By receiving real-time updates to what products are selling, price lists can be
monitored and updated. Additionally, you can develop and run markdown and
promotional strategies based on market information telling you exactly what is
happening at the point of sale.

• Shipping & Receiving

The same tags used to identify work-in-process or finished goods inventory could
also trigger automated shipment-tracking applications. Items, cases or pallets with
RFID tags could be read as they are assembled into a complete customer order or
shipment. The individual readings could be used to automatically produce a
shipment manifest, which could be printed in a document, recorded automatically
in the shipping system, encoded in an RFID tag, printed in a 2D bar code on the
shipping label, or any combination. Having complete shipment data available in
an RFID tag that can be read instantly without manual intervention is very
valuable for cross-dock and high-volume distribution environments. Incoming
shipments can be automatically queried for specific containers. If a sought-after
item was present, it could be quickly located and selected.

• Regulatory Compliance

Companies that transport or process hazardous materials, food, pharmaceuticals

and other regulated materials could record the time they received and transferred
the material on an RFID tag that travels with the material. Updating the tag with
real-time handling data creates a chain of- custody record that could be used to
satisfy regulatory reporting requirements.

• Returns & Recall Management

Companies could supplement the basic shipment identification information by

writing the specific customer and time of shipment to the tag immediately prior to
distribution. Producing and recording this information would provide several
benefits. In the event of a recall, companies could trace specific shipments to
specific customers, which would enable a highly targeted notification and return
operation and avoid a costly general recall. For general returns, companies could
verify that the customer returning merchandise is actually the customer who

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 received it, which would deter diversion, counterfeiting and other forms of return
fraud.

• Service and Warranty Authorizations

Authenticating the product and customer with proprietary information could also
be used to authorize warranty and service work. Upon completion of repairs or
service, a record of the activity performed could be encoded on the tag to provide
a complete maintenance history that travels with the item. If future repairs or
service are required, a technician could access the item's complete maintenance
and configuration information without accessing a database simply by reading the
tag. This application ensures workers have necessary information if no database
access is available, and eliminates the need and expense of making phone calls or
wireless data inquiries to access records.

• Transportation

As with order management, RFID updates can drive substantial visibility and
optimal adaptability to your transportation plan. Proactively detecting when an
order is over, short, damaged, or incorrect enables you to take control of your
transportation plan, which directly affects your financial and service level goals.

Advantages of using RFID

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 RFID technology, combined with the recent Auto ID initiatives led by the
Massachusetts Institute of Technology, is gaining momentum. These advances
offer a standardized and scalable approach that can be deployed across the
extended enterprise to suppliers, manufacturers, distributors and logistics partners
to provide very reliable and cost-effective visibility at the item, case or pallet
level.

Concerns Surrounding RFID

• Privacy concerns

Arguably the biggest concern about the RFID technology is the worry that it will
infringe on the privacy of buyers. The RFID tags would be able to scan buyer
behavior at the point of purchase and even after that. Many people consider it a
breach of privacy. This is leading to a major public outcry against the use of RFID
technology.

• High investment

The initial investment by companies for adopting RFID is fairly large. So many
organizations are shirking away from the idea of investing in RFID technology.
There are others who are conducting an in depth cost benefit analysis before
taking the plunge.

• Limited range

So far the RFID technology has a limited range in terms of frequency. Therefore
many are skeptical about the efficacy of the technology and are questioning the
claims made by the developers.

• Health concerns

Since RFID technology operates on the principle of radio frequency wave

emission, health concerns are propping up. A long tem exposure to radio waves
causes many diseases like cancer, ulcers and skin deformities.

Summary and Conclusion

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 Supply chain management is concerned with the efficient integration of
suppliers, factories, warehouses and stores so that merchandise is produced and
distributed in the right quantities to the right locations at the right time. It also involves
the integration of ad hoc and fragmented processes into a consolidated system.

