SUPPLY CHAIN MANAGEMENT PROJECT

Role of I.T. In Supply Chain Management

Submitted in partial fulfillment of the requirements of Post Graduate Programme By Priya Anand
(PG20101207)

PGP 2010-12

IILM Institute for Higher Education New Delhi

ACKNOWLEDGEMENT

It is almost inevitable to incur indebtedness to all who generously helped by sharing their invaluable time and rich experience with me, without which this project would have never been accomplished. No task can be achieved alone, particularly while attempting to finish a project of such a magnitude. Hence, I would like to acknowledge my faculty who facilitated and supported me and made this project a reality. I would like to thank Mrs.Rajkumari Mittal , faculty, IILM, for her support, encouragement and guidance throughout the project without which this project wouldnt have been possible. I would also thank our Institution without whom this project would have been a distant reality. Thank you all for supporting me in making this project a reality.

INTRODUCTION :

Supply chain is a process umbrella under which products are created and delivered to customers. From a structural viewpoint it refers to the complex network of relationships that organizations maintain with trading partners to source, manufacture and deliver products. A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request. The supply chain includes not only the manufacturer and suppliers, but also transporters, warehouses, retailers, and even customers themselves. Within each organization, such as a manufacturer, the supply chain includes all functions involved in receiving and filling a customer request. These functions include, but are not limited to, new product development, marketing, operations, distribution finance, and customer service. The organizational process of making the product and selling it stands between the supply markets and the customer markets. Information is crucial to the performance of supply chain because it provides the basis on which supply chain managers make decisions. Without information a manager cannot know what customers want, how much inventory in stock, and when more products should be produced or shipped. Without information, a manager can only make decisions blindly. Information Technology is slowly affecting the distribution channels through which consumers and businesses have traditionally bought and sold goods and services. The online channel provides sellers with the ability to reach a global audience and operate with minimal infrastructure, reduced overheads, and greater economies of scale, while providing consumers with a broad selection and unparalleled convenience. As a result, a growing number of consumers do business transactions on the Web, such as buying products, trading securities, paying bills and purchasing airline tickets. Essentially, e-commerce is all about the transactional business process of selling and buying via the Internet. E-Supply Chain refers in particular to the management of supply chain, using the Internet technologies.

Communication is in real time and data can be integrated with back office systems, reducing paperwork. Using the Web to eliminate paper transactions can generate substantial savings of cost and time. It facilitates the removal of purchase orders, delivery confirmations bills of material and invoices. The switch away from paper can also speed up response and improve communications with those in different time zones or who work outside normal office hours, such as a customer's night shift supervisor. Another significant potential benefit is a reduction in the errors associated with activities such as re-keying data, receiving orders by telephone calls and handwritten faxes. Electronic commerce, supply chain management has the characteristics like an ability to source raw material or finished goods from anywhere in the world; a centralized, global business and management strategy with flawless local execution; on-line, real time distributed information processing to the desktop, providing total supply chain information visibility; the ability to manage information not only within a company but across industries and enterprises; the seamless integration of all supply chain processes and measurements, including third party logistics, information systems, cost accounting standards, and measurement systems; the development and implementation of accounting models such as activity based costing that link cost to performance are used as tools for cost reduction; and reconfiguration of the supply chain organization into high performance tests going from the shop floor to senior management. E-Logistics enables organizations to see the big picture by capturing and sifting through data for procurement and fulfillment. Ultimately, management of the entire supply chain is e-enabled, and logistics-generated data can feedback into strategic and tactical decisions made by other parts of the organization. The Internet ultimately provides access to true rather than forecasted supply and demand information. E-Logistics also permits a closer integration of a company's internal business systems with collaborative information from partners and Web-based functions and information. In essence, e-Logistics represents the foundation for improved business processes, allowing for real-time visibility, seamless channel linkage and collaborative solutions in the supply chain. .

 SUPPLY CHAIN MANAGEMENT

SCM deals with the management of materials and information resources across a network of organizations that are involved in the design and production process. It recognizes the inter-connections between materials and information resources within and across organizational boundaries and seeks systematic improvements in the way these resources are structured and controlled. The following are five basic components of SCM:
1. Plan This is the strategic portion of SCM. You need a strategy for

managing all the resources that go towards meeting customer demand for your product or service. A big piece of planning is developing a set of metrics to monitor the supply chain so that it is efficient, costs less and delivers high quality and value to customers.
2. Source Choose the suppliers that will deliver the goods and services

you need to create your product. Develop a set of pricing, delivery and payment processes with suppliers and create metrics for monitoring and improving the relationships. Also put together processes for managing the inventory of goods and services you receive from suppliers, including receiving shipments, verifying them, transferring them to your manufacturing facilities and authorizing supplier payments.
3. Make This is the manufacturing step. Schedule the activities

necessary for production, testing, packaging and preparation for delivery.

4. Deliver This is the part that many insiders refer to as logistics.

Coordinate the receipt of orders from customers, develop a network of warehouses, pick carriers to get products to customers and set up an invoicing system to receive payments.
5. Return The problem part of the supply chain. Create a network for

receiving defective and excess products back from customers and supporting customers who have problems with delivered products.

The Supply Chain Management issues concern activities of the firm at various levels of decision making, ranging from operational level to strategic level via tactical level. The tactical level:

Decision making at this level is concerned with purchasing and production functions, inventory policies and transportation strategies. These decisions will be usually updated on an annual basis. SCM is an operations management technique that seeks to integrate and optimize the capabilities of internal business functions and to direct them to new opportunities for Cost reduction and increased channel throughout by working with the matching functions from the Supply Chain partners, customers and suppliers. Tactical SCM can be divided in into these activities: suppliers management and inventory optimization, product and service processing, customer management and customer order management, channel support activities for facilitate financial transactions, marketing information flows, electronic information transfer, integrated logistics .

