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relks ek T;ks£rxe;%

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Information System
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Supply Chain Management

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MBA – OPERATIONS & SUPPLY CHAIN MANAGEMENT

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Authored By:
Sanjive Saxena
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Associate Professor
Jagan Institute of Management Studies
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Ghaziabad
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Pondicherry University
Directorate of Distance Education
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© Copyright 2014 Publisher

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ISBN: 978-93-5119-705-8

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This book may not be duplicated in any way without the written
consent of the publisher and Pondicherry University except in the form
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of brief excerpts or quotations for the purpose of review. The
information contained herein is for the personal use of the DDE
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students, Pondicherry University and may not be incorporated in any

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commercial programs, other books, databases, or any kind of

software without written consent of the publisher. Making copies of this
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book or any portion, for any purpose other than your own is a violation
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of copyright laws. The author and publisher have used their best
efforts in preparing this book and believe that the content is reliable
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and correct to the best of their knowledge. The publisher makes no

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representation or warranties with respect to the accuracy or

completeness of the contents of this book.
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Introduction

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Supply chain is an integral part of any organisation. The entire sequence of activities involved in the procurement, production

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and distribution of a commodity forms a supply chain. It ensures the movement of a product from its raw stage, through
value addition, to the final customer. The thumb rule of an effective supply chain is to ensure that ‘the right product reaches
the right customer, in the right condition, at the right time and at the right price’.

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Managing supply chain processes is important to reduce costs in businesses. In the 1980s, when all avenues of cost cutting

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were exhausted, major businesses all over the world thought of improving the supply chain as a means of reducing business
costs. Thus, supply chain management (SCM) came into existence. SCM is a specialised process implemented in organisations

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to ensure an efficient and cost-effective supply chain. SCM improves efficiency ensuring the supply of raw components in

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order to make the required product or service, and deliver it to the customers.

An efficient supply chain requires proper coordination among its various channels that require dynamic information flow

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amongst them. Introduction of Information Technology (IT) in supply chain caters to this requirement of information flow
within and across the system.
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A number of technological changes have been implemented over time to improve the efficiency of a supply chain, such as
implementation of Radio Frequency Identification (RFID) technology, and Big Data analysis. With businesses going global,
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supply chain practices also need to evolve in order to keep pace. The evolution of supply chain is facilitated by continual
technological innovation. Future trends in technology would determine the future path of supply chain management in
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organisations. Standardisation of IT helps in maintaining consistency and smooth flow of supply chain operations in this
globalised business environment.
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Two information systems, namely Enterprise Resource Planning (ERP) and Decision Support System (DSS), play an
important role in managing resources and decision-making activities. The emergence of electronic business (e-business)
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has redefined almost all the rules and models of the business world, revolutionising the concept of traditional business
altogether. Digital technology is also transforming the role of SCM in the business world. The ability and inclination
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of an organisation to embrace this new technology will play a key role in increasing its productivity in the ever-changing
technological era.
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The book Information System in Supply Chain Management throws light on various aspects of the supply chain and the role
that IT plays in its management. The book helps students understand the role and requirement of information in supply
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chain management. It also explains the role of IT in an effective supply chain. The book deliberates on the future of IT in
supply chain management with its challenges and changing landscape. It delves into various processes of supply chain from
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the IT perspective. It also reviews the correlation of business processes and IT. The book explains the goals of supply chain
information technology and its practices. In addition, the students are also acquainted with the impact of technologies like
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ERP and DSS on the working of the supply chain. Towards the end, the book discusses various modules of the supply chain
information system and new trends in the supply chain, such as e-business, e-procurement, and e-auction.
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 Syllabus

Syllabus

MBA (Operations & Supply Chain Management) – III Semester

PAPERE - XV

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INFORMATION SYSTEM IN SUPPLY CHAIN MANAGEMENT
Paper Code: MBSC3005

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Objectives

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‹‹ To appreciate the role of IT in supply chain
‹‹ To understand data mining in supply chain

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‹‹ To analyze IT practices in supply chain

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UNIT I

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The role of IT in Supply Chain .Uses of IT in inventories, Transportation & facilities within a Supply Chain .The Supply
Chain IT frame work-macro Processes

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UNIT II
The future of IT in the Supply Chain, Internal Supply Chain management, Supply Relationship Management, The
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Transaction Management Foundation .Data mining –Methods application area in Supply Chain

UNIT III
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Goals of Supply Chain information Technology, Standardization, information Technology infrastructure Presentation
Devises, Communication Devices .Data base, System architecture.
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UNIT IV
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The Supply Chain IT in Practice, Integrating Supply Chain Information Technology, Stage of Development, Implementation
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of ERP & DSS. Structure of DSS. Selection of Supply Chain DSS. Supply Chain master Planning.

UNIT V
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Supply Chain Information System Design – Planning, Capacity, Performance requirement’ manufacturing requirement,
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Operation, Transportation, Inventory Development .E-Business –Role in Supply chain, Framework, Impact on Cost.

REFERENCES
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David Simchi-Levi et al, DESIGNING AND MANAGING THE SUPPLY CHAIN – CONCEPTS, STRATEGIES,
AND CASE STUDIES, McGraw Hill International Edition 2003.
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N. Chandrasekaran, SUPPLY CHAIN MANAGEMENT, Oxford University Press, New Delhi 2010
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Donald J Bowersox et al, SUPPLY CHAIN LOGISTICS MANAGEMENT, McGrawe hIll Education (India) Pvt. Ltd.
New Delhi 2007
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DDE, Pondicherry University, Pondicherry v

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Table of Contents

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Unit I: Information and Supply Chain Management

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1. Introduction to Supply Chain Management..........................................................................................................1
1.1 Introduction...................................................................................................................................................................................... 2

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1.2 Meaning of Supply Chain Management................................................................................................................................... 2

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1.2.1 Creating value......................................................................................................................................................................6
1.2.2 Encouraging suppliers to innovate.................................................................................................................................6

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1.2.3 Leveraging value chain partners.....................................................................................................................................6
1.2.4 Value Measurement............................................................................................................................................................8

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1.3 Evolution of Supply Chain Management.................................................................................................................................. 9
1.4. Key Issues in Supply Chain Management...............................................................................................................................11

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15. Summary.........................................................................................................................................................................................13
1.6. Glossary...........................................................................................................................................................................................14
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1.7 Terminal Questions......................................................................................................................................................................14
1.8 Answers...........................................................................................................................................................................................15
1.9. Case Study: Supply Chain Issues in Meditech Surgical.......................................................................................................15
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1.10 References and Suggested Readings.........................................................................................................................................19

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2. Value of Information in Supply Chain Management.........................................................................................21

2.1 Introduction....................................................................................................................................................................................22
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2.2 Significance of Information in Supply Chain Management...............................................................................................23

2.3 The Bullwhip Effect......................................................................................................................................................................25
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2.3.1 Quantifying the Bullwhip Effect.................................................................................................................................. 27

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2.3.2 Effect of Centralised Information on Bullwhip Effect........................................................................................... 27

2.3.3 Dealing with the Bullwhip Effect................................................................................................................................ 28
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2.4 Information Sharing and Incentives.........................................................................................................................................28

2.5 Coordination of Systems through Information.....................................................................................................................29
2.6 Trade-off between Information and Supply Chain...............................................................................................................30
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2.7 Diminishing Marginal Value of Information.........................................................................................................................31

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2.8 Summary.........................................................................................................................................................................................32
2.9 Glossary...........................................................................................................................................................................................32
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2.10 Terminal Questions......................................................................................................................................................................33

2.11 Answers...........................................................................................................................................................................................33
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2.12 Case Study: Stock Information Management at JZ International.....................................................................................34

2.13 References and Suggested Readings.........................................................................................................................................35
Information System in Supply Chain Management

3. Role of IT in Supply Chain Management..............................................................................................................37

3.1 Introduction....................................................................................................................................................................................38
3.2 Information Systems ...................................................................................................................................................................38
3.3 Role of IT in Supply Chain........................................................................................................................................................40
3.4 Applications of IT in Inventory and Supply Chain Management ...................................................................................41
3.4.1 RFID technology ........................................................................................................................................................... 42

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3.4.2 Bar code scanning ........................................................................................................................................................... 42
3.4.3 Smart card......................................................................................................................................................................... 43

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3.4.4 Global positioning system ............................................................................................................................................ 44
3.4.5 Mobile positioning system ........................................................................................................................................... 44

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3.5 Transportation and Facilities within a Supply Chain...........................................................................................................44
3.6 Macro Processes in the Supply Chain IT Framework ........................................................................................................46

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3.6.1 Customer Relationship Management (CRM)........................................................................................................... 47
3.6.2 Supplier Relationship Management (SRM)............................................................................................................... 47

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3.6.3 Basic Enterprise Resource Planning (ERP) ............................................................................................................. 47

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3.7 Summary.........................................................................................................................................................................................48
3.8 Glossary...........................................................................................................................................................................................48
3.9 Terminal Questions......................................................................................................................................................................49

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3.10 Answers...........................................................................................................................................................................................49
3.11 Case Study: Role of IT in Amul...............................................................................................................................................50
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3.12 References and Suggested Readings.........................................................................................................................................51

Unit II: IT in Supply Chain Management

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4. IT and Supply Chain Management........................................................................................................................53

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4.1 Introduction....................................................................................................................................................................................54
4.2 Internal Supply Chain Management........................................................................................................................................54
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4.3 Supply Relationship Management.............................................................................................................................................55

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4..4 Transaction Management...........................................................................................................................................................59

4.5 Applications of Data Mining in a Supply Chain...................................................................................................................60
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4.6 Summary.........................................................................................................................................................................................62
4.7 Glossary...........................................................................................................................................................................................63
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4.8 Terminal Questions......................................................................................................................................................................63

4.9 Answers...........................................................................................................................................................................................63
4.10 Case Study: Using Data Mining to Predict Demands at DCX..........................................................................................64
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4.11 References and Suggested Readings.........................................................................................................................................66

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5. Future of IT in Supply Chain Management..........................................................................................................67

5.1 Introduction....................................................................................................................................................................................68
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5.2 Recent Developments in IT .......................................................................................................................................................68

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5.2.1 Cloud Computing............................................................................................................................................................ 69

5.2.2 Mobile Applications........................................................................................................................................................ 70
5.2.3 Analytics............................................................................................................................................................................ 71
5.3 Changing Supply Chain Landscape..........................................................................................................................................74
5.4 Challenges in Supply Chain Management..............................................................................................................................77

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5.5 Supply Chain: A Future Perspective ........................................................................................................................................78

5.6 Summary.........................................................................................................................................................................................81
5.7 Glossary...........................................................................................................................................................................................81
5.8 Terminal Questions......................................................................................................................................................................81
5.9 Answers...........................................................................................................................................................................................82
5.10 Case Study: Analytics in Supply Chain of a Contact Lense Manufacturer ....................................................................83

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5.11 References and Suggested Readings.........................................................................................................................................85

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Unit III: Objectives of Information Technology in Different Business Processes
6. Information Technology and Business Processes..............................................................................................87

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6.1 Introduction....................................................................................................................................................................................88
6.2 Business Processes .......................................................................................................................................................................88

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6.3 IT in Different Business Processes...........................................................................................................................................91

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6.3.1 Financial Management................................................................................................................................................... 92
6.3.2 Marketing.......................................................................................................................................................................... 92

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6.3.3 Production......................................................................................................................................................................... 93
6.3.4 Human Resources............................................................................................................................................................ 93
6.4 Management Information System ...........................................................................................................................................94

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6.5 Summary.........................................................................................................................................................................................97
6.6 Glossary...........................................................................................................................................................................................97
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6.7 Terminal Questions......................................................................................................................................................................97
6.8 Answers...........................................................................................................................................................................................97
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6.9 Case Study: Implementation of MIS at Massachusetts General Hospital......................................................................98

6.10 E-References and Suggested Readings ...................................................................................................................................99
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7 Goals of Supply Chain Information Technology............................................................................................... 101

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7.1 Introduction..................................................................................................................................................................................102
7.2 Objectives of Supply Chain Information Technology.......................................................................................................102
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7.3 Standardisation of Information Technology........................................................................................................................105

7.4 Infrastructure of Information Technology..........................................................................................................................106
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7.5 Terminal Questions....................................................................................................................................................................110

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7.6 Summary ......................................................................................................................................................................................110

7.7 Glossary.........................................................................................................................................................................................110
7.8 Answers.........................................................................................................................................................................................111
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7.9 Case Study: Supply Chain Infrastructure in Walmart ......................................................................................................111

7.10 References and Suggested Readings.......................................................................................................................................114
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Unit IV: Information Technology in Practice in Supply Chain

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8. Implementing Information Technology in a Supply Chain............................................................................. 115

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8.1 Introduction..................................................................................................................................................................................116
8.2 Integrated Supply Chain Information Technology............................................................................................................116
8.2.1 Inventory Flow..............................................................................................................................................................118
8.2.2 Information Flow...........................................................................................................................................................120
8.3 Warehousing Management System .......................................................................................................................................121

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Information System in Supply Chain Management

8.4 Summary.......................................................................................................................................................................................126
8.5 Glossary.........................................................................................................................................................................................126
8.6 Terminal Questions....................................................................................................................................................................127
8.7 Answers.........................................................................................................................................................................................127
8.8 Case Study: Supply Chain Integration ..................................................................................................................................127
8.9 References and Suggested Readings.......................................................................................................................................128

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9. ERP and DSS in Supply Chain.............................................................................................................................. 129

