Logistics & Supply Chain

Management

Unit 5
Course Code: NHS 007
Session: 2024-25
Offered to: B. Tech 3rd year
Semester: Odd (Vth)

Course Instructor:
Ms. Sonal Mehrotra
Humanities Department,
SoHSS,
HBTU, Kanpur.
*This course is part of Minor in Business Analytics Program, offered by School of Humanities and Social Sciences.
Unit V: Supply Chain and IT B.Tech 3rd: 2024-25, Odd Sem

Unit-V: Supply chain and IT

Syllabus
Use of Information technology in Supply chain, Supply Chain IT framework, Impact of E-
business on SC. 3PLs and 4PLs; Amul-IT Supply chain case Study. Mc Donald-SC4pl )

I. Use of Information technology in Supply chain

Information is a key supply chain driver. It is said to be the glue that holds supply chains
together. It provides the foundation on which supply chain processes execute transactions and
managers make decisions. Without information, a manager cannot know what customers
want, how much inventory is in stock, and when more products should be produced or
shipped. This is where the role of IT comes into the picture. A supply chain manager gathers
and analyzes information through use of IT.
Information technology (IT) is defined as the application of computers, telecom equipment,
and the Internet to store, process, manipulate, retrieve, and transmit data and information.
IT serves as the eyes and ears (and sometimes a portion of the brain) of management in a
supply chain, capturing and analyzing the information necessary to make a good decision.
Information technology enables the development of efficient information systems, capable of
generating speedy and accurate information. An information system is basically a computer
or a server designed to collect, store, and process data and generate meaningful
information. The role of IT along with information systems is significant.
For instance, Walmart is one of the largest retailers in the world having a very effective supply
chain. One of the main reasons for the success of the supply chain network of Walmart is use
of IT and its highly efficient information sharing system. The suppliers and the warehouses of
Walmart almost always have the real-time information about the stock levels in stores. In
addition, when stock levels go beyond a particular level, stock replenishment orders are
automatically made by a centralized information system. Thus, IT plays a crucial role in
sharing of accurate and timely information regarding stock levels, resulting in efficient supply
chain and consequently contributing in the success of the organization.

 To make our supply chain more competitive, IT is used to ensure proper information flows,
cheaper supply chain costs, lower inventory levels, and greater service levels. It helps reduce
mistakes and better coordinate supplier, producer, distributor, retailer and consumer.

Course Instructor: Ms. Sonal Mehrotra 2

Unit V: Supply Chain and IT B.Tech 3rd: 2024-25, Odd Sem

Role of IT in Supply Chain

The role of IT in Supply Chain Management is given below.
1. Integrated Supply Chain
An integrated supply chain is a framework where all functions—procurement, manufacturing,
distribution, and retail—are closely synchronized to enhance efficiency and responsiveness.
The integration is achieved through:

 Centralized Data Platforms: IT systems consolidate data from various sources within the
supply chain, providing a single source of information that enhances decision-making
and reduces inconsistencies.
 Automated Workflow Coordination: Automation technologies streamline processes
across different supply chain segments, ensuring that operations are well coordinated
across all levels of the supply chain.
 Advanced Planning Systems: Sophisticated planning tools integrate data to optimize
production schedules, inventory levels, and delivery routes in real time.
 Cross-Functional Visibility: Information makes the entire supply chain visible to supply
chain managers. IT offers visibility from supplier performance to customer demand.
These help managers to make better decisions regarding resource allocation and
responsiveness to market changes.
 IoT and Smart Technologies: The use of IoT devices and smart technologies in the
supply chain collects and analyzes data in real time, enabling dynamic adjustments.

2. Increased Productivity

Productivity is a measure of how effectively resources are utilized to meet customer

demands and maintain smooth operations. Higher productivity leads to increased operational
efficiency, reduced costs, and improved customer satisfaction. IT plays a vital role in enhancing
productivity by below methods.

 Process Automation: Automated systems handle repetitive tasks such as order

processing, inventory updates, and billing, freeing up human resources for more
strategic activities and reducing the likelihood of errors.
 Enhanced Data Flow: IT tools ensure that data flows seamlessly between different
stages of the supply chain, reducing delays and improving the speed of operations.
 Resource Optimization: Advanced analytics and simulation tools help in optimal
resource allocation, ensuring each part of the supply chain operates at peak efficiency.
 Performance Monitoring: IT systems continuously monitor the performance of various
supply chain components, allowing managers to identify inefficiencies and implement
corrective measures promptly.

