SUPPLY CHAIN MANAGEMENT - USING INFORMATION TECHNOLOGY

Information Systems that Support the Supply Chain

Information technology supports internal operations and also collaboration between

companies in a supply chain. Using high-speed data networks and databases, companies can share
data to better manage the supply chain as a whole and their own individual positions within the
supply chain. The effective use of this technology is a key aspect of a company’s success.

1. DATA CAPTURE AND DATA COMMUNICATION

Data capture is the process of gathering information such as inventory levels, shipping
status, and demand forecasts, which helps in decision-making and real-time data. While data
communication refers to sharing and transferring information.

1.1 The Internet

The Internet is the global data communications network that uses what is known as Internet
Protocol (IP) standards to move data from one point to another. The Internet is the universal
communication network that can connect with all computers and communication devices. Once a
device is hooked into the Internet it can communicate with any other device that is also connected
to the Internet, regardless of the different internal data formats that they may use.

1.2 Broadband

Basically, this means any communication technology that offers high-speed (faster than a
56Kb dial-up modem) access to the Internet with a connection that is always on. This includes
technologies such as coaxial cable, digital subscriber line (DSL), metro Ethernet, fixed wireless,
and satellite. Broadband technology is spreading and, as it does, it becomes possible for companies
in a supply chain to easily and inexpensively hook up with each other and exchange large volumes
of data in real time.

1.3 Electronic Data Interchange (EDI)

Electronic data interchange (EDI) is a technology that was developed to transmit common
types of data between companies that do business with each other.

1.4 eXtensible Markup Language (XML)

XML (eXtensible Markup Language) is a technology that is being developed to transmit

data in flexible formats between computers and humans.
2. DATA STORAGE AND RETRIEVAL

The second functional area of an information system is composed of technology that stores
and retrieves data. A database is an organized grouping of data that is stored in an electronic
format.

3. DATA MANIPULATION AND REPORTING

Different supply chain systems are created by combining processing logic to manipulate
and display data with the technology required to capture, communicate, store, and retrieve data.
Data manipulation is a process of changing data so that it can be analyzed, aggregated, and
visualized.

3.1 Enterprise Resource Planning

Enterprise Resource Planning (ERP) systems gather data from across multiple functions in
a company. ERP systems monitor orders, production schedules, raw material purchases, and
finished-goods inventory. They support a process-oriented view of business that cuts across
different functional departments. departments. For instance, an ERP system can view the entire
order-fulfillment process and track an order from the procurement of material to fill the order to
delivery of the finished product to the customer

3.2 Procurement Systems

Procurement systems focus on the procurement activities that take place between a
company and its suppliers. The purpose of these systems is to streamline the procurement process
and make it more efficient. They also keep track of part numbers, prices, purchasing histories,and
supplier performance.

3.3 Advanced Planning and Scheduling (APS)

Advanced Planning and Scheduling (APS) systems are highly analytical applications
whose purpose is to assess plant capacity, material availability, and customer demand. These
systems then produce schedules for what to make in which plant and at what time. They then use
linear programming techniques and other sophisticated algorithms to create their recommended
schedules.

3.4 Transportation Planning Systems (TPS)

- Enable people to compare different modes of transportation, different routes, different

carriers.
- Transportation plans are then created
- Sold by system vendors
- Other providers - known as content vendors - provide the data that is needed by theses
systems such as : mileage, fuel costs, and shipping tariffs

3.5 Demand Planning Systems (DPS)

- Systems that use special techniques and algorithms to help a company forecast its demand.
- Take historical data and information about planned promotions and other events that can
affect customer demand such as: Seasonality and Market trends. They use this data to
create models - help predict future sales
- Often associated with DPS is revenue management. - it lets a company experiment with
different price mixes for its different products in light of predicted demand. Already using
this techniques- Companies in the travel industry : airlines, rental car agencies, and hotels.

3.6 Customer Relationship Management (CRM) and Sales Force Automation (SFA)

- Systems of this type automate many of the tasks related to servicing existing customers
and finding new customers.