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9.1 Introduction..................................................................................................................................................................................130
9.2 Role of ERP in a Supply Chain...............................................................................................................................................130
9.2.1 ERP Framework............................................................................................................................................................131

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9.2.2 Integration of ERP in a Supply Chain.....................................................................................................................133

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9.3 Role of DSS in a Supply Chain................................................................................................................................................134
9.3.1 Structure of a DSS........................................................................................................................................................135

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9.3.2 Intelligent DSS for Supply Chain Management.....................................................................................................136
9.4 Supply Chain Master Planning ...............................................................................................................................................137

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9.5 Summary ......................................................................................................................................................................................138
9.6 Glossary.........................................................................................................................................................................................139

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9.7 Terminal Questions....................................................................................................................................................................139
9.8 Answers.........................................................................................................................................................................................139
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9.9 Case Study: ERP Implementation in Newman Technology.............................................................................................140
9.10 References and Suggested Readings.......................................................................................................................................142
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Unit V: E-Business and Designing Supply Chain IT

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10.1 Introduction..................................................................................................................................................................................144
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10.2 Supply Chain Information System .........................................................................................................................................144

10.3 Modules in a Supply Chain Information System.................................................................................................................145
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10.3.1 Planning...........................................................................................................................................................................146
10.3.2 Capacity............................................................................................................................................................................146
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10.3.3 Quality Management....................................................................................................................................................146

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10.3.4 Manufacturing ...............................................................................................................................................................147

10.3.5 Operations.......................................................................................................................................................................148
10.3.6 Transportation...............................................................................................................................................................149
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10.3.7 Inventory Management...............................................................................................................................................149

10.4 Summary ......................................................................................................................................................................................150
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10.5 Glossary.........................................................................................................................................................................................150
10.6 Terminal Questions....................................................................................................................................................................151
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10.7 Answers.........................................................................................................................................................................................151
10.8 Case Study: Supply Chain Integration with Existing System in SABMilller..............................................................151
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10.9 References and Suggested Readings.......................................................................................................................................153

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11. E-Business and Supply Chain.............................................................................................................................. 155

11.1 Introduction..................................................................................................................................................................................156
11.2 Electronic Business.....................................................................................................................................................................156
11.2.1 Role of E-Business in Supply Chain.........................................................................................................................159
11.2.2 E-Business Framework................................................................................................................................................160
11.2.3 Impact of E-Business on Cost ...................................................................................................................................161

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11.3 Electronic Supply Chain............................................................................................................................................................162
11.4 Electronic Procurement.............................................................................................................................................................163

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11.5 Electronic Auctions....................................................................................................................................................................166
11.6 Summary.......................................................................................................................................................................................168

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11.7 Glossary.........................................................................................................................................................................................168
11.8 Terminal Questions....................................................................................................................................................................168

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11.9 Answers.........................................................................................................................................................................................168
11.10 Case Study: Dell.com’s Managing the Electronic Supply Chain Effectively................................................................169

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11.11 References and Suggested Readings.......................................................................................................................................171

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DDE, Pondicherry University, Pondicherry xi

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chapter

1 Introduction to Supply

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Chain Management

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Structure

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1.1 Introduction

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Learning Objectives U
1.2 Meaning of Supply Chain Management

1.3 Evolution of Supply Chain Management

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1.4 Key Issues in Supply Chain Management

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1.5 Summary

1.6 Glossary
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1.7 Key Terms

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1.8 Answers
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1.9 Case Study: Supply Chain Issues in Meditech Surgical

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1.10 References and Suggested Readings

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Information System in Supply Chain Management

Notes Learning Objectives

After completing the chapter, you will be able to:
 describe the meaning of supply chain management
 explain the functions of supply chain management
 discuss the evolution of supply chain management

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 explain the key issues in supply chain management

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1.1 Introduction
National Semiconductor is a prominent producer of analogue electronics used in computers,

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mobile phones, fax machines, and automobiles. The Intel Corporation and Motorola Inc. are

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two of its rivals. The firm now operates four wafer fabrication plants, three of which are
located in the US and one in the UK. Singapore, China, and Malaysia are home to the company’s

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testing and assembly facilities. The final goods are sent to hundreds of manufacturing sites
worldwide, including Apple, Siemens, Hewlett-Packard, Ford, Delphi, IBM, and Canon.

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A short lead time and the capacity to produce by the agreed upon date are essential to a
company’s success in the highly competitive semiconductor sector. By 1994, orders placed
with the firm were filled by 95% of its customers in 45 days or less, and those placed by the

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5% remaining clients in 90 days. Due to the short lead time, the organisation had to work with
12 separate airlines that operated on over 20,000 distinct itineraries.
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You can see that it is a very challenging job for companies to deliver the right products at
the right time. It involves efficient integration of the suppliers, manufacturers, distributers,
warehouses and the stores. In addition, companies need to ensure that the merchandises are
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manufactured and distributed at the right cost, at the right time and to the right customers.
Supply chain management involves a number of approaches that are utilized to efficiently
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integrate the suppliers, manufacturers, distributers, warehouses and stores to produce and
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distribute merchandises at the right cost and to the right locations.

The practice of managing supply chain processes started from the need of cutting costs. In
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the 1980s, when major corporations of the world exhausted almost all the ways of cutting
costs, they came up with the idea of making the supply chain more efficient to reduce costs.
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At first, only simple ways were employed to reduce costs during transportation and supply
of products. However, with the increasing complexity of different operations involved in
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the production processes, supply chain practices also evolved overtime and became highly
sophisticated and efficient. Supply chain is a very complex function with several key issues
involved. For example, developing an effective distribution strategy or involving suppliers
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in the planning and designing phases are some of the important challenges in supply chain
management.
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This chapter introduces the concept of supply chain and its evolution. The chapter also
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discusses the important functions of a supply chain process. You will also learn about supply
chain management and its role and importance in modern business environment. Towards the
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end, the chapter discusses some of the key issues in supply chain management.

1.2 Meaning of Supply Chain Management

The term ‘supply chain’ describes the whole series of actions and procedures that go into
producing and distributing a product. To put it another way, the series of actions and

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CHAPTER 1  Introduction to Supply Chain Management

Notes procedures that guarantees a product’s journey from its raw state via value addition to the
end user. This process is known as a supply chain. Organisations rely heavily on their supply
chains to make sure the right product gets to the right consumer at the right time in the right
condition at the right price. Figure 1.1 illustrates how a supply chain works.

Warehouse and
Suppliers Manufactures distribution centers Customers

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Manufacturing costs
Transportation costs

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Material Costs U Transportation
costs Inventory costs
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Fig. 1.1: Supply Chain

From Fig. 1.1, you can see that the management of a supply chain involves the integration of
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almost all the stakeholders and business processes.

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The network of storage and transportation procedures is crucial to the supply chain because
it makes sure that products are moved from the point of origin to the point of consumption.
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In their Excellent Management Introduction to E-commerce, Kalakota and Robinson (1999)

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used the following phases to characterise the supply chain:

‹‹ A farmer in Australia sells their harvest of eucalyptus leaves to a processing firm,
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which then separates the oil from the leaves.

‹‹ After that, a distributor in New Jersey purchases the oil.
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‹‹ In order to make the alcohol that is added to the mouthwash’s basic components, natural
gas is being drilled in the Saudi Arabian desert concurrently with the extraction of
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eucalyptus oil.
‹‹ Union Carbide transports the alcohol to Texas City, Texas, the home base of Warner
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Lambert, the mouthwash manufacturer.

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‹‹ Corn is grown by farmers in the midwest of the United States and used to make
Sorbitol, a mouthwash that sweetens and thickens. After being picked, this is sent to
the Texas plant.
‹‹ The mouthwash is made once the components are combined.
‹‹ The last bottles of mouthwash are sent to wholesalers or pharmacist warehouses,
where they are then dispersed to different retail locations.

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Information System in Supply Chain Management

Notes Exhibit

Collaborative Supply Chain in Dell

In 1995, Dell Computers developed “Dell Direct Model” after realising the benefits of
collaborative supply chain. Collaborative supply chain refers to the supply chain in which

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different parties work in close coordination to meet customers’ demands in a profitable
manner.

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This model included a rapid and cheaper distribution system with direct customer
relationships and build-to-order manufacturing. By implementing this model, Dell was able

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to save significant cost and time after implementing collaborative supplier relationships.
In addition, it got competitive edge over other major players in the market for several

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years.

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Dell first trimmed down the number of its suppliers from 204 to 47. The suppliers

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were advised to have their warehouses at a distance of 15 minutes from the Dell factory.
This was done to implement Just-In-Time (JIT) system for managing inventory. The
JIT system reduced the inventory costs of the organisation and led to a 6% profit

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advantage in components. This enabled the organisation to reduce the delivery time of
products to end customers from 30 to 13 days. In addition, the JIT system led to easy
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customisation of Dell products, reduced wastage of inventory and increased production
flexibility.
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Moreover, the collaborative supply chain enabled Dell to manage its product orders
effectively by sharing information, costs, risks and joint decision-making.  As a result,
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the inventory turnover of the organisation reduced by 57%, and the production space
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increased because of the decreased inventory storage area. Consequently, Dell registered
more than 50% growth rate for three consecutive years, and its annual sales reached $12
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billion by 1997.
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Customers gain from an effective supply chain since it lowers the likelihood of stock-outs and
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offers the variety of goods when needed. Higher sales, a greater turnover of inventory, and
less markdowns for merchants follow from this.
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Note
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Logistics and SCM

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The portion of the supply chain process known as logistics organises, carries out, and
manages the movement and storage of products, services, and associated data from the
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point of origin to the site of consumption in order to satisfy client demands. While logistics
is one of the activities included in supply chain management (SCM), its operational and
strategic horizons are much broader. New product development, vendor interactions, and
inventory management are a few other SCM procedures.

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Notes Fig. 1.2 shows a graphical representation of a supply chain flow:

Supplier Warehouse Processor

Wholesaler Distributor Warehouse

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Retailer’s Wharehouse Retailer

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End Customer

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Material flow
Information flow

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Fig. 1.2: Graphical Representation of a Supply Chain Flow

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A supply chain serves a variety of purposes and makes a significant contribution to retail

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operations. Among its duties are the following:
‹‹ Inbound transport management: The necessary stock-carrying trucks must show
up at the designated location and time. This is due to the receiving center’s practise

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of distributing docks to various suppliers during the day to prevent arriving delivery
trucks and goods from congregating in one area.
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‹‹ Receiving and inspection: The delivered stock is recorded and verified against
quantity and quality specifications. This is to ensure that the right product is received
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in the right quantity and meets the specified quality standards. This is called incoming
quality inspection.
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‹‹ Storage: The merchandise is unloaded and stored in the warehouse according to the
inventory management principles, such as First In First out (FIFO), Last In First Out
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(LIFO) and Fire Expiry First Out (FEFO) methods.

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‹‹ Making the merchandise ready for sale: This process involves putting tags on
products, placing them on hangers or shelves, and recording the receipt of the products
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before they are dispatched for sale.

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Note
One of the first businesses to recognise the connection between supply chain and
development was Hewlett Packard (HP). An example of this may be seen in the launch
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of the inkjet printer, where choices on product design were made based on supply chain
costs throughout the course of the product life cycle in addition to labour and material
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costs. The business has recently made a number of choices about which design tasks to
outsource and what kind of organisational structure is needed to oversee the outsourced
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design process while taking supply chain and development procedures into account.
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Now, let’s look at some of the important functions of supply chain.

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Information System in Supply Chain Management

Notes 1.2.1 Creating value

The procurement process, an important part of supply chain, now extends beyond its
traditional role. Instead of continuously negotiating for reduced prices, procurement is seen
as a means to create value from suppliers. This value can be measured as a benefit for an
organisation. The market leaders lead the competitors by generating savings and improving

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the bottom line. A majority of leaders now recognise procurement as an important factor that
can affect value creation and profitability in a business. Customer demands for new products

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and features as well as increased competition have placed innovation at the top of the must-do
list.

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1.2.2 Encouraging suppliers to innovate

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One of BMW’s leading suppliers suggested that a particularly distinctive element for the

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headlights would be the addition of light rings enabled via optic fibre. When driving on
the highway, other drivers may easily identify a BMW automobile thanks to its distinctive

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headlights. It stands out from the other automobiles because to its headlight. BMW and its
supplier worked together to create the concept for this headlamp. BMW was able to acquire
new technology and raise its profile as a consequence of this partnership. Such opportunities

N
do not come along by happenstance. Early supplier involvement in the creation of new
products or services is a strategy used by leaders to promote innovation. The phases at which
U
the supplier participates in the product development process are shown in Fig. 1.3:

Initial Prototype Launch

Development Specialisation
Y
Concept Stage Stage
R

Fig. 1.3: Stages of Supplier Involvement in Product Development

At every phase of the process, leaders communicate with their suppliers. When choosing
R

suppliers, they usually consider a supplier’s “potential to innovate.” As part of the supplier
development process, they also monitor and assess the innovation-related contributions made
E

by suppliers. Suppliers may aid in the creation of new products as well as the enhancement of
H

procedures, responsiveness, and quality. This benefits suppliers by bringing in new business,
creating more growth prospects, and enhancing their reputation as innovators.
IC

Companies must understand, meanwhile, that including suppliers too early in the process
might jeopardise intellectual property. Genuine trailblazers create the conditions for prosperity
in both personal and legal spheres. They establish solid, trustworthy connections supported
D

by unbreakable commitments.
N

1.2.3 Leveraging value chain partners

O

Due to high maintenance expenses, there was debate at Southwest Airlines—the airline
P

that owns almost three-quarters of its fleet—about who should do these tasks. Cost was
not, however, the only factor taken into account when deciding whether to outsource. Line
maintenance and heavy maintenance are the two types of airline maintenance. While extensive
maintenance is essential to extending the life of owned assets, line maintenance is the key to
promptly resuming flights. For Southwest Airlines to stay on schedule, it was essential to
manage the turnaround time of each aircraft. Southwest improved this by bringing all line
maintenance tasks in-house, which resulted in a 20% turnaround time reduction.