The strategic level :

The decision making at this level is made with long term objectives and with long lasting effects. These include decisions regarding location of various facilities, including the manufacturing plant, distribution warehouses and the structure of the distribution channel. SCM transforms the linear, sequential SC into a networked SC focused on functional and strategic interoperability through collaborative partnerships for the correlation of SC processes. The SC process correlation creates unique sources of value by unifying resources, competencies, capacities of the entire network. These tactical and strategic approaches are focused on the evolution of business network, resulting in innovations, new processes and technologies, increased reliability and speed and mass customization economies.

The operational level:

Decision making at operational level will concern day to day management of activities such as scheduling, routing and vehicle loading etc.

 Supply Chain Process Integration

Supply chain management involves the efficient integration of suppliers, factories, warehouses and stores. The challenge in integrating the supply chain is to coordinate activities throughout the supply chain so that it can improve the performance of businesses: lower costs, increase service level, reduce the bullwhip effect, a better use of resources and effective response to changes in the marketplace. Many companies have recently realized, these challenges are met not only through the coordination of production, transportation and inventory decisions, but ,more generally, by integrating the front end of the supply chain (customer demand) to the back end of the supply chain (production and manufacturing part of the supply chain). The accessibility of information plays a crucial role in the supply chain integration. In some cases, the supply chain must be designed to have this information available. In other cases, the supply chain strategy should be designed to take advantage of information already available. And, in many cases an expensive network should be developed to compensate for the lack of information. The positive value of information sharing in supply chain management is well appreciated by leading companies, and this has led to various industry initiatives to support companies to develop a framework for collaboration for common benefit. One such initiative is the industry is Collaborative Planning Forecasting and Replenishment systems (CPFR). This is a software system which assists retailers and manufacturers to share information about past sales data and future price and promotion initiatives. This is a relatively new development, but is gaining popularity in the industry. In the highly organized network economy, the supply chain system consists of some independent subsystems. These subsystems may be in different functional areas of a company or a business partner outside the direct sphere of influence of the Company. The concentration of management is based on the integration of all processes that affect the service and the cost structure of the company, and information is the key for that integration. The fundamental problem is to discover a common goal that would make this integration easily acceptable, simply because diverse sub-systems have different operating economics.

What is needed is a holistic view of the supply chain, and a mechanism by which the integration process can be a win-win situation for all participants. It is important to do this work as the optimization of the supply chain can result in apparent sub-optimization of one or more individual elements of the chain.

The New Way of managing supply chain

Procurement
S u p p l i e r s

Production

Distribution
C u s t o m e r s

E-commerce enabled SCM Solution

Electronic Procurement

Productio n Optimizati on ERP Performance enhancement using data warehousing decision support & web technology

Distribution, sales & service coordination Collaborative demand planning Internet-enabled distribution optimization Web-based customer service

Extranet-based integration with suppliers Advanced decision system for material sourcing & purchasing

 Supply Chain Management in an E-Biz Environment:

Virtual Integration:
Virtual integration is to use technology and information to blur the traditional boundaries among suppliers, manufacturers, distributors, and end users in a supply chain. Today, the virtual corporation of various firms in a supply chain is a reality with suppliers and customer trading over the Internet in real-time to create maximum value. Virtual integration offers the advantage of tightly coordinated supply chain that has traditionally come through vertical integration. In the age of virtual organizations, managers, engineers, professional staff, and technical workers are no longer the lone custodians of the corporate knowledge base. Knowledge is shared across cultural-boundaries, time-boundaries, and space-boundaries to create strategic frontiers in global and virtual enterprises. A seamless virtual integration of firms within a supply chain requires realtime automation of inter-organization business processes that span across trading partners. In the last decade, organizations involved in a supply chain use e-mail, faxes, and voice mail. These practices introduce delays and often require data to be re-entered multiple times. An integrated supply chain model focuses on mutual trust and respect of supply chain members, just-in-time manufacturing, and eliminating thirdparty retailers. The integrated supply chain includes joint improvement projects, training seminars, workshops, and meetings between organizations top management. As the degree of communication increases between customers and suppliers, higher levels of informal information sharing are witnessed. A step ahead of integrated supply chain is virtual integration, which blurs the walls of supply chain. The trend of mass-customization forces many companies to focus on their core competences, and outsource a wide range of functions including design, manufacturing, and distribution. This trend drives the need for a virtually integrated supply chain.

Information and Technology: Application of SCM

In the development and maintenance of supply chains information systems, software and hardware must be addressed. Hardware includes computers input / output devices and storage media. Software comprises the entire system and application program which is used for processing transactions, management control, decision making and strategic planning used. Latest developments in supply chain management software are: 1. Base rate, carrier select & match pay developed by Distribution Sciences Inc., which is very helpful in order to calculate freight costs, compare transportation mode rates, analyze costs and service effectiveness of the carrier.

2. A new software programme was developed by Ross Systems Inc. known as supply chain planning which is used for demand forecasting, replenishment and scheduling of activities.

3. P & G Distributing Company and Saber Technologies decision led to a software system called Transportation Network Optimization for reforming the bidding and award process.

4. Logistics planning solution was recently introduced to provide a programme which is capable of managing the entire supply chain.

Electronic Commerce: It is the term used to describe the wide range of tools and techniques which is used to conduct business in a paperless environment. Electronic commerce thus comprises of electronic data interchange, e-mail, electronic funds transfers, electronic publishing, image processing, electronic bulletin boards, shared databases, and magnetic / optical data recording. The

companies are able to automate the process of transition of documents electronically between suppliers and customers.