● Customer Relationship Management (CRM) systems - track buying patterns and histories
of customers.
- Benefits : consolidate a company’s customer-related data in a place where
it is quickly accessible to customer-service representatives and salespeople
who use the data to better respond to customer requests.
● Sales Force Automation (SFA) systems- allow a company to better coordinate and monitor
the activities of its sales force.
- Benefits : automate many of the tasks related to scheduling sales calls and
follow-up visits and preparing quotes and proposals for customers and
prospects.

3.7 Supply Chain Management (SCM) Systems

- Collections of different applications designed for managing the various aspects of a supply
chain.
- Integrated suites : contains advanced planning and scheduling, transportation planning,
demand planning, and inventory planning applications.
- Rely on ERP or relevant legacy systems- to provide them with the data to support the
analysis and planning task.
- Analytical capabilities - to support strategic-level decision making.
3.8 Inventory Management System (IMS)

- Support the activities : tracking historical demand patterns for products, monitoring
inventory levels, calculating economic order quantities, and the levels of safety inventory.
- Used to find the right balance for a company between the cost of carrying inventory and
the cost of running out of inventory and losing sales revenue because of that.

3.9 Manufacturing Execution Systems (MES)-

- Focus is on carrying out the production activities in a factory.

- Less analytical than an APS.
- It produces short-term production schedules and allocates raw materials and production
resources within a single manufacturing plant.
- It is similar in its operational focus to an ERP system and frequently MES software is
produced by ERP software vendors.

3.10 Transportation Scheduling Systems (TSS)

- Similar to ERP and MES applications- less analytical and more focused on daily
operational issues.
- It produces short-term transportation and delivery schedules that are used by a company.

3.11 Warehouse Management Systems (WMS)

- Support daily warehouse operations, and provide capabilities to efficiently run the ongoing
operations of a warehouse.
- Keep track of inventory levels and stocking locations within a warehouse and they support
the actions needed to pick, pack, and ship products to fill customer orders.

4. NEW TRENDS IN SUPPLY CHAIN TECHNOLOGY

The global economy’s demands are forcing companies and entire supply chains to adopt
more flexible and responsive modes of operations. The interdependence of businesses and the fast-
paced nature of events require quicker and more strategic responses. To meet these challenges,
companies must enhance their existing supply chain systems by providing timely and accurate
data, improving coordination, and focusing on overall supply chain improvements rather than just
individual activities.

There are four promising technologies that can be used to complement existing supply chain
systems. These four technologies are:
1. Radio Frequency Identification (RFID)

● RFID is increasingly used in supply chains to track products from manufacturers to

customers; while not new, it is now more cost-effective and feasible for global use.
● RFID technology includes both hardware (tags, scanners, and antennas) and the
information captured, each playing a crucial role in enhancing supply chain efficiency.

RFID Technology:

● RFID tags come in two types:

○ Active tags: Have their own power source and continuously broadcast data.
○ Passive tags: Require energy from a scanner to activate and transmit data.
● Scanners operate on specified radio frequencies and power levels, with standards that are
still evolving as technology advances.
● Passive tags are widely used because they are cheaper and simpler, with large companies
(e.g., Wal-Mart) mandating their use on pallets and cases, moving towards tagging
individual items as costs decrease.

RFID Information:

● RFID data includes product information and tracking details, tracing product movement
in the supply chain.
● A universal standard (GS1) is set to allow global consistency in reading and sharing
RFID data, simplifying international supply chain operations.

RFID Benefits and Challenges:

● Benefits:
○ Reduces costs of capturing data on product movement and increases data
accuracy.
○ Enables detailed tracking from containers to individual items, improving visibility
and efficiency in supply chains.
○ Facilitates easier data sharing across supply chain partners, enhancing
collaboration.
● Challenges:
○ RFID technology is still evolving and can be difficult to implement, often
requiring adjustments for high data-read accuracy.
○ Passive tags may face obstacles (e.g., metal, liquids) that lower read rates,
necessitating time and trial for optimal setup and data-read efficiency.
2. Business Process Management (BPM)

BPM is a strategy for continuous improvement in business operations. It involves mapping

key processes, defining steps, and using BPM software to automate tasks and monitor data flow.
This software improves process visibility, enabling quicker responses to issues, and provides data
that can be used to redesign processes as needed.