6 DDE, Pondicherry University, Pondicherry

CHAPTER 1  Introduction to Supply Chain Management

Notes Most businesses still haven’t fully realised the potential of outsourcing, despite the fact that
they are becoming skilled strategic outsourcers. According to a research, the vast majority
of businesses outsource in order to save operational expenses, concentrate more on their core
competencies, or have access to suppliers’ technologies. On the other hand, fewer businesses
concentrate on outsourcing in order to increase sales or open up new markets.

Leaders put in time and effort to ensure that their relationships succeed in addition to using

Y
their partners as leverage. They are more likely to create official supplier-development
positions, employ cross-functional teams from both organisations, and define and monitor

IT
project objectives and milestones.

Leaders categorise suppliers across many organisational divisions and geographic regions,
using distinct approaches when interacting with them. Four groupings are often used to

S
categorise suppliers:

R
‹‹ Strategic suppliers

E
‹‹ Collaborative suppliers
‹‹ Transactional suppliers

IV
‹‹ Opportunistic suppliers

Leaders establish enduring partnerships with critical suppliers with the goal of enhancing their

N
respective competitiveness over time. Mid-to long-term collaborative supplier agreements are
centred on ongoing shared process improvement. However, since transactional and opportunistic
U
suppliers are worked with for shorter periods of time than the other two kinds of suppliers,
relationship development is not prioritised in these cases.
Y
Leaders may more quickly identify which suppliers have higher potential value and direct
management attention and resources in that direction by clearly segmenting their suppliers.
R

Leaders look to the best suppliers for fresh ideas on product enhancement, cost cutting, and
innovation. They examine, debate, and adjust performance targets for important suppliers on a
R

regular basis. A lot of businesses also host supplier events, including dinners for recognition, in
order to cultivate significant connections. These are only carried out in conjunction to systematic
E

reviews, not in instead of them.

H

Exhibit
Factors Affecting Supply Chain Effectiveness
IC

Factors influencing supply chain effectiveness are as follows:

‹‹ Short life cycles: Products that are perishable in nature, such as groceries or
D

seasonal products, are said to have a short life cycle.

N

‹‹ Time to market: This is the time taken by an organisation to recognise an

opportunity, convert it into a product or service, and make it available in the market.
O

If the time to market is slow, the company misses out on an opportunity to increase
sales.
P

‹‹ Time to service: This is the time taken by a retailer to service a customer’s demand.
If the customer has to wait for months for product delivery, he may lose interest
and purchase from a competitor.
‹‹ Just in time (JIT): This is an inventory strategy employed by companies to
increase efficiency and decrease waste by receiving goods only when needed in the
production process, thereby reducing the inventory. This is possible only if SCM is
efficient and reliable.

DDE, Pondicherry University, Pondicherry 7

Information System in Supply Chain Management

Notes ‹‹ Collaborative planning forecasting and replenishment (CPFR): It refers to the

concept that intends to integrate supply chain with the help of joint practices with
other stakeholders. The model seeks cooperative management of inventory with
the help of joint replenishment of products throughout the supply chain.
‹‹ Country of origin: Generally, products made in Europe are more expensive than
those made in, say Bangladesh, because of the difference in labour costs. However,

Y
the products made in Europe are supposed to have a higher quality. Thus, a luxury
retailer may prefer to source from Europe. A country like Japan has an image of

IT
producing superior consumer electronics. The prices reduce if the quantity is high.
‹‹ Foreign currency: Foreign currency fluctuations also influence the global sourcing

S
decisions. The rate of Dollar or Pound can influence the sourcing decision for
certain countries.

R
‹‹ Duty: Duty is an import tax imposed by the government. Tariffs on imports

E
have been used to protect home producers from foreign competition. Tariffs are
decreased by the North American Free Trade Agreement (NAFTA), the General

IV
Agreement on Tariffs and Trade (GATT), and foreign trade zones. The World
Trade Organization (WTO), which keeps an eye on free trade, took the position
of GATT. A free trade zone is a defined region within a nation where imports may

N
be assembled, packed, inspected, labelled, or stored without being subject to duties
from that nation.
U
‹‹ Transportation cost: The transportation cost of merchandise increases with the
distance. For example, the cost of shipment from Europe to India will be higher
Y

than that from Bangladesh to India.

R

1.2.4 Value Measurement

R

An efficient supply chain may provide businesses a competitive edge by using the skills and
E

ideas of important suppliers to create offers for consumers in the form of goods and services.
One tool for measuring performance and identifying areas for improvement is a two-way
H

performance scorecard.
IC

A balanced scorecard counts both quantitative and qualitative measures. This includes the
perceived quality of the relations among the parties. These scorecards are filled and shared
between the customer and the supplier. The joint review shows that the relationship is open
D

and collaborative and that good performance on both sides will enhance and strengthen it
further.
N

Prominent companies monitor particular cost reductions achieved at the supplier level. The
O

fact that the supply chain may influence financial performance in a variety of ways makes
assessing financial effect very difficult. Among them are:
P

‹‹ Reduced costs: A supplier may offer a favourable price to a customer, or a customer

may involve a supplier in improving the design of products.
‹‹ Increased focus on timely and efficient delivery: This provides revenue growth
opportunities, such as gaining early access to innovative products or technology and
joint forecasting to avoid stock- out situations.

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CHAPTER 1  Introduction to Supply Chain Management

Notes SCM is an important concept that includes logistics management among the members of the
supply chain. In addition to the flow of goods from one point to another, SCM also involves
supplier relationship management, logistics partner relationship management, and customer
relationship management. To execute these functions, SCM uses strategic alliance and ensures
a rigorous exchange of resources and information. The objective of SCM is to add value to the
relationships among different entities by synchronising the processes of each of the partners

Y
involved in the relationship.

SCM covers all dimensions of sourcing and procurement. It establishes the links to connect

IT
businesses. In other words, SCM is the management of networks of business functions connected
to each other to provide the product as specified by the customer. This also includes safety of the

S
product, and at times, processing it during its journey till it reaches the customer. For example,
special care needs to be taken for transporting products that are perishable in nature and prone

R
to physical damage. This is the reason online retailers, such as Flipkart and Infibeam, focus on
product packaging to prevent damages to the products during transportation.

E
SCM can include inventory management, material management and production planning in

IV
its concept. Logistics includes forecasting and demand management.

Self-Assessment Questions

N
1. ________ refers to the entire sequence of activities and processes involved in the
production and distribution of a commodity.
U
2. The management of a supply chain involves the integration of almost all the
stakeholders and business processes. (True/False)
Y

3. Logistics is a part of supply chain. (True/False)

R

4. List different types of suppliers.

R

Activity
E

With the help of the Internet, study the supply chain of Walmart.
H

1.3 Evolution of Supply Chain Management

IC

In order to reduce production costs and successfully compete in various markets, a large number
of western corporations had developed a variety of manufacturing technologies and methods
by the 1980s. At the same time, a variety of production techniques were implemented, including
D

Just-in-Time (JIT), Kanban, Lean Manufacturing, Total Quality Management, and other
services. These methods gained a lot of traction quickly, and the majority of firms invested
N

in implementing them. Nevertheless, after a few years, many businesses found that using these
methods to reduce costs would be impossible. The next logical move to cut costs, boost profit,
O

and gain market share was, of course, to establish an efficient supply chain.
P

These days, supply chains and logistics are crucial to the functioning of the whole world economy.
An overview of the nation’s whole logistics budget may be found in the “State of Logistics
Report,” which was first released in the US in 1989 and is sponsored by the Council of Supply
Chain Management Professionals. It also monitors changes in the expenses associated with
carrying inventory, transportation, and overall logistics. US logistics expenses as a proportion
of GDP are shown in Figure 1.4:

DDE, Pondicherry University, Pondicherry 9

Information System in Supply Chain Management

Notes U.S. logistics costs as percent of GDP

14

13

12

Y
11

10

IT
9

S
8
1984 1988 1992 1996 2000 2005

R
Fig. 1.4: Logistics Costs Share of the US Economy

E
(Source: Based on www.dcvelocity.com/articles/200060801/news.cfm.)

Fig. 1.5: shows total US logistics cost between 1984 and 2005:

IV
1,400

N
1,200
U
1,000
Y
800
R

600
R

400
E

200
H

0
IC

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Inventory carrying Transportion Administration Total

D

Fig. 1.5: Total US Logistics Cost between 1984 and 2005

N

Many firms were forced to outsource in the 1990s due to intense pressure to cut expenses
and boost revenues. Businesses thought about outsourcing much of their operations, from
O

manufacturing and production to purchasing. When compared to the companies’ overall

revenues, purchases of the businesses increased significantly in the mid-1990s.
P

Towards the end of 1990s, Internet and advancement of communication technologies

brought revolutionary changes in supply chain processes. E-commerce is another very
important happening of the same period. E-business strategies supposedly reduce cost,
increase efficiency, improve service level, and increase profit. However, in many cases, these
expectations were not met as many e-businesses failed. In most cases, the main reason of the
failure of e-businesses was their faulty and inefficient supply chain strategies.

10 DDE, Pondicherry University, Pondicherry

CHAPTER 1  Introduction to Supply Chain Management

Notes Self-Assessment Questions

5. Mention some production strategies that were introduced towards the beginning of
the evolution of supply chain.

6. In the 1990s, the huge pressure to reduce costs and increase profits pushed many
manufacturers towards _______.

Y
Activity

IT
Make a group of your friends and discuss the evolution of supply chain.

S
1.4 Key Issues in Supply Chain Management

R
SCM involves integrating suppliers, manufacturers, customers, warehouses and other parties

E
to ensure smooth operations of a business. Following are some of the issues arising out of
the supply chain activities of business organisations:

IV
‹‹ Configuring the distribution network: Suppose a number of manufacturers are
manufacturing certain products to be distributed. How is the firm going to configure
an optimised distribution network? How will management decide which warehouses to

N
build and how big to build them, how much each product will produce at each factory,
and how to arrange transportation between locations? This optimisation issue is really
U
intricate.
‹‹ Inventory control: Assume the role of a store responsible for keeping track of a certain
Y
product’s inventory. It is normal for client demands to shift over time. As a result, the
retailer’s sole tool for estimating future demand is previous data. In these situations, the
R

retailer’s primary goal is to ascertain when to place a fresh batch of the product order
and how much to purchase in order to keep inventory ordering and holding costs to a
R

minimum. Establishing the appropriate inventory level is another difficult optimisation

challenge.
E

‹‹ Production sourcing: In many businesses, keeping production and transportation

prices equal is essential. Transportation and manufacturing expenses are related in a
H

way that represents a trade-off. Reducing manufacturing costs often results in lowering
transportation expenses, which in turn raises production costs. Achieving cost parity
IC

between production and transportation is a critical concern.

‹‹ Supply contracts: Generally, each party in the supply chain makes choices without
D

taking into account the financial effects on the other parties since it is more concerned
with its own profits. Buyer-supplier relationships are established via supply contracts.
N

These agreements include quality, return policies, bulk discounts, and lead periods for
deliveries. The effects of revenue-sharing agreements and volume discounts on supply
O

chain performance are among the key concerns in supply contracts, as are the pricing
tactics that suppliers might use to entice customers to make larger purchases while
P

boosting their own earnings.

‹‹ Distribution strategies: One of the most crucial issues in the supply chain is how
much should the distribution channel be centralised or decentralised? How would
centralisation or decentralisation impact inventory levels and transportation costs?
How would they impact the service level? These are important questions to be answered
while developing a distribution strategy.

DDE, Pondicherry University, Pondicherry 11

Information System in Supply Chain Management

Notes ‹‹ Creating strategic alliances and integrating supply chains: A business’s ability to
develop and expand is greatly influenced by its ability to properly design and operate an
internationally optimum supply chain. Globally, major corporations like Procter & Gamble,
Dell, and Wal-Mart have been successful in creating very efficient supply chains. These
businesses also demonstrated the positive effects that an effective supply chain may have
on revenue and overall success. In this context, some crucial queries are: What are some
successful methods for integrating a supply chain? What kind of data need to be exchanged?

Y
What application does this information have? What impact does information have on the
supply chain’s layout and functionality?

IT
In this book, we will study how various companies approach to solve these issues to have a
highly effective supply chain in place.

S
Exhibit

R
Challenges in supplier management with respect to Indian infrastructure

E
Business organisations often face several challenges in managing their supply chains in
India. Some such challenges are given below:

IV
‹‹ Road, rail and air: Roadways are the most commonly used infrastructure for supply chain
in India. These should be improved with the objective to connect all interior locations

N
of towns and villages. Improved roadways would ensure better logistic connectivity
and better availability of products across geographies. Railway connectivity, though
U
extensive, needs to be improved in terms of efficiency and timeliness. In India, air
connectivity is not very extensive, connecting only major cities.
‹‹ Visibility in the supply chain partnership: Supply chain partners are not
Y

comfortable sharing visibility in their operations and suggestions from their clients.
This is caused by the traditional mindset that the customer may try to squeeze the
R

profit margin from the supply chain partner. Due to this opaqueness, there is often
a little or no discussion on the process improvement and thus both partners cannot
R

get the benefit to the degree that they could.