Electronic Data Interchange:

Electronic Data Interchange (EDI) refers to computer-to-computer exchange of business documents in a standardized format. EDI describes, both, the ability and the practice of transmitting information between two organizations electronically rather than the traditional form of mail, courier, and fax. The benefits of EDI are: Quick information processing

Better customer service Reduced paper work

Increased productivity Cost efficiency Competitive advantage Improved billing By using EDI, supply chain partners can get rid of the distortions and exaggerations in supply and demand information through improved technologies which facilitate real-time sharing of the actual demand and supply information. Bar coding and Scanner: Bar code scanners are most prevalent and visible in the check-out counter of the super market. This code specifies the name of the product and the manufacturer. Other applications include the tracking of moving objects such as components in personal computer assembly operations, automobiles in assembly plants. Data Warehouse:

Data warehouse is a consolidated database which is maintained separately from an organizations production system database. Many organizations have multiple databases. A data warehouse is organized around information subject matter rather than specific business processes. Data held in data warehouses are time-dependent where historical data can also be aggregated.

The Strategic Advantage

Rapid Deployment and Scalability - The e-SCM suite of applications is based on an "open" Internet Application Architecture that provides enterprise-wide scalability and rapid deployment to numerous end-users. Real-time Processing - E-SCM creates an open, integrated system that addresses the complex e-business and supply chain management needs and requirements by allowing the exchange of "real-time" information to "take place with employees and their trading partners (customers, suppliers, distributors, manufacturers) regarding product configuration, order status, pricing, and inventory availability. Such functions improve order accuracy and provide 100 per cent order fulfillment through accurate inventory information. This "real-time" data enables users to make informed ordering, purchasing and inventory decisions, and thereby enhances the quality and scope of customer service. Return on Investment - In addition to increasing productivity and reducing overall operating expenses, e-SCM maximizes selling opportunities by capturing valuable customer information-buying patterns, frequency of visits, preferences, order history-and then uses this information for upselling, cross-selling and promotional opportunities. E-SCM provides the tool sets to achieve new business by reaching out to customers that you never could before.

E-supply Chain Components

The components of e-supply chain are -

Advanced Scheduling and Manufacturing Planning Programme - This automated programme provides detailed coordination of all manufacturing and supply efforts based on individual customer orders. Scheduling is based on real-time analysis of changing constraints throughout the process, from equipment malfunctioning to supply interruptions. Scheduling creates job schedules for managing the manufacturing process well as logistics. Demand Forecasting Programme - This module supports a range of statistical tools and business forecasting techniques. It constantly takes into account changing market scenarios and economic factors while making decisions. Transportation Logistics Programme - This programme facilitates resource allocation and execution to ensure that materials and finished goods are delivered at the right time and at the right place, according to the planning schedule, at minimal cost. It considers such variables as transportation mode and availability of each mode such as airlines, trains, and trucks. Distribution Planning Programme - This is integrated with demand forecasting, manufacturing schedules and transportation logistics to reach the customer.

Developing E-Supply Chain Strategy:

SCM systems will be extensively modified in terms of strategy, process, and system. E-Supply Chain Management has redefined and will continue to redefine how companies will compete for customers. While the internet offers some exciting opportunities to improve Supply Chain Management effectiveness by lowering costs and increasing the speed of order-todelivery, it is by no means the first step on the right path to having highly competitive e-Supply Chain capabilities. Just throwing more software at the problem is not the answer to the core issues of Supply Chain Management. Although software is needed, it is very necessary to define the process of information flow that will activate material flow at the right time. Spending time in the upfront strategy development to improve order-todelivery cycle and supply chain management will pay big dividends. The hard part is the prerequisite tasks of discovering and thinking through supply

chain opportunities and then developing a strategy and plan for an e-supply chain roadmap, the direction taken may not take the company to its desired destination. The biggest loss of missing the target can never be regained. It is essential to do it right the first time.

Procurement Process and the supply chain

The subject of B2B e-commerce can be complex because there are so many ways the internet can be used to support the exchange of goods and payments among organizations. Ultimately, B2B e-commerce is about changing the procurement process of thousands of firms across the world. One way enter this area of internet-based B2B commerce is to examine the existing procurement process. Firms purchase goods from a set of suppliers, and they in turn purchase their inputs from a set of suppliers. This set of firms is linked through a series of transactions referred to as the supply chain. The supply chain includes not just the firms themselves, but also the relationships among them and the processes that connect them. There are seven separate steps in the procurement process. The first three steps involve the decision of who to buy from and what to pay: searching for suppliers of specific products, qualifying both the seller and the products they sell, and negotiating prices, credit terms, escrow requirements, quality and scheduling of delivery. Once a supplier is identified, purchase orders are issued, the buyer is sent an invoice, the goods are shipped, and the buyer sends a payment. Each of these steps in the procurement process is composed of many separate sub-activities. Each of these activities must be recorded in the information systems of the seller, buyer, and shipper. Two distinctions are important for understanding how B2B improve the procurement process. First, firms make purchases of two kinds of goods from suppliers direct goods and indirect goods. Direct goods are goods integrally involved in the production process; for instance when in automobile manufacturer purchases sheet steel for auto body production.

Indirect goods are all other goods not directly involved in the production process, such office supplies and maintenance products. Often these goods are called MRO goods products for maintenance, repair, and operations. Second, firms use two different methods for purchasing goods contact and spot purchasing. Contract purchasing involves long term written agreements to purchase specific goods, with agreed upon terms and quality, for an extended period of time. Spot purchasing involves the purchase of goods based on immediate need in larger marketplaces that involve many suppliers. According to surveys, about 80% of inter firm trade involves contract purchasing of direct goods, and 20% involves spot purchasing of indirect goods. Although the procurement process involves the purchasing of goods, it is extraordinarily information intense, involving the movement of information among many existing corporate systems.