Advanced Planning and Scheduling (APS) aims to reduce the inventory

that a company stocks through accurate forecasting, near perfect scheduling and reduced
cycle times. Customer satisfaction levels are increased as the good are delivery on-time
due to increased efficiency in the distribution process

CPFR aims to improve the flow of goods from the suppliers to the manufacturer
and finally to the retailer. It identifies errors in the forecasts relating to the ordering and
inventory management functions of the organization.

Under CPFR, the manufacturer’s business information such as sales history

and planned sales is collated with the suppliers’ information such as availability of raw
materials and lead times.

COLLABORATIVE DESIGNING: In collaborative designing, product

development teams and individuals spread across different geographical locations
collaborate with each other through internet to arrive at a product design.

Collaboration in business can be found both inter- and intra-organization and

ranges from the simplicity of a partnership to the complexity of a multinational
corporation

SUPPLIER RELATIONSHIP MANAGEMENT

COMMODITY BASED:

Traditional direct commodity relationships: To accommodate Contingencies

that occurs due to miscommunication in information between companies and suppliers.
Suppliers tend to maintain inventory levels higher than required stocks, leading to
accumulation of inventory.

Enabled direct commodity relationships Product scheduling and purchasing

of direct commodities can be significantly improved through E- business .It enables
companies to share forecasts inventory.

Information and production schedules electronically with the supplier .Instead of stacking
up inventory, information flows help maintaining just adequate inventory

Strategic Relationship:

Traditional Strategic Component Supplier Relationship:

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 The manufacturing companies and suppliers have to communicate regularly
whether there are obstacles in demand forecast and production. It will be dangerous if the
company doesn’t inform the changes in demand the supplier will not able to serve the
company effectively

E-Enabled Strategic Component Supplier Relationship:

The company can be in constant contact with the supplier regarding product
specification, changes in design, inventory, pricing, demand forecast and production
schedules, but at much lower cost than the traditional communication methods.

INTEGRATION OF SCM WITH LEGACY APPLICATION

Any changes in the company are updated so that the activities are
synchronized. Thus the supply chain achieves complete integration of partner and
suppliers and enables the company to more receptive to changes in customer preferences
and to manufacture and to manufacture and deliver the product on time.

Types of Inter-Enterprise Integration

For high performance and efficiency, a tightly-coupled chain needs to be

designed. Inter-enterprise integration is possible through three types of supply chain
responsive, enterprising, and intelligent. Responsive supply chains enable quick response
to customer requirement. This is also called available-to-promise (ATP). Enterprising
supply chain aim to bring about changes in the supply chain in response to changes in
customer demand as quickly as possible.

Intelligent supply keep fine-turning the weak links (to make them strong) in
the supply chain on the basis of changing market condition to gain competitive advantage
over other

RFID:

RFID Technology and the underlying standards are readily available and mature
enough to support production-level pilots. RFID will have substantial and
positive impact on supply-chain performance. RFID will improve operating
margins, speed the flow of inventory and improve supply-chain service levels.
RFID-enabled supply chains will outperform their competitors with regard to
operating cost and excellence of execution.

Bibliography

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BOOKS:

• Sunil Chopra and Peter Meindel. Supply Chain Management: Strategy,

Planning, and Operation, Prentice Hall of India, 2002.
• Sridhar Tayur, Ram Ganeshan, Michael Magazine (editors). Quantitative
Models for Supply Chain Management. Kluwer Academic Publishers,
1999.
• Effective SCM: Concepts and Cases by Londhe B R.
• Essentials of Supply Chain Management, 2nd Edition by Michael Hugos.
• Lean Logistics: The Nuts And Bolts of Delivering Materials and Goods by
Michel Baudin.
• World Class Production and Inventory Management, 2nd Edition by
Darryl V. Landvater.

WEBSITES:

• lcm.csa.iisc.ernet.in/scm/supply_chain_intro.html
• www.scmlowdown.com
• www.studentwebstuff.com/mis
• www.esnips.com
• www.businessinsights.biz
• www.sap.com
• www.cis.gsu.edu

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