E

‹‹ Disparate systems across the supply chain: The events occurring in the business of the
supplier have a direct impact on the business of the retailer. This is despite the fact that
H

suppliers often maintain their independent systems. Incorporating crucial information

from suppliers into the retailer’s own data offers the perspective necessary for retailers
IC

to make optimal decisions for both customers and the business. As developments unfold
within the suppliers’ operations, retailers must assess the potential effects of disruptions
on both upstream and downstream activities within the retailer’s business processes.
D

Along the supply chain, there are different systems that each component of the supply
chain uses to monitor its operations. The retailer has a different system, the warehouse
N

has a different system, the supplier has a different system and the logistics partner has
a different system. For example, Maruti is one of the organisations that recognised the
O

need to have a common system for monitoring and tracking the supply chain. More and
more organisations are now collaborating for common systems across their supply chains.
P

‹‹ Managing service level agreements: Variability in service is a major cause of

product unavailability, thereby causing unpredictable inventory levels. Excess in
inventory increases costs and on the other hand, shortage of inventory can lead to
loss in business. The organization should have the capability to share visibility with its
suppliers through a unified system that holds them responsible for their specific service
level agreements. Centralising data control ensures that all concerned parties view

12 DDE, Pondicherry University, Pondicherry

CHAPTER 1  Introduction to Supply Chain Management

Notes one version of the data. This enhances collaboration, which in turn facilitates
identification and improvement of process-related problems.
‹‹ Decreasing product margins due to higher costs: The profit margins can be
increased significantly by managing the product flow properly. With an increasing
trend of peaks and troughs in the demands of the customer, the agility in adjusting
orders with suppliers enables retailers to carry out their operations smoothly.

Y
‹‹ Supply chain visibility: It helps businesses to adjust orders with suppliers in response

IT
to shifting needs and the upstream and downstream effects of such adjustments, as
well as to coordinate business operations. Additionally, this transparency reduces
process unpredictability in the supply chain. Additional benefits include lower total

S
inventory levels, lower freight and operating expenses in the supply chain, leaner
supply chain processes, and more operational efficiency.

R
‹‹ Governance: Usually, the procurement function is in charge of developing the

E
governance model, which involves creating a transparent governance structure for
top-tier key suppliers that has been mutually agreed upon. Senior executives at

IV
the supplier and customer levels should be included in the purview of successful
governance. It consists of a face-off model that links executives from suppliers
with those in engineering, procurement, operations, quality, and logistics. It also

N
entails reviewing meetings, coordinating operational and strategic planning, and
having clearly defined escalation mechanisms in place to guarantee that issues or
U
disagreements are resolved quickly and at the appropriate organisational level.

Self-Assessment Questions
Y

7. Mention some of the key issues faced by the management of business organisations
R

while managing their supply chain.

8. What kind of relationship is there between production costs and transportation

R

costs?
E

Activity
H

With the help of the Internet, study SCM practices in some globally leading companies
and make a note of how they solve various SCM issues.
IC

1.5 Summary
D

‹‹ The term ‘supply chain’ describes the whole set of procedures and actions involved in
N

the manufacture and delivery of a product. Stated differently, a supply chain is defined
as the series of events and procedures that guarantee the flow of a product from its
O

unprocessed state via value addition to the end user.

‹‹ Almost all parties and business processes must be integrated in order to manage a
P

supply chain.
‹‹ The portion of the supply chain process known as logistics organises, carries out, and
manages the movement and storage of products, services, and associated data from the
point of origin to the site of consumption in order to satisfy client demands.
‹‹ A supply chain serves many purposes and makes a significant contribution to retail
operations.

DDE, Pondicherry University, Pondicherry 13

Information System in Supply Chain Management

Notes ‹‹ Suppliers and leaders can forge enduring relationships with the goal of enhancing the
competitiveness of both parties. Collaborative supplier partnerships are of medium to
long-term duration and centre on the ongoing enhancement of shared processes.
‹‹ Some of the factors that affect supply chain effectiveness are short life cycles, time to
market, time to service, Just in Time (JIT), and collaborative planning, forecasting and
replenishment (CPFR).

Y
‹‹ SCM covers all the dimensions of sourcing and procurement, establishing links to
connect businesses. In other words, SCM is the management of networks of business

IT
functions connected to each other to provide the product as specified by the customer.
‹‹ Towards the end of 1990s, Internet and advancement of communication technologies
brought revolutionary changes in supply chain processes.

S
‹‹ Some major issues faced by companies in managing their supply chain are configuring

R
distribution network, inventory control, production sourcing, supply contracts,
selection of distribution strategies, integration of supply chains and development of

E
strategic partnerships.

IV
1.6 Glossary
‹‹ E-commerce: Business activities conducted with the help of communication

N
technologies, such as computer and the Internet.
‹‹ GATT: A multilateral agreement regulating international trade.
U
‹‹ Inventory: Goods in stock.
‹‹ Inventory Turnover: A ratio that shows the number of times the entire inventory of a
Y

company is sold and replaced over time.

R

‹‹ JIT: A production strategy that aims to cut wastes and reduce costs with the help of
timely inventory management.
R

‹‹ Kanban: A scheduling technique that helps in JIT. Total Quality Management: It is a

production technique that focuses on complete quality enhancement of produced goods.
E

‹‹ WTO: The apex body of regulation international trade.

H

1.7 Terminal Questions

IC

1. Define a supply chain.

2. What do you mean by supply chain management?

D

3. Mention some of the functions of a supply chain.

N

4. Describe the evolution of supply chain management.

O

5. What are the key issues faced by organizations while managing their supply chain
processes?
P

14 DDE, Pondicherry University, Pondicherry

CHAPTER 1  Introduction to Supply Chain Management

Notes
1.8 Answers
Q. Self Assessment Questions
1. Supply chain
2. True

Y
3. True
4. Strategic suppliers, collaborative suppliers, transactional suppliers, opportunistic

IT
suppliers
5. Just-in-Time (JIT), Kanban, Lean Manufacturing, Total Quality Management

S
(TQM)

R
6. Outsourcing
7. Configuring the distribution network, inventory control, production sourcing,

E
and supply contracts

IV
8. Trade-off
Q. Terminal Questions

N
1. The term “supply chain” describes the whole set of procedures and actions involved
in the manufacture and delivery of a product. Refer to section 1.2 Meaning of
U
Supply Chain Management.
2. Virtually all stakeholders and business processes must be integrated in order to
effectively manage the supply chain. Refer to section 1.2 Meaning of Supply Chain
Y

Management.
R

3. The administration of incoming transportation, receipt and inspection, storage,

and getting the goods ready for sale are a few of the supply chain’s tasks. Refer to
R

section 1.2 Meaning of Supply Chain Management.

E

4. In order to reduce production costs and successfully compete in various markets, a

large number of western corporations had developed a variety of manufacturing
H

technologies and methods by the 1980s. The next stage to cut costs, boost profit,
and gain market share was to establish an efficient supply chain. Refer to section
IC

1.3 Evolution of Supply Chain Management.

5. Configuring the distribution network, inventory control, manufacturing sourcing,
D

and supply contracts are some of the major concerns in supply chain management.
Refer to section 1.4 Key Issues in Supply Chain Management.
N

Case Study: Supply Chain Issues

O

1.9
in Meditech Surgical
P

Three years after the creation of Meditech from its parent company, it captured the majority
of the endoscopic surgical instrument market. National Medical Corporation was the primary
competitor of Meditech. National Medical practically invented a USD 800 million market
in just over a decade earlier. However, Meditech was an aggressive competitor. It developed
modern and innovative instruments and distributed them through a very efficient supply
chain. The combination of innovative product development and an aggressive sales team made

DDE, Pondicherry University, Pondicherry 15

Information System in Supply Chain Management

Notes Meditech a phenomenal success within a few years. Despite high growth of the company,
customer dissatisfaction was a major concern for Dan Franklin, the manager of customer
service and distribution of Meditech.

Y
IT
Recently, the company introduced a number of products in the market, which were central
to the entire product line of the company. The new products needed to be introduced

S
flawlessly in the market to do justice to the reputation of the company. However, the company
continuously failed to meet the initial high demands after the product launch. The production

R
capacity was not enough to fulfill customers’ demand as they had to wait more than six weeks
to get their products delivered. The reputation of the company was getting affected because

E
of its poor delivery services.

IV
Product Distribution

N
At Meditech, two main routes assisted in the distribution of all items from a central warehouse.
These were foreign affiliates and local merchants. The first was limited to domestic sales.
U
Numerous manufacturers, including Meditech, provide items that the domestic dealers order
and receive. The variety of goods in store comprised anything from commonplace things
like aspirin and medical gloves to endoscopic surgical tools. Because dealers were involved,
Y

hospitals could order products without having to go directly to the producers for a variety
of purposes. Furthermore, the distance between a hospital and the warehouse was shortened
R

since the dealers kept regional warehouses around the country. Hospital inventory was
lowered as a result of this regular restocking, which also decreased material costs.
R
E

Introduction of New Products: High Inventory Level and Poor Service Level
H

Over the past few years, Meditech introduced a number of innovative products in the market.
Most of these are just updates of the existing products. The product strategy of the company
IC

is to continuously obsoleting its own products and introducing new products with the help of
innovations. The market has well accepted the innovative products; however, each new product
introduction has created tremendous supply chain problems. Dan Franklin started realising
D

that customers started being tired of the poor service resulting from each new product
introduction. A number of interactions with the hospital material managers made Franklin
N

realise the various reasons of customer`s frustrations. However, Franklin failed to solve the
puzzle why the company faced consistent shortages of supply with each introduction. One of
O

the problems was forecasting. Previously, the data to track forecast accuracy was not recorded.
In addition, forecasts and demand information were not kept. Gathering of forecasting data
P

involves a complex process of going back through the hard copies of previous monthly
plans and manually entering the information into a computer. Even with the help of a better
methodology, forecasts cannot be improved much.

In addition to the distribution problems of newly introduced products, the inventory level of
finished goods appeared to be remarkably high. The company has recently hired a consultant

16 DDE, Pondicherry University, Pondicherry

CHAPTER 1  Introduction to Supply Chain Management

Notes to Examine the list. The consultant discovered that at least 40% of the total inventory could
be cut without compromising the quality of the services provided. The manufacturing process
at Meditech is shown in the following figure:

Component Bulk
parts instruments Packaging
Assembly

Y
sterilization

IT
Forecast Forecast Order point/
Order quantity

S
Production Process of Meditech

R
The actual service level during the previous years was dismal and did not even reach the

E
targets, despite the high level of inventory. The management was concerned that lowering
inventories would lower performance even further.

IV
One important cause of the problem was panic ordering from the customers and the affiliates.
Panic ordering takes place when a dealer or affiliate is unsure about the capability of the
company in delivering the entire product and places big orders expecting that at least part of

N
the order would be delivered on time. Knowing the past delivery problems of the company,
the dealers and the affiliates had good reasons to panic order.
U
Dan instructed a staff member to look into the inventory/service level contradiction and
the challenge of introducing new products. The employee needed many months to gather
Y

data on demand trends, production rates, and projections. Due to the company’s decentralised
structure, the data was spread across many systems in various organisational divisions. Of
R

course, there was no standard method for examining the incoming demand, stock levels, or
rates of production for a given instrument. Moreover, creating a standard format for the data
R

proved challenging. Certain data were gathered in terms of weeks, while other data were
gathered in terms of calendar months. However, some additional information was related to
E

the company financial schedule. When combined, the data expressed the following:
H
IC
Sales Units
D
N
O

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
week #
P

Total Net Orders

‹‹ After introduction, the demand for the new product consistently reached a high peak
during the first few weeks, but it became relatively stable immediately.
‹‹ Very often, there were more variations in the production schedules than the variations
in demands.

DDE, Pondicherry University, Pondicherry 17

Information System in Supply Chain Management

Notes ‹‹ It was possible to improve monthly forecasts with the help of a simple statistical
method: generating a linear regression through past data.

(4) Production decreases output

(2) Production increases output
16000
(1) Increased demand causes back order

Y
14000

12000

IT
10000

S
8000

R
6000
(5) (Beginning of)

E
4000 Steady state
2000

IV
(3) FG inventory shoots up

0
Month Month Month Month Month Month Month Month Month

N
-2000 -2 -1 0 1 2 3 4 5 6

-4000
U
Net Orders Planned Production FG Inventory
Y

Equipped with this information, Dan Franklin started thinking about fixing Meditech`s
scheduling problems.
R

Discussion Questions
R

1. What are the problems faced by Meditech in introducing new products?

E

(Hint: Meeting customer demands, leveraging the supply chain)

H

2. Imagining yourself as a manager facing the same issues, as are given in this case study,
IC

explain how would you approach to fix the problems?

(Hint: Effective demand forecasting and information sharing is vital to meeting

customer demands.)
D
N
O
P

18 DDE, Pondicherry University, Pondicherry

CHAPTER 1  Introduction to Supply Chain Management

Notes
1.10 References and Suggested Readings
‹‹ Simchi-Levi, D., Kaminsky, P. and Simchi-Levi, E. (2000). Designing and managing the
supply chain. 1st ed. Boston: Irwin/McGraw-Hill.
‹‹ Habib, M. (2014). Supply Chain Management (SCM): Theory and Evolution. [online]
Intechopen.com. Available at: http://www.intechopen.com/books/supply-chain-

Y
management-applications-and-simulations/supply-chain-management-scm-theory-
and-evolution [Accessed 8 Aug. 2014].