Smart Chains, Smarter Gains

An efficient supply chain management can bring down the prices of commodities by as high as 40 per cent. This is not with the help of a budget sop, but by reducing average inventory levels, lowering transport costs, lowering warehousing costs-among others. Children will be excited on having Maggi at Rs 6 against the prevalent price of Rs 10. Industry estimates show that a company spends between 17 per cent and 50 per cent of the price for just moving the goods from their manufacturing plant to shop shelves. This includes the margin of the retailer and of the distributors. Most of it is taken up by logistics and holding inventory and these costs can be controlled, optimized and reduced, thus reducing price or increasing profit. Now if we can practically apply this model on a Rs 50,000 crore FMCG company with thousands of wholesalers and retailers, the result will be mind boggling. This will not on; give the company a cost benefit but also will also result in improved customer service levels, improved competitiveness and an overall gain in profitability for the organization. Managing logistics is a nightmare for all company executives in the sales and purchase departments. Handling logistics not only adds cost to the business but also increases the number of business processes and involves lot of resources. The logistics chain starts from the supplier end, and continues to the customer end involving members in surface, air, sea express

couriers, brokers, customs, excise, etc. This is for the sales part. Later it will also include similar contacts for the after sales support, repair and maintenance. Many of the companies cannot take up this load and outsource these activities to experts, and many companies manage this efficiently and make huge profits. Some top FMCG companies like Nestle, P&G have tied up with logistics companies like TCIL, Concor in an initiative called an Efficient Customer Response (ECR), with a one-point mission to clean-up India's supply chain.

The Pay Off

Every company aims at reducing costs and cycle time and increasing revenue. E-supply chain supports these objectives. Companies find that enterprise integration leads to a new level of relationship, be it with its customers or suppliers. Customers can quite literally check the status of their orders, and suppliers can gain access to inventory levels to find out whether they need to replenish stock, all through the internet. The benefits of reduced cycle time provide measurable competitive advantage in terms of both cost and performance. The faster we move a critical data the internet, the quickest we can react and deliver the end product to the customer. This leads to enhanced customer satisfaction and promotes revenue growth.

Major Trends in E-SCM

When one considers the challenge of meeting the demands of busy, timestarved, dissatisfied consumers in an environment of hostile competition, low margins and countless sales outlets selling similar products, it becomes clear that changing the entire business model is the only plausible strategy. E-business applications must cut the time customers wait for service. Customers, now penalize companies that infringe on their time through delays, mistakes, or inconveniences. If companies do not expedite processes, customers will go to someone who does it faster. If one company does not make it easy for the customer to do business, another will.

Online ordering will be adopted slowly. Customers will adopt new ebusiness technologies when it benefits them and limit technology usage when the technology does not help them. In Facing the Forces of Change: Future Scenarios for Wholesale Distribution, it was founded that the percentage of orders received on-line will grow substantially, but not overtake more traditional methods within the next five years. In other words, the phone, fax and sales rep will remain common modes of order placement in B2B channels despite the Internet and other new technologies. It is very important that managers understand and diagnose the cause behind service delays. They need to analyze if an integrated system can speed-up service. If so, they need to strategize, design and implement such systems as soon as possible. Unfortunately for some companies, their managers may wake up too late to heed the sound of their customers' fists pounding on the counters for faster service. These companies will not be in business for long. In the e-business world, innovation is derived from spotting the trend well before any one else does and from the sophisticated exploitation of information and technologies to create value. It is the senior managers in particular who will be called on to lead the innovation charge. Today, every manager is wondering how the Internet can remake his or business.

Real-time Benefits of E-supply chain

E-SCM is being transformed by the rapid growth of Internet-based communications. The movement to Internet-based communications represents a paradigm shift from the client/ server model. The power of Web-based applications is their ability to allow people to communicate mission-critical, real-time information anywhere in the world instantaneously. This migration has precipitated the widespread adoption of Internet software applications utilizing the latest technology to fulfil these new and complex communication needs. As these applications emerge, their immediate and measurable benefit make them essential business tools. With the increasingly competitive business landscape, it has become a strategic necessity to optimize a company's supply chain in a fashion that leverages the potential of the Internet. Some of these are - Global trading capabilities, mass personalization and custornization, global knowledge exchange, global communities, collaborative workflow, industry specific (vertical) marketplaces, horizontal marketplaces, enterprise-toEnterprise connectivity, e-marketplace-to-E-marketplace connectivity.

Radio frequency identification [RFID]

Radio Frequency Identification is one of the fastest growing and most advantageous technologies which is being adopted by businesses today. Adoption of this automatic data-collection (ADC) technology has been recently accelerated by the establishment of important standards, retailers and government mandates, improved technology performance and falling implementation costs. RFID offers great value for many industries and applications. However, misperceptions about what RFID is and what it may do pose difficulties which discourage some organizations from using this technology to reap benefits.

Collaborative Planning, Forecasting and Replenishment (CPFR)

Collaborative Planning, Forecasting and Replenishment (CPFR) is one of the fastest growing technologies for both retail and consumer goods firms. CPFR is seen as a new business essential for collaboration. CPFR is a combination of Continuous Replenishment Programs (CRP) and vendormanaged inventory (VMI). CPFR involves working with network members to forecast demand, develop production plans, develop joint sales and operational plans, coordinate shipping and warehousing details and electronically collaborate to generate and update sales forecasts and replenishments plans.