Course Instructor: Ms. Sonal Mehrotra 3

Unit V: Supply Chain and IT B.Tech 3rd: 2024-25, Odd Sem

 Collaborative Tools: Enhanced communication tools enable better coordination across

departments, leading to faster resolution of issues and more streamlined operations.

3. Cost Reduction

Cost reduction is a fundamental objective in supply chain management, aiming to decrease

expenses without compromising on quality or customer satisfaction. IT helps achieve cost
savings by enabling more precise planning, reducing waste, and automating routine tasks.

 Automated Procurement Systems: These systems streamline the procurement process,

by ensuring that materials are bought at the best prices and terms.
 Efficient Inventory Management: IT tools help maintain optimal inventory levels,
minimizing costs related to overstocking and understocking, and reducing the need for
expensive emergency orders.
 Transportation Management Systems : Advanced software optimizes delivery routes
and loads, cutting down on fuel consumption and vehicle maintenance costs.
 Energy Management Systems: IT can monitor and control energy usage in warehouses
and production facilities, significantly reducing utility costs.
 Supplier Integration: By integrating suppliers into the IT framework, companies can
reduce transaction costs, improve negotiation capabilities and secure better prices.

4. Product Improvement

Product improvement in supply chain management focuses on enhancing the quality,

features, and appeal of products to meet customer expectations and gain market share. This
involves continuous innovation. IT facilitates this process by providing market insights.

 Market Trend Analysis: IT systems analyze market data and consumer trends to
identify what features are most likely to satisfy current and future customer demands.
 Customer Feedback Systems: Integrated feedback systems collect and analyze
customer reviews and complaints, providing direct input into product development
cycles.
 Rapid Prototyping Tools: Advanced IT tools like 3D printing technology allow quick
creation of prototypes, enabling faster iteration and refinement of product designs.
 Performance Tracking: IT tools track the performance of products in various markets
offering insights that guide further improvements and innovations.
 Collaborative Product Development: IT enables collaboration between different
departments (such as R&D, marketing, and production) fostering innovation and
speeding up product development processes.

Course Instructor: Ms. Sonal Mehrotra 4

Unit V: Supply Chain and IT B.Tech 3rd: 2024-25, Odd Sem

5. Inventory Management

Inventory management ensures that goods are available when needed while minimizing
excess stock. By precisely controlling inventory levels, businesses can reduce costs and
increase responsiveness to market demand. IT provides unprecedented level of precision and
efficiency to this vital function.

 Real-Time Inventory Tracking: Advanced IT systems enable continuous monitoring of

inventory levels, providing updates as sales are made and stock is replenished. This
helps prevent stockouts and overstock situations.
 Automated Reordering Systems: By setting reorder points in an IT-driven system,
companies can automate their purchasing processes. This ensures that new orders are
placed just in time when inventory levels drop below predefined thresholds.
 Enhanced Forecasting Accuracy: Integration of point-of-sale (POS) systems with
inventory management software allows for more accurate demand forecasting based on
real-time data.
 Barcode and RFID Systems: Utilization of barcode and RFID technology in inventory
management automates the tracking of products throughout the supply chain. This not
only speeds up the process but also reduces human error.

The other role of IT in supply chain is demand forecasting, order processing and fulfillment,
logistics and transportation etc.

II. Supply Chain IT Framework

The performance of an organization is linked to performance of the supply chain, it is crucial
for the firms to focus on all macro processes. A company’s supply chain can be grouped into
macro processes:
1. Customer Relationship Management (CRM): All processes that focus on the interface
between the firm and its customers.
2. Internal supply chain management (/SCM): All processes that are internal to the firm.
3. Supplier Relationship Management (SRM): All processes that focus on the interface
between the firm and its suppliers.

The goal of the firm should be to increase overall profitability of the supply chain. “Good
supply chain management is a positive-sum game in which supply chain partners can
increase their overall level of profitability by working together.” Therefore, to increase the
supply chain profitability, firms must expand their scope beyond their enterprise and think in
terms of all three macro processes. All three macro processes should be integrated. IT and
information system must focus on these three macro processes.
Course Instructor: Ms. Sonal Mehrotra 5
Unit V: Supply Chain and IT B.Tech 3rd: 2024-25, Odd Sem

1. Customer Relationship Management: CRM consists of processes that focus on

downstream interactions between the enterprise and its customers.
The CRM macro process aims to generate customer demand and facilitate the placement and
tracking of orders. It includes processes such as:
 Marketing: Marketing processes involve decisions regarding which customers to target,
how to target customers, which products to offer, how to price products, and how to
manage the campaigns. IT helps improve these decisions.
 Sell: The sell process includes providing the sales force the information it needs to make
a sale and then execute the actual sale. IT helps to configure various orders.
 Order management: IT soft-wares help to track customer orders.
 Call/service center: Acall center software helps customers place orders, suggests
products, solves problems, and provides information on order status.