IT
E-References

S
‹‹ Scm.ncsu.edu, (2014). What is Supply Chain Management? - SCM | Supply Chain Resource

R
Cooperative (SCRC) | North Carolina State University. [online] Available at: http://scm.
ncsu.edu/scm-articles/article/what-is-supply-chain-management [Accessed 13 Aug.

E
2014].
‹‹ Koganpage.com, (2014). 5 Key issues and challenges for Logistics and the Supply Chain.

IV
[online] Available at: http://www.koganpage.com/news/key-issues-and-challenges-
for-logistics-and-the-supply-chain [Accessed 13 Aug. 2014].

N
‹‹ Bossard.com, (2014). Supply Chain Management: challenges and solutions | It is about proven
productivity! | Bossard Group - Fasteners, Application Engineering, Customer Logistics,
U
C-Part management. [online] Available at: http://www.bossard.com/en/how-we-add-
value/key-challenges-in-supply-chain-management.aspx [Accessed 13 Aug. 2014].
‹‹ Team, S. (2014). Logistics / Supply Chain Management – Evolution, Directions
Y

and Shifts. [online] Supplychainasia.org. Available at: http://www.supplychainasia.

org/knowledge/scm/item/5269-logistics-supply-chain-management-%E2%80%93-
R

evolution-directions-and-shifts [Accessed 13 Aug. 2014].

R
E
H
IC
D
N
O
P

DDE, Pondicherry University, Pondicherry 19

P
O
N
D
IC
H
E
R
R
Y
U
N
IV
E
R
S
IT
Y
chapter

Value of Information
2 in Supply Chain

Y
IT
Management

S
R
E
Structure

IV
2.1 Introduction

N
Learning Objectives U
2.2 Significance of Information in Supply Chain Management

2.3 The Bullwhip Effect

Y

2.4 Information Sharing and Incentives

R

2.5 Coordination of Systems through Information

2.6 Trade-off between Information and Supply Chain

R

2.7 Diminishing Marginal Value of Information

E

2.8 Summary
H

2.9 Glossary
IC

2.10 Terminal Questions

2.11 Answers
D

2.12 Case Study: Stock Information Management at JZ International

N

2.13 References and Suggested Readings

O
P
Information System in Supply Chain Management

Notes Learning Objectives

After completing this chapter, you will be able to:
 describe the significance of information in a supply chain
 explain the bullwhip effect
 discuss the importance of information sharing and providing incentives

Y
 explain how systems are coordinated through information
 explain the types of trade-offs between information and supply chain

IT
 describe the diminishing marginal value of information

S
2.1 Introduction

R
In the last few decades, major technological advancements in various sectors have ushered
in an age of information revolution. No one today can deny the need and importance of

E
easily accessible and updated information in almost every sector, be it medicine, defense,

IV
research or business. Almost all organisations have their information systems that collect and
collate relevant data in various forms, such as customers’ feedback, market trends, etc. The
information, thus derived, is used by the management to take major organisational decisions.

N
In supply chain management, organisations mainly rely on the feedback and inputs given by
U
their customers, retailers and suppliers to solve any issues and improve services.

The previous chapter has familiarised you with the concepts of supply chain and supply
chain management. You also studied about the need to manage supply chain processes and
Y

the issues faced by organisations while implementing these processes. Now, let us move
forward and study the role information plays in supply chain management.
R

Walmart is one of the largest retailers in the world having a very effective supply chain.
R

One of the main reasons for the success of the supply chain network of Walmart is
its highly efficient information sharing system. The suppliers and the warehouses of
E

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
H

automatically made by a centralised information system. Therefore, you can see that the
availability and sharing of timely information regarding stock levels, demand forecasts,
IC

etc. play an important role in the effective management of supply chains and consequently
in the success of the organisation.
D

One of the major challenges in supply chain management occurs when there is a variation
in consumer demands, as this can create huge variations in the orders put to the suppliers.
N

This phenomenon is known as the bullwhip effect. It can be prevented if different systems
of an organisation share the required information and work in proper coordination.
O

In this chapter, you will study the role and importance of information and information
sharing in supply chain management. The chapter next explains the bullwhip effect,
P

which occurs due to the variations in supply orders and demand of products. Next, the
chapter explains the importance of information sharing in supply chain and providing
incentives to promote sharing of information. You next learn about the coordination of
systems and various types of trade-offs between information and supply chain. Towards
the end, the chapter explains the concept of diminishing marginal value of information.

22 DDE, Pondicherry University, Pondicherry

CHAPTER 2  Value of Information in Supply Chain Management

Notes
Significance of Information in Supply Chain
2.2
Management
Information enables business organisations to view all the aspects of a given problem or
situation and take correct decisions. Timely information about stock levels or customers`
demands helps a retailer to take effective supply chain decisions. For organisations operating

Y
in a highly competitive global environment, access to timely and accurate information becomes
very important in managing their supply chain processes. An example of such an organisation

IT
is Amazon.com, an e-retailer that merchandises its products in multiple countries. The success
of such e-retailing companies completely depends upon their ability to deliver the right goods

S
to the customers at the promised time. Availability of information helps these companies
integrate their supply chain and manage it, so that customer satisfaction can be achieved. For

R
example, when a customer puts an order in an online e-portal, say Flipkart.com, the website
needs to provide the right information regarding the price, product specifications, delivery

E
time, etc. This will help the customer in making the right purchase decisions. In addition, the
e-portal should have access to information, such as availability of the product, procurement

IV
time of the product from the suppliers in case the product is not available, and availability of
the courier partners to promise a delivery time to the customer.

N
Information sharing greatly enhances the way multinational corporations and their partners do
business, particularly in the aftermath of growing outsourcing and globalisation, which both
U
have a substantial impact on supply chain networks of corporations. By sharing information
about inventory levels, forecast data, and sales patterns, organisations may enhance customer
services, decrease excess inventory, shorten cycle times, and fulfil orders faster. Information
Y

sharing is applicable to almost every one of an organization’s primary areas. With partners,
suppliers, customers, and other stakeholders, information may be exchanged at every step of
R

the product creation process, up to the point of distribution.

R

Sharing of information would be most effective when it is done with the help of the latest
business tools. Some such tools used by organisations to enhance supply chain integration and
E

data sharing are collaborative planning, forecasting, and replenishment workflows.

H

Information is collected, processed, and shared with the help of information systems. A well-
designed information system acts as a tool for managing and performing different types of
IC

logistics functions. One of the prerequisites for successful logistics management is collection
of the business information in a systematic way. Information systems enable an organisation
to obtain accurate and updated information about its different processes. Such an information
D

system, if used for the purpose of logistics, would help the organisation to create new and
competitive market positions, reduce costs and perform all the logistics functions more efficiently.
N

Exhibit
O

Logistics Information System (LIS)

P

To understand the working of an LIS, you first need to know about data, information and
information system in detail. Data and information are often used synonymously. However,
there is a difference between the two. Data is the raw form of collected facts while
information is the processed and organised form of data. Data is not of any use unless
it provides the information required for performing an operation or taking a decision. An
information system processes different types of data to generate specific information. The
following figure shows an LIS:

DDE, Pondicherry University, Pondicherry 23

Information System in Supply Chain Management

Notes

LIS

Y
IT
Logistics Information System
Sales Purchasing Inventory Control

S
Information System Information System System

R
Shop Floor Quality Management Plant Maintenance
Information System Information System Information System

E
Planning/ Forecasting

IV
Early Warning System

N
Logistics Information Library
U
As an LIS helps to process data related to different logistics activities, it can be defined
as a set of inter-related components that helps in gathering, processing, storing and
distributing information related to logistics. LIS also enables managers and workers
Y

to solve business problems and identify new opportunities. This is possible due to the
following activities of an LIS:
R

‹‹ Taking input: Gathers raw data related to the different activities in logistics chain,
R

such as inventory levels, purchase orders, transportation of inventory, etc

‹‹ Processing data: Converts the raw input into some meaningful information by
E

processing and organising data

H

‹‹ Generating output: Transfers the processed information to the relevant people or

activities where it will be used
IC

‹‹ Providing feedback: Provides data and information that can be suitably analysed
and evaluated by the appropriate members of the organisation to help them correct
D

the input stage

For example, in a retail enterprise, the input of information refers to the various logistics-
N

related information that needs to be further analysed in an LIS. Some logistical information
includes inventory level, products that are out-of-stock, products that sell the most and
O

products that sell rarely or do not sell at all. The LIS processes all the information and
generates the output in an easy-to-understand format. This output is then forwarded to
P

the right department for making decisions, such as when to replenish the stocks and which
product to order. In large retail enterprises, such as Walmart, replenishment orders are
automatically generated by the LIS.

A typical national retail logistics has multiple regional warehouses, offices and retail outlets.
In such cases, it becomes difficult for the head office to know the daily turnover in each of its

24 DDE, Pondicherry University, Pondicherry

CHAPTER 2  Value of Information in Supply Chain Management

Notes stores. The head office needs to have information about the products that are sold the most,
and the region and store they are sold from. It also needs to know if a particular store has run
out of a particular merchandise and if this merchandise is available at the nearby warehouse.
Such issues can be resolved easily by the use of Information Technology (IT). Some IT
applications in logistics and supply chain management can be briefly explained as follows:
‹‹ Electronic Data Interchange (EDI): It refers to an electronic communication system
that provides standards of exchanging information through electronic means. Retailers

Y
can use the EDI technology to transfer information to suppliers as soon as possible. EDI
also helps in integrating information generated by different applications of logistics.

IT
‹‹ Point-of-sales (POS) system: It refers to an electronic system that facilitates payment
at a retail store. The retailers using Vendor Managed Inventory (VMI) can send sales

S
data from a POS to the supplier in the form of an EDI message.

R
‹‹ Bar code and scanning: Bar code refers to a machine-readable code in the form of
numbers and a pattern of parallel lines of varying widths, printed on a commodity

E
and used especially for stock control. It helps in preparing goods receipts and updating
inventory information in a retail store.

IV
‹‹ Advanced Shipping Notification (ASN): It refers to a document that provides detailed
information to a consignee about the delivery. ASN helps in making the warehouse
system ready for inbound logistics.

N
‹‹ Evaluated Receipt Settlement (ERS): It is an electronic system that automatically
settles goods receipts.
U
‹‹ Enterprise Resource Planning (ERP): It refers to a software platform that integrates
various functions of an enterprise. There are various ERP solutions in logistics, such
Y

as System Application & Products (SAP) and Software As a Service (SaaS) Business
Intelligence. These software applications are highly efficient in integrating the logistical
R

functions of an enterprise and increasing logistical efficiency.

R

Self-Assessment Questions
1. ________helps in making the warehouse system ready for inbound logistics.
E

2. Sharing of information would be least effective when it is done with the help of the
H

latest technological tools.(True/False)

3. EDI stands for:

IC

a. Elementary Data Interchange

b. Electronic Data Interchange
D

c. Electronic Database Interchange

N

d. Elementary Database Interchange

O

Activity
P

Discuss the significance of information sharing in supply chain management.

2.3 The Bullwhip Effect

A few years ago, the logistics executives at Procter and Gamble (P&G) examined the order
pattern of one of its best-selling product: Pampers. The executives noted that sales in retail

DDE, Pondicherry University, Pondicherry 25

Information System in Supply Chain Management

Notes outlets showed some fluctuations, but these weren’t overly pronounced. Yet, upon examining
orders from distributors, they were taken aback by the significant variability. Additionally,
there was notable variability in P&G’s orders to its suppliers. At first, the executives couldn’t
fathom why this variability existed. After all, babies, the primary consumers, maintained a
consistent usage rate. So, why did demand order variations intensify as they progressed up
the supply chain? P&G coined this phenomenon the “bullwhip effect.” In certain other sectors,
this same phenomenon goes by names like the “whiplash” or “whipsaw” effect.

Y
Fig. 2.1 shows the bullwhip effect:

IT
Order Quantity Order Quantity Order Quantity Order Quantity
Stock Stock Stock Stock

S
Consumer Retail Wholesale Manufacturer

R
E
IV
Zeit Zeit Zeit Zeit

Order Quantity n Stock Transfer of Order

N
U Fig. 2.1: Bullwhip Effect

In Fig. 2.1, you can see that the variability increases as we go up the value chain from the
consumer to the manufacturer.
Y

Exhibit
R

Bullwhip Effect in HP
R
E

Executives from Hewlett-Packard (HP) looked at the sales of one of their printers at
H

a large shop and saw some predicted variations over time. But when they looked at the
retailer’s orders, they saw far larger fluctuations. They were shocked to learn that there
IC

were even more variations in the orders that went from the company’s integrated circuit
division to its printer division.
D

What occurs when demand information in a supply chain is distorted during transmission
up the chain due to the bullwhip effect? Previously, HP had to depend on the sales orders
N

from the store to anticipate items, plan capacity, manage inventory, and schedule production
since it was unable to observe sales of its products at the distribution channel stage. The
O

management of HP faced significant issues due to the lack of timely information on

fluctuations in demand. Excessive inventory, inaccurate product forecasts, insufficient or
excessive capacities, unreliable production planning (i.e., excessive revisions), high costs
P

for corrections (such as expedited shipments and overtime), and poor customer service
resulting from unavailable products or long backlogs are some common causes of such
variations. As a result, the bullwhip effect at HP led to order swings that the retailers
overstated in comparison to their sales, which further inflated order swings to the suppliers.