3. Business Intelligence (BI)

BI systems help companies stay informed by collecting and analyzing data from sources
like sensors, transaction systems, and ERP systems. This data is stored in a database and analyzed
using BI tools, from simple spreadsheets to advanced models, depending on the users' needs. BI
supports decision-making by offering insights into internal operations and market trends.

4. Simulation Modeling

Simulation modeling software enables companies to test decisions like factory layouts or
distribution routes by creating models and applying various scenarios. It reduces risk by
highlighting potential issues before actual implementation. By using data from BI systems,
companies can simulate and test new business models, allowing them to make confident, informed
decisions.

THE IMPACT ON SUPPLY CHAIN OPERATIONS

Combining BPM, BI, RFID, and simulation modeling can optimize supply chains. RFID
tracks items in real-time, while BPM software visualizes supply chain flow, identifying
bottlenecks. BI analyzes issues, and simulation models test process changes. Together, these
technologies enable efficient, responsive supply chains, fostering competitive advantages in the
market.

CLOUD COMPUTING

Since the early 2000s, rapid advancements in various information technologies, including
the Internet, Web browsers, server virtualization, parallel computing, and open-source software,
have collectively enabled the delivery of on-demand computing resources. This convergence of
technologies is known as cloud computing.

Cloud computing represents both a model for business-computing service delivery and a
methodology for managing and operating computing infrastructure. Various definitions exist, but
all highlight three fundamental characteristics:

● Practically Unlimited Resources: Computing power, storage, and user access are
scalable and readily available.
● No Long-Term Commitments: Resources are available immediately and can be retired
as needed.
● Pay-as-You-Go Cost Structure: Costs vary based on usage, providing flexibility for
businesses.

ASSESSING TECHNOLOGY NEED FOR SUPPLY CHAIN INTEGRATION

The key to effective supply chain management is the integration of technologies that
enhance service delivery and cost-efficiency. The ultimate goal of technology within a supply
chain is to improve customer service and reduce costs, with successful supply chain management
often achieved by using simpler technologies effectively rather than complex, costly systems that
may introduce inefficiencies.

E-BUSINESS AND SUPPLY CHAIN INTEGRATION

The widespread use of the Internet has created new opportunities for supply chain
integration, making it possible for companies to connect, share data, and collaborate despite
differences in internal software or systems. This evolution of e-business and supply chain
integration is defined through four key dimensions:

● Information Integration: Sharing of key data, such as sales forecasts and inventory
status, across companies to facilitate real-time decision-making.
● Planning Synchronization: Joint forecasting and inventory scheduling to streamline
supply chain operations.
● Work-Flow Coordination: Automation and optimization of business processes across
companies, including purchasing and product design.
● New Business Models: Redefining roles within the supply chain to focus on core
competencies and enable new efficiencies.

APPLICATION OF SIMULATION MODELING IN SUPPLY CHAIN

MANAGEMENT
To address the complexity of modern supply chain decisions, companies use simulation
modeling to support strategic, tactical, and operational planning:

● Strategic Planning (1-5 Years): Using simulation tools to optimize supply chain
networks, determining where to build or locate inventory and how best to respond to
changes, such as adding new products or reducing inventory.
● Tactical Planning (1 Month - 1 Year): Simulators help quantify demand and process
uncertainty, allowing companies to develop flexible response plans.

● Operational Planning (1 Day - 1 Month): Real-time adjustments based on simulations

of daily variations in workflows, helping companies manage demand fluctuations and
improve service levels.

Simulation modeling aids in warehouse operations and helps identify bottlenecks, manage safety
stock, and improve layout efficiencies. For example, three-dimensional simulations can be used
to assess new picking or replenishment strategies within a warehouse environment.