CRM enables organization to:

 Identify the types of customers.
 Design individual customer marketing
campaigns.
 Treat each customer as an individual.
 Understand customer buying behaviors

Course Instructor: Ms. Sonal Mehrotra 6

Unit V: Supply Chain and IT B.Tech 3rd: 2024-25, Odd Sem

2. Internal supply chain management (ISCM): ISCM consists of processes that focus on
internal operations within the enterprise. It includes all processes involved in planning for and
fulfilling a customer order. The ISCM macro process aims to fulfill demand generated by the
CRM process in a timely manner and at the lowest possible cost. ISCM processes include the
planning of internal production and storage capacity, preparation of demand and supply
plans, and fulfillment of actual orders.
The various processes included in ISCM are as follows.
 Strategic planning: This process focuses on the network design of the supply chain.
 Demand planning: Demand planning consists of forecasting demand, pricing and
promotions.
 Supply planning: Factory planning and inventory planning capabilities are typically
provided by supply planning software.
 Fulfillment: The fulfillment process links each order to a specific supply source and
means of transportation.
 Field service: Finally, after the product has been delivered to the customer, it eventually
must be serviced. Service processes focus on setting inventory levels for spare parts as
well as scheduling service calls.
There must be strong integration between the internal supply chain management and CRM
macro processes

3. Supplier relationship management (SRM): SRM consists of processes that focus on

upstream interactions between the enterprise and its suppliers.

Source: The SRM process manages supply sources for various goods and services. It evaluates
and selects suitable suppliers based on product, price, capability, background etc.
Negotiate: SRM Software help negotiate supply, pricing and delivery terms.
Buy: Through SRM, firm make decisions of placing orders and buying resources from suppliers.
Design Collaboration: It involves integrating suppliers into the product design process. This
leads to lower costs and improved quality.
Supply Collaboration: Real time collaboration happen between supplier and the firm to
manage demand, reduce excess inventory and shortages.
Course Instructor: Ms. Sonal Mehrotra 7
Unit V: Supply Chain and IT B.Tech 3rd: 2024-25, Odd Sem

Transaction Management Foundation (TMF): The transaction management foundation (TMF),

includes basic ERP systems (and its components, such as financials and human resources),
infrastructure software, and integration software. TMF software is necessary for the three
macro processes to function and to communicate with each other. These systems excelled at
the automation of simple transactions and processes. These systems enabled to store and
view data across the division. The real value of TMF is extracted if decision making within the
supply chain is improved.

The large ERP players are SAP, Oracle, People Soft, Workday, Net Suite, Microsoft, Baan etc.
It plays a crucial role in maintaining a competitive edge.

III. Impact of E-Business on Supply Chain

E-business is a term used to describe businesses that run on the internet, or utilize internet
technologies to improve the profitability of a business.
 The entire process of setting up a website, helping the prospective customers navigate
through the website, showing them the available products, offering discounts and
vouchers and doing everything possible to encourage the prospective clients and
converting them into customers, comes under the area of e-business.
 Enables customers to place and track orders.

 By selling products and services online, an e-business is able to reach a wider consumer
base. This function of e-business is referred to as e-commerce, and the terms are
occasionally used interchangeably.

 E-commerce receives payment through online transactions. For instance, accepting

credit card payment for products sold to consumers or making payments for shopping
online are examples of e-commerce.

 An e-business may also use the internet to acquire wholesale products or supplies for
in house production. This is sometimes referred to as e-procurement.

 It eliminates the need to have physical presence.

 E-commerce advertising techniques like social media advertising involve lower costs
than traditional marketing allowing firms to reach their target audience.

Three types of E-commerce are:

 Business -2-Customer (B2C): The relationship between business and consumers i.e. the
sale of goods and/or services to the end consumer through digital means. Some include
well-known players like Amazon, Flipkart, etc.
Course Instructor: Ms. Sonal Mehrotra 8
Unit V: Supply Chain and IT B.Tech 3rd: 2024-25, Odd Sem

 Business -2-Business (B2B): Business relationship between two companies. These

include wholesalers and producers who are dealing with retailers.
 Consumer-2-Consumer (C2C): All transaction among consumers through social media or
any other digital platform. The transactions are pursued through a platform such as
OLX, Quickr, etc.