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CHAPTER 2  Value of Information in Supply Chain Management

Notes The bullwhip effect has many primary causes, including variations in demand, issues with
quality, strikes, and plant fires. Put simply, the bullwhip effect is caused by unpredictability,
together with delays in information exchange up the supply chain and in the manufacture and
distribution of goods down the supply chain. The following causes the bullwhip effect:
‹‹ Oversupplying of products to address backlogs
‹‹ Avoiding ordering goods to reduce inventory level

Y
‹‹ Lacking communication up and down the supply chain

IT
‹‹ Delaying information and material flow
‹‹ Placing large orders to suppliers

S
‹‹ Discovering inaccuracies in forecasting demands

R
‹‹ Implementing free return policy

E
2.3.1 Quantifying the Bullwhip Effect

IV
If the bullwhip effect is measured in advance, its negative effects on an organization’s
productivity or revenues may be mitigated. Measuring the growing heterogeneity at various

N
supply chain stages is necessary to quantify the bullwhip impact. Quantification aids in
illustrating the extent of the increased variability as well as the connection between the lead
U
time, forecasting method, and variability increase.

To measure the rise in unpredictability for a basic supply chain, let’s look at a two-stage
Y

process where a merchant purchases products from a manufacturer based on client needs.
Additionally, let’s say the shop has a certain lead time (L). This suggests that the retailer’s
R

order, made at period’s end, t, is received at period’s beginning (t+L). In order to maintain
inventory at a minimal stock level at all times, the store also regularly monitors the inventory
R

level and arranges orders appropriately. As a result, the base stock level is determined as
follows:
E

L × AVG + z × STD × √L
H

where z is a constant that represents the safety factor and AVG and STD are the average
IC

and standard deviations of the customer’s needs. Z is selected from the statistics tables to
guarantee that the lead time’s chance of having no stock outs is equivalent to the desired
service level. The average and standard deviations of the demand based on the observed
D

customer demand must be determined in order to put this inventory strategy into effect.
Based on modifications to the current estimations of the average and standard deviations, the
N

number of orders fluctuates every day.

O

2.3.2 Effect of Centralised Information on Bullwhip Effect

P

Centralisation of demand information within the supply chain involves providing each stage
of the supply chain with comprehensive details regarding customer demands. This enables
every stage of the supply chain to utilize actual customer data and forecast more accurately.

The availability of centralized information allows retailers to precisely monitor customer

demands, forecast demand mean and variance using a moving average, determine the target

DDE, Pondicherry University, Pondicherry 27

Information System in Supply Chain Management

Notes inventory level, and place orders with wholesalers. The wholesaler, upon receiving the order
from the retailer along with forecast information, utilizes the forecast to establish the target
inventory level and places an order with the distributor. The distributor, upon receiving the
order along with the retailer’s forecasts, uses the forecast to determine the target inventory
level and places an order with the factory. In a centralized supply chain, each stage receives the
forecast mean demand from the retailer and adheres to a base-stock inventory policy based on
this mean demand. This minimizes the effects of the bullwhip effect.

Y
2.3.3 Dealing with the Bullwhip Effect

IT
Bullwhip effect may be managed by identifying and measuring the different contributing

S
variables. The following is a discussion of some of these factors:

R
‹‹ Reducing uncertainty: By lowering supply chain uncertainty, the centralised
information system may help reduce or even eliminate the bullwhip effect. As we’ve

E
previously covered, centralising demand data gives every link in the supply chain access
to comprehensive data on real client requests.

IV
‹‹ Reducing variability: By lowering the inherent unpredictability in the customer
demand process, we may lessen or even eliminate the bullwhip effect. For instance,
wholesalers might notice less unpredictability in demand if it is able to lessen the

N
retailer’s perception of the variability in client wants.
U
‹‹ Reducing lead time: Demand forecasting increases variability, which lead times
amplify. You may minimise the bullwhip effect by reducing the lead time.
‹‹ Creating strategic partnerships: By establishing alliances amongst different
Y

stakeholders, including suppliers, retailers, manufacturers, and so on, we can do away

with the bullwhip effect. Within a supply chain, strategic alliances alter the way
R

inventory is maintained and information is exchanged.

R

Note
Shortage Gaming: In times of short supply, customers generally order more than they
E

require expecting that at least a portion of their demand will be delivered.

H

Self-Assessment Questions
IC

4. The _______ effect is also known as the whiplash effect.

5. The bullwhip effect occurs due to delaying information and material flow. (True/
D

False)

6. Name any two causes of the bullwhip effect.

N
O

Activity
Take a case study of any business enterprise (for example Canon) from Internet and study
P

the bullwhip effect on its functioning. Make notes on your findings.

2.4 Information Sharing and Incentives

We have already discussed that centralised information sharing can reduce variability in the
supply chain.

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CHAPTER 2  Value of Information in Supply Chain Management

Notes Retailers play a major role in information sharing as they are the first point-of-contact for the
customers and the information regarding customers’ demands usually come from them.

To promote information sharing, retailers should be motivated to share such information with
the rest of the supply chain. Providing some sort of incentives to retailers will motivate them
to share demand information, which in turn will benefit the entire supply chain by reducing
the variability.

Y
In spite of the benefits of sharing information, information is not properly shared by retailers

IT
in many industries. For example, According to the Business Week, “Forecasts by the electronics
and the telecom companies are often inflated.” The main problem in these industries is that
the manufacturers typically use an assemble-to-order strategy, while contract manufacturers

S
need to increase their production capacity because of high lead time. Because of such an
asymmetry, the suppliers usually take responsibility of all the risks even when they do not

R
possess the necessary supplying capacity. In such cases, the manufacturers respond by inflating
their forecasts so that the supplier gets the incentive to build more capacity.

E
Self-Assessment Questions

IV
7. Variability in the supply chain can be increased in case a retailer shares customer
demand information with the rest of the supply chain. (True/False)

N
8. The main problem with the electronics and telecom industries is that the manufacturers
typically use an _______strategy, while contract manufacturers need to build capacity
U
because of high lead time.

2.5 Coordination of Systems through Information

Y
R

An information system is a computer/server that is used for the purpose of collecting, storing,
processing and sharing of information. Like any other computer, it comprises input/output
R

devices, storage media, and other peripherals. Software in an information system is used for
processing transactions, analysing and processing data, making decisions, etc.
E

The information generated from an information system is used to establish coordination

H

among the different departments of an organisation. For example, sharing of information

helps suppliers, manufactures and various other business units to coordinate with each other.
IC

Now let us study how different components of an information system helps in coordinating
among different systems.

An LIS consists of two parts, namely the information base and the execution component.
D

Information base maintains the data warehouse and includes the information related to
purchase orders, inventory status and customer orders. On the other hand, the execution
N

component starts, keeps track of and measures the activities required for fulfilling customer
and replenishment orders. These activities follow two different flows that form the basis of
O

the LIS architecture. These flows are planning and coordination flow and operating flow,
which are discussed as follows:
P

‹‹ Planning and coordination flow: Planning and coordinating components are the
backbone of an information system. These include:
‹‹ Strategic plan: It defines the marketing and financial goals of an organisation. The
strategic objectives of marketing include target markets, marketing mix plans, service
capabilities, etc.

DDE, Pondicherry University, Pondicherry 29

Information System in Supply Chain Management

Notes ‹‹ Capacity plan: It contains details on resource transportation, storage, and

manufacturing. Capacity planning assist in figuring out the “where,” “when,” and “how
much” for inventory movement, storage, and manufacturing for each product.
‹‹ Logistics plan: It is prepared with the help of Distribution Requirement Planning
(DRP), which is an inventory management tool. This helps in coordinating facilities,
equipment and inventory resources in the logistics plan.

Y
‹‹ Manufacturing plan: It supports the scheduling of production resources and identifies
the solutions to solve day-to-day capacity problems in the materials management

IT
system.
‹‹ Procurement plan: It arranges for material releases, shipments, and receipts. Schedules

S
for long-term material requirements are determined by production needs, logistical
requirements, and capacity limitations.

R
‹‹ Operating flow: It includes information related to the receiving, processing and

E
shipping of customer orders and coordinating the receipt of purchase orders. The
various components in operating flow are:

IV
 Order management
 Order processing

N
 Distribution operations
 Transportation and shipping
U
 Procurement
Y

Self-Assessment Questions
9. ______ helps in establishing coordination among different systems of an organisation.
R

10. Name two components of LIS.

R

11. Manufacturing plan supports the marketing of production resources and suggests
E

solutions to solve technological problems in the materials management system.

(True/False)
H

Activity
IC

Use Internet to find different types of information systems used by some major production
houses.
D

2.6 Trade-off between Information and Supply Chain

N

Global optimisation is posing a major challenge to supply chain management in lieu of

O

sequential planning techniques. Sequential planning maximises profits at each level of the
supply chain without taking into account the potential effects of actions made at one stage
P

on subsequent ones. On the other hand, the goal of global optimization is to arrange supply
chain operations in a manner that maximises supply chain performance.

Typically, managers at various points in a supply chain have divergent objectives. For
instance, within a specific stage of the supply chain, there might be trade-offs between
diminishing inventory or transportation expenses, or between augmenting product diversity
or lowering inventory levels. Due to these conflicting objectives, managers must harmonize

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CHAPTER 2  Value of Information in Supply Chain Management

Notes and synchronize the distinct stages of a supply chain. Achieving global optimization in a
supply chain involves judiciously leveraging shared information and minimizing overheads
while considering the array of conflicting goals and trade-offs.

The following are some of the important trade-offs in the supply chain:
‹‹ The Lot Size-Inventory Trade-off: Large lot sizes are usually preferred by
manufacturers since they lower manufacturing costs. Customer demand, however,

Y
seldom occurs in big lot quantities. As a result, warehouse inventories are large.

IT
‹‹ The Inventory-Transportation Cost Trade-off: Transportation costs go down when
inventory expenses go up, and vice versa. This is so because moving big loads of cargo
together lowers the cost of transportation. Nevertheless, products must wait longer to

S
be consumed due to low demand. The cost of inventory rises as a result.

R
‹‹ The Lead Time-Transportation Cost Trade-off: As the amount of commodities
moved between various supply chain stages increases, transportation costs also fall. Lead

E
times can only be shortened, however, if products are sent straight from production to
the next phase of the supply chain.

IV
‹‹ The Product Variety-Inventory Trade-off: Variability in products makes the supply
chain more intricate. Transportation and warehousing expenses rise in tandem with
product diversity. To maintain the service level, a larger level of inventory must be kept

N
for each product in the case of a wider variety of products.
U
‹‹ The Cost-Customer Service Trade-off: Lowering production, shipping, or inventory
expenses may result in worse customer service.
Y

Self-Assessment Questions
12. One of the biggest challenges faced by the supply chain managers is replacing the
R

sequential planning processes with ___________.

R

13. Mention some important trade-offs in a supply chain process.

E

2.7 Diminishing Marginal Value of Information

H

Diminishing marginal value of information refers to the fact that every succeeding piece
IC

of information is of less value than the previous piece of information. In other words, the
initially shared information is of greater value than the information shared at a later stage.
An organisation generally has to spend huge amounts to collect information. For example, the
D

customer surveys or the market research reports require significant amount of investment
by an organisation. The cost of collecting information goes on escalating as an organisation
N

collects more information. The continuously increasing cost decreases the value of the
collected information. In addition, the cost of exchanging information with other parties
O

also escalates. Therefore, the value of additional exchanged information keeps decreasing. It
has also been observed that in multistage decentralised manufacturing supply chains, sharing
P

information proves beneficial only in case a small amount of information is exchanged among
supply chain participants. Collecting more frequent information or more detailed information
is always costly. Therefore, companies need to :
‹‹ Calculate the costs and benefits of the collected information
‹‹ Decide how often the information should be collected

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Information System in Supply Chain Management

Notes ‹‹ Set limits on the amount of the collected information that should be stored
‹‹ Identify the type and amount of the collected information that should be shared
‹‹ Determine the form in which the collected information should be shared

Because of the diminishing marginal value of information, many firms struggle to decide
exactly how to use the information collected from various sources, such as loyalty programs,

Y
surveys, and Radio Frequency Identification (RFID) readers.

IT
Self-Assessment Questions
14. RFID stands for:

S
a. Radio Frequency Identification
b. Radio Formation Identification

R
c. Radiation Frequency Identification

E
d. Radiation Formation Identification

IV
15. An organisation has to spend huge costs to collect information. (True/False)

Activity

N
With the help of Internet, search more about the RFID technology.
U
2.8 Summary
Y

‹‹ Information enables business organisations to view all the aspects of a given problem
R

or situation and take correct decisions.

‹‹ Information sharing greatly enhances the way multinational corporations and their
R

partners do business, particularly in the aftermath of growing outsourcing and

globalisation.
E

‹‹ Information is collected, processed, and shared with the help of information systems.
H

An information system is a computer that is used for the purpose of collecting, storing,
processing and sharing of information.
IC

‹‹ ERP refers to a software platform that integrates various functions of an enterprise.