CPFR collaboration requires information technology to build, share and adjust on- line forecasts and plans. The core objective of CRPF is to increase the accuracy of demand forecasts and replenishment plans to lower inventories. It requires trust between partners. For it to succeed, partners must be willing to share their promotion schedules, POS data, and inventory data. CPFR is proving to be a Win- Win situation for the partners involved in meeting the customers demand, reducing inventory, lowering costs and improving the bottom line.

Enterprise Resource Planning systems (ERP)

It integrates the entire companys information system, process and store data, cut across functional areas, business units, and product lines to assist managers make business decisions. As an IT infrastructure, ERP influences the way companies manage their daily operations and facilitates the flow of information among all supply chain processes of a firm. The 1990s caught sight of increased globalization. In order to improve competitiveness, companies began realize the potential of information technology to dramatically transform their business. Instead of automating old, inefficient processes, companies began to reengineer business processes using technology as the enabler. This led to the development of ERP systems that give complete visibility to the organization, integrating previously stand-alone systems. ERP became more acceptable during the mid- and late 1990s. ERP is not just MRPII with a new name. ERP is the next logical sophistication level in an evolutionary series of computer tools for material and supply chain management. ERP systems provide an integrated view of information across functions within a company and with the potential to go across companies.

In Late 90s and the beginning of 21st century, electronic communications as opposed to paper transactions allow for a decrease in amount of lead-time required to replenish inventory. Cutting lead-time minimizes the risk of uncertainty in demand and decreases the probability of over or under-stocking inventory. The 90s marked the wide use of the Internet. This provided great opportunity for companies to integrate E-commerce into their business models. The primary emphasis during that period was business-tocustomer (B2C). Today, the emphasis expands to include business-to-business or B2B. Back-end system integration, especially supply chain management provides greater visibility and more strategic capability for companies to improve profitability and competitiveness. A supply chain consists of all stages involved, either directly or indirectly, in fulfilling a customer request. A supply chain includes manufacturer, supplier, transporters, warehouses, retailer, third-party logistics provider, and customer. The objective of supply chain management is to maximize

Enterprise Resource Planning (ERP) tools:

Many companies now see the ERP system (eg Baan, SAP, People soft, etc.) as the heart of their IT infrastructure. ERP systems have become enterprisewide transaction processing tools that capture the data and trim down manual activities and tasks related to the processing of financial, inventory and customer order information. ERP system attain a high degree of integration through the use of a single data model, develop a common understanding of what the shared data constitutes and establishing a set of rules for accessing the data.

DSS (Decision Support Systems)

Supply Chain Management problems are not fixed and need not only the computer knowledge but human knowledge too in order to manage the

systems effectively. DSS systems are meant to ensure that the analysis is easily understood with the help of computers. DSS in supply chain management is often called Advanced Planning and Scheduling (APS) systems. This systems help to generate solutions in the following areas: i. Demand planning to help determine accurate forecasts based on historical data, understanding the buying behaviour of customers, helps facilitate collaboration between suppliers and customers. Procurement (Supply) planning which are sometimes called distribution resource planning (DRP) and assist in inventory planning, transportation planning, procurement planning, strategic supply chain planning. Production planning and scheduling - these include the traditional material requirement planning (MRP) system. It helps efficiently allocate production resources to satisfy demand requirements. It can also quote lead times to customers.

ii.

iii.

Three major components of DSS:

1.

Input data, which is a database that contains basic information required for decision making. It may come in the form of a data warehouse where the all the companys past transactions are saved, distributed databases which are accessed over a network or a PCbased database extract used for a specific problem.

Below is an example of the kind of data a company must earn for their logistics network design would be-

Component Manufacturer

Data Location, production capacity, production costs, transportation costs to warehouse

Warehouse

Location, fixed costs, variable costs, inventory turnover, transportation costs to retailers Location, demand for product annually Volume, weight, holding costs

Retailer Product

2.

Analysis tools- Once data has been collected, there are tools used to analyze the data. Tools that can be used to do so are as follows-

Query- decision makers ask questions about the data

Statistical analysis - this is used to determine the trends and patterns

Data mining- these look for these hidden patterns, trends and relationships in the data.

Online Analytical Processing (OLAP) tools - it allows the user to find the way through the hierarchies and dimensions by drilling down. Statistical tools are used to analyze data. This also has presentation tools to present the data after it has been analyzed.

Calculator-These carry out specific calculations, such as accounting costs.

Simulation it creates a model of the process. The random elements are calculated using a probability distribution and every time a random event occurs. The computer uses this to determine what would happen in this particular situation. As the model runs, statistical data is collected and analyzed and then statistical methods help determine the average results and variability of this result.

Artificial intelligence - these are databases of the rules that are collected from experts, which can be used for specific problems or online intelligent agents. These intelligent agents can be characterized by the number of activities assigned to them, the level of interaction with other intelligent agents and the level of knowledge implanted in it.

Mathematical models and algorithms - Algorithms come in two forms that are exact algorithms and heuristics. Exact algorithms are the best mathematical solution, and are long run especially if the problem being solved is complex. Heuristics give goo, but not the optimal solutions. They offer a good solution quickly, in contrast to exact algorithms.

Factors to be consider when determining which analytical tools to use are Nature of the problem being solved. The required accuracy of the solution. Problem complexity. The number and type of quantifiable output measures. DSS required lead times for speed-the faster speed is necessary.

 The number of targets assigned according to the decision maker expectations

The following table shows analytical instruments and the problems that they solve best: Problem Marketing Routing Production scheduling Logistics network configuration Mode selection
3.

Tools Query, statistics, data mining Heuristics, exact algorithms Simulation, heuristics dispatch rules Simulation, heuristics, exact algorithms Heuristics, exact algorithms

Presentation tools-these show the results of data analysis. Data visualization techniques are used to make user understand the output data. There are several formats used to present data to the user as: Reports, charts, tables, animations, special graphics formats, and Geographic Information Systems (GIS).