Advantages of E-business
The advantages of e-business are described below:
Worldwide/Global presence
 This is the biggest advantage of conducting business online. A firm engaging in e-
business can have a nationwide or a worldwide presence. Example, Amazon, Wallmart

Cost effective marketing and promotions

 Advertising techniques like pay per click advertising ensure that the advertiser only pays
for the advertisements that are actually viewed.
 The cost effective online advertising strategies are used in e-business.

Developing a competitive strategy

 In order to ensure a competitive advantage, an effective strategy should be there to
maintain the advantage and earn profits.

Course Instructor: Ms. Sonal Mehrotra 9

Unit V: Supply Chain and IT B.Tech 3rd: 2024-25, Odd Sem

 It can be a cost strategy or a differentiation strategy.

 The E-business of Dell managed to capture a vast market using its differentiation
strategy.

Better customer service

 Customer services help in encouraging the customer to know more about the product or
service.
 For example, on visiting a website, the customer is greeted by a pop-up chat window.
Moreover, payments can be made online; home-delivery of products can be done. It
enables the timely delivery of goods.

Streamlined Operations
 E-Commerce enhances communication across various stages, minimizing delays in
shipments, and preventing delays in production lines.

Increased Profitability
 Effective SCM systems pinpoint operational inefficiencies, cutting costs, minimizing
errors, and reducing delays, which boosts profitability.

IV. 3PLs and 4PLs

3PLs: The third-party logistics includes any form of outsourcing of logistics activities previously
performed in-house. For example, a company with its own warehousing facilities employing
external transportation.

Traditionally, 3PLs focused on specific functions such as transportation, warehousing and

information technology. Additional services may be performed such as crating, boxing and
packaging to add value to the supply chain.

In farm-to-grocery store example as shown in the figure, a 3PL may be responsible for packing
the eggs in cartons in addition to moving the eggs from the farm to the grocery store.

4PLs: 4PL may be a general contractor who manages other 3PLs, truckers, forwarders and
custom house agents. Outsourcing a noncore activity such as logistics does not guarantee any
growth in SC surplus.
The basic advantage that a 4PL may provide comes from greater visibility and coordination
over the firm’s supply chain, which requires sophisticated IT which is both costly and needs
expertise. The 4PL provider typically offers more strategic insight. When grocery store
inventory decreases, it communicated to the farmer.
Course Instructor: Ms. Sonal Mehrotra 10
Unit V: Supply Chain and IT B.Tech 3rd: 2024-25, Odd Sem

Example: Procter & Gamble Third-Party Logistics Management Supply Chain

Procter & Gamble (P&G) is the world’s largest consumer goods manufacturers. In 1992,
Procter & Gamble entered the Chinese market and established large-scale production base. In
order to save transport costs, railway as transport and logistics service was used. Using third-
party 3PL logistics companies, P&G used rail freight in order to “quality first, customer first,
24-hour service” feature, to provide “door to door” service. For the establishment of the
logistics network across the country, 3PL was used. The aim of the whole process was to
provide value-added services to ensure the delivery of goods to the destination. The storage
and transportation trainings were given to staffs for receiving, unloading, delivery services. It
maintained strict quality management standards. P&G’s products were quickly, accurately and
timely delivered to sales outlets across the country.

Course Instructor: Ms. Sonal Mehrotra 11

Unit V: Supply Chain and IT B.Tech 3rd: 2024-25, Odd Sem

Case Study: AMUL IT Supply Chain

There are various companies that manage supply chain through use of IT. One such company
is Amul.
Amul – Taste of India
Amul is a dairy cooperative based in the Anand district of Gujarat, India. It was formed in
1946. The word amul is derived from the Sanskrit word “Amulya”, meaning invaluable. The co-
operative was initially referred to as Anand Milk Federation Union Limited and hence the
name AMUL.
Today, Amul is the leading food brand in India and has been accredited with ISO: 9001. Amul
initiated the dairy co-operative movement in India and formed an apex co-operative
organization called Gujarat co-operative Milk Marketing Federation Ltd (GCMMFL). Today
70,000 villages and 200 districts in India are part of it. It markets its products through 50 sales
offices throughout India and distribution is done through a network of 4,000 stockists who in
turn supply 500,000 retail outlets. Amul is the largest producer of milk and milk products in
the world. The group turnover for Amul in 2023-24 is Rs 80,000 crores ($10 billion), which is
an increase from Rs 72,000 crores ($9 billion) in 2022-23.
Amul Supply Chain
The Supply Chain Of Amul in dairy development is a three-tiered structure with the dairy
cooperative societies at the village level, federated under a milk union at the district level,
and a federation of member unions at the state level.