‹‹ Diminishing marginal value of information refers to the fact that every succeeding
piece of information is of less value than the previous piece of information.
D

‹‹ The concept of diminishing marginal value of information describes how the value of
N

each new piece of knowledge decreases with respect to the prior item.
O

2.9 Glossary
P

‹‹ Electronic Data Interchange (EDI): Technology to transfer information to suppliers

and integrate information generated by different applications of logistics.
‹‹ Feedback: Output that is returned to appropriate members of the organisation to help
them evaluate or correct the input stage
‹‹ Information system: A computer/server that is used for the purpose of collecting,
storing, processing and sharing of information

32 DDE, Pondicherry University, Pondicherry

CHAPTER 2  Value of Information in Supply Chain Management

Notes ‹‹ Logistics Information System (LIS): Information system designed to process logistics
data of an organisation
‹‹ Strategic plan: Schedule to achieve marketing and financial goals of an organisation

2.10 Terminal Questions

Y
1. Discuss the significance of information in supply chain management.

IT
2. Explain the bullwhip effect with the help of an organisational example.

3. Elaborate the importance of information sharing and incentives in supply chain

management.

S
4. Discuss about the coordination of systems through information.

R
5. Elaborate on some of the trade-offs in the supply chain.

E
6. What do you understand by diminishing marginal value of information? Explain.

IV
2.11 Answers
Q. Self Assessment Questions
1.

N
Advanced Shipping Notification (ASN)
U
2. True
3. b. Electronic Data Interchange
Y

4. bullwhip
5. True
R

6. demand variability, quality problems

R

7. False
E

8. Assemble-to-order
9. Information
H

10. Information base and execution

IC

11. False
12. Global optimisation
D

13. Lot size-inventory trade-off, inventory-transportation cost trade-off, lead time-

transportation cost trade-off, product variety-inventory trade-off, cost-customer
N

service trade-off
14. a. Radio Frequency Identification
O

15. True
P

Q. Terminal Questions
1. Information enables business organisations to view all the aspects of a given
problem or situation and take correct decisions. Timely information about stock
levels or customers` demands helps a retailer to take effective supply chain
decisions. Refer to section 2.2 Significance of Information in Supply Chain
Management.

DDE, Pondicherry University, Pondicherry 33

Information System in Supply Chain Management

Notes 2. Variability increases as we go up the value chain from the consumer to the
manufacturer. This refers to the bullwhip effect. Refer to section 2.3 The
Bullwhip Effect.
3. Information sharing increases the efficiency of a supply chain. Refer to section
2.4 Information Sharing and Incentives.

Y
4. An information system is a computer/server that is used for the purpose of
collecting, storing, processing and sharing of information. Like any other

IT
computer, it comprises input/output devices, storage media, and other peripherals.
Refer to section 2.5 Coordination of Systems Through Information.

S
5. A few trade-offs that occur in the supply chain include those between lot size and
inventory, inventory and transportation costs, lead time and transportation costs,

R
product diversity and inventory, and cost and customer service. Refer to section
2.6 Trade-off between Information and Supply Chain.

E
6 Diminishing marginal value of information refers to the fact that every succeeding

IV
piece of information is of less value than the previous piece of information. Refer
to section 2.7 Diminishing Marginal Value of Information.

N
Case Study: Stock Information Management at JZ
2.12
International
U
Founded in 2009, JZ International is a private label clothing retail store in New Delhi. In
addition to designing and manufacturing its own line of apparel, JZ operates a chain of retail
Y

stores located in New Delhi, Noida, Mumbai, Chandigarh, Hyderabad and Bengaluru. It
R

operates more than 15 stores at different locations in the country.

JZ was among the early adopters of RFID technology for managing its stock and store
R

operations. The technology enabled the organisation to implement item-level tagging of its
products. All individual merchandise of JZ bears a product label with an RFID chip embedded
E

in it. The tags are attached to individual merchandise at manufacturing units. They are first
H

read at the time of merchandise arrival at distribution centres. After receiving the shipment
order and verifying the merchandise, the cartons (holding the merchandise) are also labelled
IC

with an RFID tag. These tags contain a unique serial shipping container code to be identified
as logistics unit. This ensures the inspection of all the cartons in just a few seconds.

The application of RFID gave JZ a competitive edge in terms of saving time and money,
D

while managing its stock. The technology also helps the company in maintaining a safety
N

stock of the merchandise. The use of RFID technology in the enterprise enables it to monitor
the stock level and reorder for merchandise on a regular basis. Each of JZ’s store stocks about
O

10 thousand items. Therefore, managing the store stock without this system could be very
time consuming and cumbersome. Apart from this, when a customer brings his/her selected
P

merchandise at the check-out counter, the cashier simply reads the barcode with the help of
a reader, and the total price instantly appears on the system. The selected goods are instantly
scanned by the RFID scanners, which also compute the total amount that has to be paid.
Customers enjoy a more luxurious shopping experience as a result, and it also aids in efficient
stock management.

34 DDE, Pondicherry University, Pondicherry

CHAPTER 2  Value of Information in Supply Chain Management

Notes Discussion Question

1. What role does RFID play in JZ International’s store stock information management
process?

(Hint: RFID helps the company in maintaining a safety stock of the merchandise.)

Y
2.13 References and Suggested Readings

IT
‹‹ Simchi-Levi, D., Kaminsky, P. and Simchi-Levi, E. (2000). Designing and managing the
supply chain. 1st ed. Boston: Irwin/McGraw-Hill.

S
‹‹ Habib, M. (2014). Supply Chain Management (SCM): Theory and Evolution. [online]
Intechopen.com. Available at: http://www.intechopen.com/books/supply-chain-

R
management-applications-and-simulations/supply-chain-management-scm-theory-
and-evolution [Accessed 8 Aug. 2014].

E
IV
E-references
‹‹ http://www.infosysblogs.com/supply-chain/2011/09/the_role_of_information_

N
sharin.html
‹‹ http://sloanreview.mit.edu/article/the-bullwhip-effect-in-supply-chains/
U
‹‹ http://togarsim.tripod.com/publish/simpost.pdf
Y
R
R
E
H
IC
D
N
O
P

DDE, Pondicherry University, Pondicherry 35

P
O
N
D
IC
H
E
R
R
Y
U
N
IV
E
R
S
IT
Y
chapter

3 Role of IT in Supply

Y
Chain Management

IT
S
R
E
Structure

IV
3.1 Introduction

N
Learning Objectives U
3.2 Information Systems

3.3 The Role of IT in Supply Chain

Y

3.4 Applications of IT in Inventory and Supply Chain Management

R

3.5 Transportation and Facilities within a Supply Chain

3.6 Macro Processes in the Supply Chain IT Framework

R

3.7 Summary
E

3.8 Glossary
H

3.9 Terminal Questions

IC

3.10 Answers

3.11 Case Study: Role of IT in Amul

D

3.12 References and Suggested Readings

N
O
P
Information System in Supply Chain Management

Notes Learning Objectives

After completing the chapter, you will be able to:
 explain various types of information systems
 explain the role of IT in supply chain management
 discuss various IT applications in inventory and supply chain management

Y
 explain the role of various transportation facilities in supply chain
 discuss the role of various macro processes used in the supply

IT
chain IT framework

3.1 Introduction

S
R
In the previous chapter, we have already learned about the role and importance of information
in supply chain management. However, it is not enough to just collect, organise, and store

E
information. Such information would become stagnant, serving no purpose at all. For the
smooth functioning as well as growth of any enterprise, it is important that the relevant

IV
information should be shared within and across various business units, organisations and
stakeholders.

N
As the success of a supply chain depends upon the proper coordination among its various
channels, this information flow is all the more important in supply chain management.
U
Without this information flow, the operations of a supply chain could come to a standstill.

Information technology was introduced in supply chain precisely to cater to this requirement
of information flow within and across the system. Information technology, commonly referred
Y

to as IT, is defined as the application of computers, telecom equipment, and the Internet to
store, process, manipulate, retrieve, and transmit data and information.
R

In this chapter, you will first study about the concept of information system. Next, the
R

chapter explains the role of information technology in supply chain. After that, you learn
about various IT applications in inventory and supply chain management. The chapter next
E

discusses the role of various transportation facilities in transmitting products. In the end, the
chapter explains the various macro processes used in the supply chain IT framework.
H

3.2 Information Systems

IC

An information system is basically a computer or a server designed to collect, store, and

process data and generate meaningful information. Information technology enables the
D

development of efficient information systems, capable of generating speedy and accurate

information. Organisations that have a complex supply chain network are required to develop
N

a few information systems that would help them to automate and quicken their supply chain
operations. Fig. 3.1 shows some types of information systems:
O

Information System
P

Intra-firm information system Inter-firm system Supply chain information system

Fig. 3.1: Types of Information Systems

38 DDE, Pondicherry University, Pondicherry

CHAPTER 3  Role of IT in Supply Chain Management

Notes Let us now discuss each of these information systems.

‹‹ Intra-firm Information System: The intra-firm information system connects the
computers/servers of various departments of an organisation to each other. Each
computer/server acts as an information hub of a department containing the database
or latest information about the proceedings of that department. When connected
together, these computers/servers form an intra-firm information system, which

Y
facilitates smooth flow of information within the organisation. It is imperative for
organisations to first develop an effective intra-firm information system to be able to

IT
develop an efficient supply chain information system. Some examples of an intra-firm
information system are:
 Warehouse management system (WMS)

S
 Transportation management system (TMS)

R
 Decision support system (DSS)

E
 Enterprise resource planning system (ERP)

The consolidated information obtained from an intra-firm information system helps

IV
organisations to plan and manage various organisational activities, identify and prevent
certain problems, and take strategic decisions or corrective measures on time.

N
Materials Requirement Planning (MRP) and Distribution Requirement Planning (DRP) are
some intra-firm applications that benefitted greatly from the advancements in the field of IT.
U
‹‹ Inter-firm Information System: The inter-firm information system allows the flow
of information between an organisation and its suppliers and/or customers. In today’s
competitive business environment, inter-firm information systems have almost become
Y

a necessity for organisations. These systems facilitate in removing the redundancy of

inventory and duplicate service operations at different phases of a supply chain. The
R

Internet and Electronic Data Interchange (EDI) are a couple of significant inter-firm
platforms. Just-in-time (JIT) manufacturing and cross-docking are two examples of
R

inter-firm applications.
E

‹‹ Supply Chain Information System: The goal of the supply chain information system
is to achieve the functional integration of different components from one end of the
H

supply chain to the other, including product flow, information flow, and financial flow.

Extranets and forecasting systems are two crucial supply chain information systems. Applications
IC

of supply chain information systems include Automatic Replenishment (AR), Vendor-Managed

Inventory (VMI), Quick Response (QR), and Efficient Customer Response (ECR).
D

Self-Assessment Questions
N

1. The _________ information system connects the computers/servers of various

departments of an organisation to each other.
O

2. The inter-firm information system allows flow of information between an organisation

and its suppliers and/or customers. (True/False)
P

3. Which of the following is an example of an intra-firm system?

a. Warehouse marketing system
b. Transportation management system
c. Bar coding system
d. Database management system

DDE, Pondicherry University, Pondicherry 39

Information System in Supply Chain Management

Notes Activity
With the help of the Internet, study different types of intra-firm information systems of
some major production organisations.

3.3 Role of IT in Supply Chain

Y
IT helps reorganise the organisation’s whole supply chain distribution system, resulting

IT
in cheaper supply chain costs, lower inventory levels, and greater service levels. Using IT
applications in supply chain operations speeds up procedures, lowers mistake rates, and
improves information flow, all of which help businesses better coordinate with suppliers,

S
consumers, and retailers.

R
Earlier, information exchange and all the other transactions between various departments of
an organisation are done on paper. Similarly, the correspondence of an organisation with its

E
supply chain members also used to be on paper. Now, we all know that paper communication
is slow, time consuming and error prone.

IV
Because the value of information gathered on paper to supply chain participants was unclear,
it was often overlooked as a vital competitive resource.

N
The introduction of IT in supply chain management has automated these operations,
equipping organisations with relevant and instant information; thereby giving them an edge
over their competitors.
U
The growth of IT has led to a plethora of other options for efficiently managing the supply
Y
chain. The following are some significant IT advancements that have an impact on supply
chain operations:
R

‹‹ Electronic commerce (E-commerce): E-commerce is the term that encompasses

the tools and techniques of conducting business electronically, i.e. in a paperless
R

environment. E-commerce enables electronic sharing of information within and

across organisations via e-mails, electronic fund transfers, electronic publishing, image
E

processing, electronic bulletin boards, shared databases, etc.

H

‹‹ Electronic Data Interchange (EDI): “The transmission in a standard syntax of

unambiguous information of business or strategic significance between computers
IC

of independent organisations” is how the American National Standards Institute’s

Accredited Standards Committee for EDI defines EDI. Put another way, EDI is the
technology that allows business documents to be exchanged between computers in pre-
D

established standard formats. Since data is automatically sent between organisations via
EDI instead of conventional means like mail, courier, and fax, human interaction is not
N

necessary. EDI enables supply chain participants to monitor the exchange of real-time
supply and demand data.
O

 EDI has the following advantages:

P

 Fast processing of information

 Improved customer service
 Negligible paper work
 Increased productivity
 Improved tracing and expediting

40 DDE, Pondicherry University, Pondicherry

CHAPTER 3  Role of IT in Supply Chain Management

Notes  Cost-effective operations

 Improved billing
‹‹ Bar code: Bar code is a set of vertical bars usually printed at the back of the packing
of an object or a product. These bars contain information about the product that can
be read by a bar code scanner. Bar code scanners are mostly used at check-out counters
of super markets.

Y
‹‹ Data warehouse: Data warehouse is the term used to represent a consolidated database

IT
that contains the summarised view of the information collected from different business
processes of an organisation. This enterprise-wide information can be used by various
levels of management to take various strategic decisions.