Implementation of ERP and DSS

Implementation of a system that supports supply chain integration requires both infrastructure and DSS. A company needs to decide which system it will install first. ERP takes longer and are more expensive to implement. Supply Chain Systems Inc. has developed a methodology, which should be followed when implementing ERP: 1. Top management should participate in the whole project. The scope of the project should fit with the available resources and time required. Functional managers should be responsible for their respective parts of the project.

2. 3. 4.

Senior management should define supply chain policies that will specify how the business will operate; these set the parameters for ERP. A discipline process for resource planning should be defined. A process should be implemented that will generate feasible production schedules. The operational planning process must be mapped and finite capacity scheduling models (for production and inventory plans) developed

5. The processes and maps should be used to determine what management reports are required. 6. Data elements should be identified that will be used in planning models. A plan for building a data warehouse and interfaces to the legacy system is needed. 7. Define the ERP parts and determine when each can be implemented, with the help of an implementation team.

8. An implementation schedule is developed and critical success factor problems should be raised to appropriate senior management so that they are solved immediately. 9. A Gap Analysis is conducted between system capability and functionality. As functionality begins to appear more critical it should be implemented.

The Future of Information Technology in the Supply Chain:

At the highest level the three SCM macro processes will continue to drive the evolution of enterprise software. To this end, we expect to see software focused on the macro processes become a larger and larger share of the total enterprise software landscape and software firms that focus on the macro processes to be much more successful than those that focus elsewhere. For firms targeting a macro process, we see functionality, the ability to integrate across macro processes, and the strength of their ecosystems as the keys to success. There is one final note worth mentioning with regard to the future of new software players in this area. One might conclude from our analysis that it will be very difficult for a new company to break into the ranks of successful enterprise software companies, given the lead in- functionality, integration, and ecosystems that existing firms already have. However, that there are two potential paths for a company to enter the market. The first is through superior functionality, whether it be specific functionality needed by a particular industry or an application with vastly improved ease of use. In this area, we see start-ups adding value to enterprise software, although it is a very difficult path to take given the advantages the ERP players hold today. The other path consists of providing an integrated product that increases the link-ages between the macro processes. Certainly, it will be difficult for a start-up to garner the resources to build an integrated product across CRM, ISCM, and SRM. However, a large software company with tremendous resources and a history of pulling disparate products into an integrated package could take this path. The one obvious company here is Microsoft. Microsoft has certainly noticed the growth and size of the enterprise software market and has begun to make a significant effort to enter this space. It has made two acquisitions of over $lB and is showing more signs that this will be a focus in the future. Even with these acquisitions, Microsoft is not yet a significant player in supply chain software and has targeted only small companies as its customers, leaving the large customers and the large revenues to the existing players. Given Microsoft's tried-and-true strategy of going in on the low end and expanding upward, however, it is certainly a company to watch for on the enterprise software landscape.

 Technology
Many issues about technology that are faced by a company: Technology Solutions: Largely, multinational companies come across that supply chain operations throughout the world are managed not on one application or a set of applications, but every location and country either would have implemented legacy systems or stand-alone systems to manage its individual local logistics activities. Once implemented, it is difficult to isolate these applications and move them to a common platform without which common processes and standards cannot be stimulated across locations. Secondly, it is essential to customize software solution according to local site and country-specific requirements. A single solution does not fit all. While the solution may be in a country with larger volumes and the size of the supply chain network and factories, the same software may not be suitable to be implemented in a small country with a single location. Cost of technology absorption: If a project is to introduce a system in all countries of the supply chain network for bringing about seamless integration and common processes, it is in vain to account for the cost of technology and capabilities of all countries and locations to absorb the cost. The cost of IT operation is very huge. A larger city and country may be able to pay for the IT costs, but if the same cost is expected to be from another country having a lesser volume, it cannot suck up the cost, unless the global project management is able to suck up the costs into project costs or get corporate management to absorb the costs and take it off from the user countrys budget. Implementation of IT requires the IT team to travel to all of the sites to execute the setup. Train the people and stabilize the sites to go live. The cost of implementation can run very high. Also, all countries may not be able to bear the costs of such an implementation.

Availability of IT infrastructure:

Technology infrastructure availability is not the same between countries and within the country too. Internet connectivity and bandwidth may not be the same across all sites; this can hamper the application of an Internet-based technology. Normally, if the project is operating on a global level, the local infrastructure problems in many countries, taking into account the suitability of the IT platform for the implementation.

Internal & External resources capacity:

Supply chain projects involve multiple sites and cross-functional teams and departments within the organization. Moreover, they also have a number of external agencies to manage the logistics. Driving projects through different countries requires management to do enormous internal sales. The projects also call for external sales with the service provider. Local land management and the service provider country management may or may not have the same interest and commitment to the project as the global project leadership would have. These are soft challenges being faced by project managers, to be able to sell the idea and the get commitment from all involved. The availability of quality resources both internally and externally in all locations is essential for the implementation of the project and is often a challenge, which can hold up implementations and training.

 CASE STUDY ANALYSIS

In order to understand the application of IT in real life, I studied the case of Hero Honda and HUL. The case analysis is as follows -

Hero Honda
Hero Honda has accelerated its server architecture to offer special platforms for storage, mail, backup, and database management. Hero Honda Motors Limited is the world's biggest two-wheeler company. And to keep tempo with the incredible growth and preserve the competitive advantage, it has a network of over 700 nodes. This includes the HO (Head Office), two manufacturing plants and 20 marketing offices nationwide. In addition to migrating from a slower to a faster performing network, almost glitch-free network, Hero Honda has also consolidated different applications that previously ran on different departmental servers through the implementation of SAP. It has also revised its server architecture to offer dedicated platforms for applications, storage, e-mail, backup, and database management. Hero Honda Motors Limited is a joint venture between the Hero Group, the world's largest bicycle manufacturers and the Honda Motor Company of Japan. It manufactures India's largest selling motorcycle. Its network is distributed across 700 nodes and includes two production facilities, one HO and regional offices nationwide. Need As business needs had developed, the enterprise had to solidify them technologically and shift from traditional old applications, servers and connectivity options to something more structured and reliable. The Solution The company prepared components and devices in its LANs and WANs nationwide. And it executed a new line of servers to run its databases, applications, and SAP functions .