The farmers are organized into

cooperatives called Village Cooperative
Societies (VCS). These VCSs supply milk to
dairy cooperatives, called Unions, of
which Amul is one. The milk or milk
products made at these unions are
supplied to the Gujarat Cooperative Milk
Marketing Federation (GCMMF).

The GCMMF is the marketing entity for the products of all the unions under the name of
AMUL only. The Supply Chain Of Amul eliminates middlemen and directly links rural dairy
producers to urban consumers through dairy cooperatives, trucking networks, chilling plants
and processing plants.
Course Instructor: Ms. Sonal Mehrotra 12
Unit V: Supply Chain and IT B.Tech 3rd: 2024-25, Odd Sem

Amul & IT
 Amul uses E- supply chain management that helps improve efficiency and transparency.
E-SCM may be described as the integrated management approach for planning and
controlling the flow of materials from suppliers to end users using Internet technologies.
 Amul is one of the first FMCG firms in India to employ internet technologies to
implement B2C commerce. Amul has introduced IT-based solutions across all stages of
production to better manage inventory.

 In collaboration with IBM, Amul has set up an ERP base system to integrate its
upstream (suppliers) and downstream partners (distributors) to improve efficiency,
reduce wastage and balance the supply and demand.
 It’s ERP software named as Enterprise Wide Integrated Application System(EIAS)
covers a plethora of operations like market planning advertising and promotion,
distribution network planning. Each of amul offices are connected via internet and all of
them send daily reports on sales and inventory to the main system at Anand.
 Another e-initiative provides farmers access to information related to the dairy sector
(markets/technologies etc.) through net-enabled kiosks in the villages.
 Amul has also installed over 3000 Automatic milk collection system units (AMCUS) at
village societies to capture member information, milk fat content, volume collected and
amount payable to each member. Thus, AMACUS is a computerized database that has
all information about its suppliers and measures & records qualities & quantities of
milk collected.
 Each farmer is given a plastic card for identification. Computer calculates amount due
to farmer on the basis of fat content. The value of the milk is then printed out on slip,
handed over to the farmer, who collects the payment from adjacent window. Thus, with
the help of IT farmers receive their payment within minutes. Nowadays, UPI payment
is made within few seconds.
 At the distribution end stockists have been provided with basic computer skills. Amul
experts assist them in building promotional web pages. Amul has linked distributors to
the network & also incorporated web pages of top retailers on their website.
Distributors can place their order on website amulb2b.co.
 Automated supply & delivery chain practices and just in time supply chain
management is done with the technology of e-commerce. Amul Cyber stores have been
setup in India, USA, Singapore and Dubai with the help of IT.

Course Instructor: Ms. Sonal Mehrotra 13

Unit V: Supply Chain and IT B.Tech 3rd: 2024-25, Odd Sem

 Amul has also implemented a Geographical Information System (GIS) at both ends of
the supply chain (milk procurement and marketing). The GIS is used in conjuction with
the ERP.

Awards and Achievements

The CIO 100 Awards celebrates 100 organizations and the teams within them that are using IT
in innovative ways to deliver business value.
Amul won the prestigious CIO 100 award in the year 2003.
Amul won World Dairy Innovation Award in 2014 and 2018.
Amul award list is very long. Amul’s transformation from a farmer-led cooperative to a global
brand is truly inspiring. It’s all due to use of IT in its supply chain.

International Markets: Amul has long list of market where it does exports of its products. It’s
recent launch in the US(to provide fresh milk) is an inspirational step toward establishing a
strong foothold in the international dairy market. Amul formed a strategic partnership with
the Michigan Milk Producers Association (MMPA) to facilitate its US product launch. MMPA is
responsible for the collection and processing of milk, while the Gujarat Cooperative Milk
Marketing Federation (GCMMF), which operates Amul, oversees marketing and branding
initiatives. Amul’s milk products are currently available in key markets, including New York,
New Jersey, Chicago, Washington, Dallas, and throughout Texas.
*****

Course Instructor: Ms. Sonal Mehrotra 14