 Advantages The LANs at different locations are now fully developed and switch efficient. And the WAN has multiple links over dedicated lines with reasonable fallback options. The server configuration is able to run all the enterprise applications smoothly. In order to obtain grip over its varied activities, the company felt it necessary to add new applications such as Oracle and Ingress. These relational databases helped the company to combine data in one place and make it accessible to an authorized user on the fly. These new entities demanded a higher throughput and better scalability. The old LAN had a high failure rate and it was difficult to fix a problem that arose at times, in different segments. In addition, his legacy had TDMA-based WAN, which was a common network, had the propensity to choke as new users were added. To solve this problem of bandwidth-intensive applications efficiently via the LAN, Hero Honda, decided to strengthen the existing server infrastructure primarily. The company deployed IBM RS/6000 midrange servers (the H70 and F50 series) for the working of ingress and Oracle. Lotus Notes was used to manage mail and messaging, and it was run on IBM's Netfinity servers. A 10/100 Mbps switched network was soon used and fiber was installed in all the vital areas. The HO-and two plants in Gurgaon and Dharuhera were connected with secure leased links and radio links. Enterprise Applications The next step was to implement an ERP to consolidate various departmental servers performing various functions such as accounting, inventory management and so on under the same roof. SAP R/3 4.6B was implemented to control their operations. The company went with SAP in February 2001. It uses modules such as production planning, materials management, quality management, and sales & distribution. SISL was the implementation partner. SAP provided a number of benefits. It presented a high degree of data integration and enabled joint master sheets that can be used throughout various functions like operations, validation, accounting and reporting. There have been improvements in the quality, access and use

of transaction data. It correctly eliminated multiple entries and there was no need for manual settlement. Hero Honda has now made better cost control measures. ERP made it feasible to estimate costs for consumables, tool inventory cost, power plants and fuel costs, and overheads charge. And it prepared the organization for future SCM (Supply Chain Management) and CRM (Customer Relationship Management) implementation. Server Everywhere To build up the server architecture it was determined to bond to a single server vendor, IBM. This allows getting a more complete variety of products and services under one roof and communicates with a single point of contact for services and complaints. Hero Honda uses separate servers for running applications, databases, mail and messaging, network management, development, testing and production. IBM RS/6000 SP servers are used for most SAP applications. The servers have varied hardware and software configurations to give best possible performance. The RS/6000 is a highly reliable and scalable system. IBM AIX that is shipped with the boxes also performs exceptionally well .. The Web servers can be outsourced. The network Hero Honda's network connects two manufacturing plants in Gurgaon and Dharuhera (Haryana), a HO in New Delhi and 20 marketing offices across India. A mixture of VSAT links, leased lines, Frame Relay links and dialups interconnect these offices. The companys LANs at different locations are now fully developed and switch efficient. They use 10/100 Mbps Ethernet technologies for data transmission and are connected with Cat 5 cables so that it can support bandwidth requirements for the next few years. There are rare cases of network failures and there have been no major outages in the last three years. The Gurgaon plant has two Cisco 2610 routers that are connected to an IBM 8274 LAN Route Switch. A large body of servers, storage boxes, backup devices and workstations are connected to the switch. An RS/6000 SP runs SAP applications, an e-server p-Series 620 server runs Tivoli, an H70 Enterprise Server runs Oracle, a Netfinity server handles mail, and a

G8BlueBox G8.NET (appliance designed to provide end-to-end provide services over the Internet) works as a mail gateway. The two Cisco 2610 routers connect to the HO in New Delhi and the plant in Dharuhera. It connects with the HO through a 2 Mbps leased line with a 128 Kbps ISDN dial-up link as a backup. A 64 Kbps ISDN dial-up link is used as a second backup. The Dharuhera plant connects with the Gurgaon facility by a 768 Kbps RF (Radio Frequency) connection. There is also a backup 192 Kbps VSAT PAMA (Permanent Assigned multiple access) link by Comsat Max made available. The HO has a Cisco 1720 router connected to a 3Com 3300 switch. This is again connected to another 3Com 3300 Switch which supports Netvista and 300GL workstations. A number of devices handle backup, e-mail, bridging, firewall, dial-up RAS (Remote Access Server) and e-mail gateway functions. The company plans to implement the Human Resources and Production Management modules of SAP. It also plans to implement CRM and SCM applications to provide a seamless connection and management of their dealers and suppliers. Hero Honda is currently connected to the public network for e-mail management applications. Thus, this step calls for more secure networks. To view the current security needs they have established a basic level of protection through firewalls and point-to-point connections. A comprehensive security policy will be evaluated on the new security concerns that will come after the CRM and SCM initiative. And it will implement the policy before we connect with the outside world. Although they have allocated a sufficient bandwidth for the WAN connectivity throughout all critical points, more bandwidth is always useful. Unfortunately, public networks are not very reliable and do not provide sufficient bandwidth these days. There are also plans to move from copper to optical fiber leased lines. This will support the movement towards a faster and freer network.

Hindustan Lever Limited

Hindustan Unilever (HUL) has a common reputation of being Indias leading fast moving consumer goods company; it is one of the largest promoters of soaps, detergents and household care products in the country. But apart from its strong financial base and vast product portfolio, HUL has much to boast even when it comes to the art of integrating information technology (IT) with its core business. This initiative of the company rides on the front-end point software called RSNet developed by the company. The supply chain initiative called Project Leap was launched by HUL in 2001. RSNet is one of the largest B2B e-commerce initiatives ever undertaken in India. The objective is to catalyze HULs growth by ensuring that the right product is available at the right place in right quantities, on a continuous replenishment basis.

RSNet connects HULs redistribution stockiest through an Internetbased system. It provides linkages with the transaction systems.

RSNet connects HULs redistribution stockiest (RS) through an Internet-based system. It provides linkages with the stockiest transaction systems, enables monitoring of stocks and secondary sales. It also optimizes their orders and inventories. This has already been extended to more than 3,500 stockiest, accounting for nearly 80 per cent of the turnover. Introduction of RSNet has been a mammoth implementation effort for HUL. They had to build bridges with more than 50 different RS transaction platforms. Many RS points had to be computerized. Millions of product codes had to be standardized and robustness ensured at each RS point. The internal supply chain runs on advanced planning systems of Adexa. The system manages the companys production, distribution and sourcing requirements on an integrated basis. This has been implemented in most parts of the business.

The system handles the complex task of deciding which pack must be produced where, and where it should be dispatched to effectively meet the orders generated on RSNet. The new model helps ascertain the daily stock positions at each point in the supply chain, projects stock requirements at these points, and plans for its replenishment with complete transparency right across the supply chain.

The frequency of production planning is being compressed, with a capability to plan on a daily basis and even a shift level on a nationally optimized basis. The last leg of Project Leap in HUL is the Supplier Net. The Supplier Net links suppliers into the chain. Suppliers can check inventory levels for raw and packaging materials at factories and their projected requirements. The system ensures call-off of materials from suppliers on a daily replenishment basis. This project integrates several IT elements providing a holistic business solution. The starting point has been the core enterprise recourse planning or ERP (Mfg/Pro), which HUL has been using for quite some time now. The new IT capability added around ERP now includes Web based e-commerce solutions for collaborating with supply chain partners, data warehousing and reporting tools for information management, work flow tools for process and systems integration, high bandwidth wide area network to connect all its locations, and clustered servers deployed at chosen data centers.

 Conclusion and recommendations

A broad range of technologies have been used to exchange business information electronically between organizations but e-commerce will be the new way - the way business will be done. The web has captured the attention of merchants, consumers and vendors alike and has caused the scope of ecommerce expand to incorporate Internet commerce. IT is key success of a supply chain because it enables management to make decisions over a broad scope that crosses both functions and companies. By considering a global scope across the entire supply chain, a manager is able to craft strategies that take into account all factors that affect the supply chain rather than just those factors that affect a particular stage or function within the supply chain. Taking the entire chain into account maximizes the profit of the total supply chain, which then leads to higher profits for each individual company within the supply chain. The focus is on technology, applications and standards for business-tobusiness and consumer-to-business e-commerce transactions. E-commerce is the use of electronic information technologies to conduct business transactions among buyers, sellers and other trading partners. E-commerce combines business and electronic infrastructures, allowing traditional business transactions to be conducted electronically. E-commerce enables supply of goods and services via the communications capabilities of private and public computer networks, including the Internet. Internet commerce involves managing and conducting of business transaction using the Internet. To analyze the individual factors from the company point of view, the topmost improved factors are Information about inventory levels and Transaction time between the company and its supply chain partners. The improvements pertaining to Information technology based supply chain management are in the areas of information and channel partner relationship. So, it find that most improved areas are accurate demand forecasting followed by information, cost reduction, response capabilities of the organization.

In the same manner if take individual factors from dealers or distributors point of view, most of the improvement have taken place in following areas: Information about inventory levels and change in confidence and trust level. But if we take the clubbed factors, we find that most improved areas are accurate demand forecasting followed by information, cost reduction, response capabilities of the company have improved considerably, but it is not significant enough. There is some gap between the company and the dealers perception. The gap between companys and dealer perception are not significant. The dealers think that improvements in these areas are not so high as than what company thinks. Hence organisations can leverage on this point more to enhance the supply chain relationship.

RECOMMENDATIONS

The focus should be on technology application and standards for business to business and business to consumer transactions. The barriers to e-enabled supply chain have included concern about the security, reliability and poor performance often experienced by consumers due to Internet congestion, slow modems, and the use of large graphical files amongst others. So, the organizations should take care of these barriers. Selling online in not as easy as it seems to be. So pricing, customer service, logistic, infrastructure investment and marketing are some major issues. The Organization should have a delivery system in and outside the country, which ensures timely distribution of goods and services. The delivery system should be amongst the primary concerns of the organization. Business to consumer transactions including credit, debit, and smart card transactions at the point of sale as well as other payments such as electronic bill payments and presentation should also be present in the portfolio. The organizations objective should be to provide a platform for business-to-business communication and business-to-consumer

transaction processing where the organization would generate revenue with each business transaction. This segment is to witness the highest growth as well as provide the highest margins.

The driving force behind the strategy should be to look into the future of the Information world and to give the customers a competitive advantage in cost and the way of doing business over what is being done today.

 BIBLIOGRAPHY

Books:
Simchi-Levi, David, Philip Kaminsky & Edith Simchi-Levi, Designing & Managing the Supply Chain: Concepts, Strategies & Case Studies, 2nd edition, Tata MacGraw Hill, 2004

Websites:
www.networkmagazineindia.com www.google.com www.maganementstudyguides.com www.oocities.org www.ehow.com