S
‹‹ Enterprise Resource Planning (ERP) tools: ERP refers to a set of activities that are
supported by application software, which helps organisations in managing important

R
business operations, such as product planning, customer handling, inventory management,

E
etc. Some popular ERP solution providers are Baan, SAP, PeopleSoft, and Oracle.

To survive in today’s competitive business environment, organisations are required to keep

IV
themselves updated on the IT front and how to best utilise its applications to improve and
update their supply chain processes.

N
Self-Assessment Questions U
4. EDI stands for ______________.

5. Bar code is a set of horizontal bars usually printed at the back of the packing of an
object or a product.(True /False)
Y

6. ERP is a term that encompasses the tools and techniques of conducting business
R

electronically. (True /False)

R

Activity
E

Visit an enterprise and study the role of IT on its supply chain operations.
H

Applications of IT in Inventory and Supply

3.4
IC

Chain Management
An efficient inventory management system is essential to the success of any supply chain. The
D

term “inventory” describes the unfinished products, commodities in development, and raw
materials that are owned by a manufacturing facility. All products that are or will be ready for
N

sale are regarded as an organis ation’s assets. One of the main sources of income and profits
for the company and its partners is thought to be the turnover of inventory.
O

Almost all phases of a supply chain include inventories, whether they be for raw materials,
semi-finished goods, or completed goods. Organisations often maintain an additional backup
P

inventory of their products. Keeping this backup in place is mostly done to handle unforeseen
circumstances that can arise in the supply chain. Keeping inventory costs businesses between
15 and 30 percent of their worth, therefore managing it well is essential to supply chain
operations.

The use of IT in inventory management has completely changed how it operates. use of
technology, including radio frequency identification chips and automated scanners (RFID)

DDE, Pondicherry University, Pondicherry 41

Information System in Supply Chain Management

Notes enable organisations to keep track of their inventory from the moment of its procurement till
the time the finished product gets delivered to the customer.

The entire process of maintaining inventory and moving goods is a costly affair for any
organisation. It involves purchase of goods, which entails a huge investment of the company
capital. This capital is not recovered until and unless the organisation sells the inventory.
Warehousing of goods between purchase and sale exposes goods to various possibilities of

Y
deterioration. The goods are exposed to theft, damage, degeneration or changes in customer
taste. Transportation of goods from warehouses to the point of sale also involves shipping

IT
costs.

Implementation of IT in the whole scenario enables the organisation and its managers to

S
view this entire work flow process in real-time, and allows them to reduce purchasing costs
by minimising the inventory. It also helps in increasing the efficiency of storage and keeping

R
track of each item, thereby reducing the possibility of theft or damage.

E
Fig. 3.2 shows some of the commonly-used IT applications in supply chain:

IV
RFID Technology

Bar Code Scanning

N
Applications of IT in Supply Chain Smart Card
U
Global Positioning System
Y

Mobile Positioning System

R

Fig. 3.2: IT Applications in Supply Chain

R

Let us now discuss each of these applications in detail.

E

3.4.1 RFID technology

H
IC

RFID is one of the most commonly used applications for tracking the movement of assets
(and people carrying those assets) in and out of the premises of an organisation. These days,
the RFID technology is widely used in manufacturing, distribution, healthcare or education
D

centres. For example, RFID chips installed in the products of a supermarket prevent them
from being taken away in an unauthorised manner. Similarly RFID chips placed in the identity
N

cards of students or employees help to track their movements in their respective premises.
Thus an effective RFID tracking solution reduces the risk of losing assets through pilferage,
O

3.4.2 Bar code scanning

P

When an organisation receives goods from a supplier, all the items are scanned by using a bar
code or radio-frequency identification scanner. This scanning of individual items enables an
organisation to list all the shipments from a supplier, which in turn helps in comparing against
the purchase order for any errors or losses in transit. When these goods are delivered from
the warehouse to their point of sales, a second scan is carried out. This scan automatically

42 DDE, Pondicherry University, Pondicherry

CHAPTER 3  Role of IT in Supply Chain Management

Notes helps in tallying the remaining stock in the warehouse and in turn alerts the purchasing
managers if it is time to reorder the goods and replenish the inventory.

Exhibit
Benefits of Bar Code Technology

We all know that bar codes can be easily scanned by bar code scanners. As bar codes can

Y
encode and decode information automatically, they are sometimes also referred as ‘keyless
data entries’. Let us now look at some of the benefits of the bar code technology:

IT
‹‹ Increased Operational Efficiency: Work in progress may go more swiftly and
be monitored more accurately thanks to bar codes, which enable quicker and more

S
accurate information recording.

R
‹‹ Saves Time: Depending on the volume of work and the tool used to do it, time
has always been important. For example, if ten cartons are sent, writing down

E
the product codes and serial numbers would take at least two minutes, whereas
scanning the bar codes will take just ten to twenty seconds. This may save a lot of

IV
time in a hectic process.
‹‹ Minimise Mistakes: Data entry and clerical errors may be a major cause of cost

N
increases and other associated issues.
‹‹ Reduced Costs: Bar codes may be used to localised, focused issues or ones that are
U
connected with information systems that span the whole organisation. Bar code
technology may decrease mistakes and save time in numerous procedures when
Y

used properly planned.

(Source: http://www.makebarcode.com/info/benefit.html)
R

3.4.3 Smart card

R
E

The smart card is another significant IT invention in the banking and business domains. It
is a plastic card with an integrated computer chip that resembles a credit card. The chip may
H

consist of a memory chip with non-programmable circuitry or a microprocessor with internal

memory. When connecting, some chips need direct physical touch, while others employ an
IC

electromagnetic interface that requires no physical contact at all.

The use of smart cards can be seen in a scheme launched by Bharat Petroleum Corporation
D

Limited (BPCL) to build loyalty among its fleet owners. This scheme is called SmartFleet
under which a smart card is issued for every truck. The truck driver can use the card to
N

buy fuel at petrol pumps by swiping his card at the pumps. The information is automatically
uploaded at the server of BPCL. If any fleet operator wants to know where a particular truck
O

is, he makes a call to the BPCL call centre and asks the location where the truck driver last
swiped his card.
P

In India, predicting when a consignment will reach its destination is a difficult task because
of unforeseen reasons like trucks breaking down, drivers abandoning and escaping with the
diesel money, or just driving along slowly. Since the drivers swipe their cards at fuel pumps
after some fixed distance, the freight carriers are better informed about the exact location
of the trucks. The drivers too waste little time since they know their progress is being
tracked.

DDE, Pondicherry University, Pondicherry 43

Information System in Supply Chain Management

Notes 3.4.4 Global positioning system

A Global Positioning System (GPS) tracking unit is a set of devices that operates on the
space-based satellite navigation system, also called GPS, to determine the exact location of a
person, vehicle, or any asset to which it is attached. This tracking system can provide location
and time information in all the weather conditions.

Y
Bangalore Metropolitan Transport Corporation uses GPS receivers in its buses to track
where they went, where they stopped and for how long so that routes could be better planned.

IT
A few car-manufacturing companies have also launched a GPS navigation system, which not
only helps the motorists to look for the desired location with an in-built liquid crystal display
(LCD) monitor, but also provide them with directions with its integrated voice-guided system.

S
R
3.4.5 Mobile positioning system

E
The Mobile Positioning System (MPS) is built on wireless technology, which has become a
whole new medium for service providers to develop new Internet applications and a channel

IV
of information for users to access content. A growing number of portable phones with
Internet access have opened up a market for service providers to launch new mobile apps that

N
provide web content. The data and forecasts make it abundantly evident that m-commerce is
on the rise. U
Users may safely manage everyday transactions whenever and wherever it’s convenient
for them thanks to mobile devices. The technology provides real-time access to one’s bank
account at any time, enabling bill payment and electronic money transactions. Both business
Y

customers and individual subscribers are driving a growing amount of demand for cellular
data applications.
R

Self-Assessment Questions
R

7. MPS is based on wireless technology. (True/False).

E

8. ________ is a plastic card that looks like a credit card but contains an embedded
computer chip.
H

9. GPS stands for______________.

IC

Activity
D

Using the Internet, explore the RFID technology and discuss its implementation in
various sectors of society.
N

3.5 Transportation and Facilities within a Supply Chain

O

Transportation is one of the most significant processes of a supply chain. It refers to the
P

movement of products from one location to another through various modes, such as trucks,
ships, airplane, etc. Products need to be transferred as it is not necessary that they are produced
and consumed at the same location.

The total cost of the product that the company produces is heavily impacted by the cost of
transportation. Transportation affects information flow and integration between suppliers,

44 DDE, Pondicherry University, Pondicherry

CHAPTER 3  Role of IT in Supply Chain Management

Notes customers, and carriers in addition to product movement. Any supply chain’s ability to
function effectively and efficiently is primarily dependent on its transportation infrastructure.

To implement a cost effective and efficient supply chain, an organisation must have a
responsive, economical transportation network in place. Transportation sometimes involves
two stages: product movement and product storage. Although moving products from one
place to another is the primary function of transportation, sometimes the products also need

Y
to be stored temporarily in between. In such cases, product storage becomes the secondary
function of transportation.

IT
The following are the three key players affecting the transportation decisions:
‹‹ Shipper: The person who starts moving a product between two locations in a supply

S
chain is referred to as the shipper. A shipper selects the method of transportation in
an effort to reduce the total cost, which takes into account the expenses of facilities,

R
sourcing, processing, inventory, and transportation. Any choice about transportation
must take all of these expenses into account. Choosing a mode of transportation

E
typically aims to lower overall logistics costs rather than just minimising expenses per
unit. Shippers must thus use supply chain management procedures to coordinate their

IV
operations with all chain participants in order to maximise their relationships with
forwarders.

N
‹‹ Carrier: The entity in the supply chain that actually carries the product is called the
carrier. A carrier’s expenses consist of trip-related expenses, fixed operational costs, and
U
vehicle-related expenditures. The features of carriers differ widely from one another.
Carriers may travel at supersonic speeds in the air or at a comfortable 5–10 km/h on a
riverboat. The size of shipments may range from 10 tonnes transported by vehicle to
150 tonnes shipped on a train. There is a wide range of equipment available based on
Y

the items that are transported. The kinds of services also differ in terms of price. As a
result, the supply chain management must consider several factors before deciding on a
R

method of transportation for the company’s goods.

R

‹‹ Consignee/Receiver: Consignee is the party in supply chain that receives the shipment.
Usually, they are retailers who order and receive products from the company and further
E

sell them to the end user.

H

In a supply chain, shippers and carriers are always more significant than the recipient, who
is a third party. Dell sent its PCs from the production to the client via UPS couriers. In this
IC

instance, UPS is the carrier and Dell is the shipper.

The right choice and use of the mode of transportation are critical to the success of a supply
chain operation. The most often used forms of transportation for the movement of goods are
D

as follows:
N

‹‹ Airplanes, helicopters, etc.

‹‹ Trucks, cars, etc.
O

‹‹ Railways
P

‹‹ Ships, boats, etc.

Organisations may also utilise a combination of various modes for the transportation purpose.
It has been established that with the use of advanced supply chain management, a reduction
in inventory and warehousing costs can be achieved, along with hastening delivery to the end
customer. For instance, Wal-Mart has adeptly employed a responsive transportation system
to decrease its overall expenses.

DDE, Pondicherry University, Pondicherry 45

Information System in Supply Chain Management

Notes Cross-docking is a technique used by Wal-Mart in which goods are swapped between trucks
so that each vehicle headed to a retail location is stocked with goods from several vendors.

The decision to use a particular carrier for transportation is driven by the time taken to
deliver the product and the price incurred. Water is the slowest and also the least expensive
mode; whereas, air is the fastest and the most expensive. Rail and water are preferred modes
when the budget is low and are suitable for large shipments that have longer delivery time;

Y
whereas air is best suited for small, high-value and emergency shipments.

IT
Exhibit
MD Logistics Offers Clients More Efficient Transportation Options

S
Third-party logistics (3PL) firm MD Logistics specialises in creating unique supply chain
solutions. It is present in the retail and consumer goods, transportation services, and life

R
sciences and pharmaceuticals. Global supply chain solutions, freight forwarding, freight
management, and packaging, fulfilment, and distribution are just a few of the services

E
provided by MD Logistics.

IV
For clients that choose the value-added service, freight solutions have been manually
optimised using the outdated Transportation Management System (TMS) that MD
Logistics created. Its coordination and integration with its warehouse management

N
system, however, was lacking (WMS).
U
MD Logistics used the Agile TMS into their existing Red Prairie WMS in order to solve
this issue and provide improved customer service. With the aid of this integration, MD
Logistics was able to identify the most advantageous carrier for its clients based on a
Y

number of variables, such as cost, transit duration, and retail compliance. These days,
MD Logistics not only chooses freight but also manages non-deliverables for clients in an
R

economical and effective way, files claim documentation, and audits invoicing.
R

Self-Assessment Questions
E

10. The three key players that affect transportation decisions are _____, _____ and
_______.
H

11. Name the fastest and the slowest mode of transportation.

IC

12. Which of the following is the most commonly-used mode of transporting products?
a. E-mail b. Fax
D

c. Telephone d. Trucks
N

3.6 Macro Processes in the Supply Chain IT Framework

O

The Customer Relationship Management (CRM), Supplier Relationship Management (SRM),

and Basic Enterprise Resource Planning (ERP) system are the three macro operations that
P

make up the supply chain process. These organisational macroprocesses are concerned with
controlling the movement of money, goods, and information. These materials are all necessary
to create, obtain, and complete an order for a client. Most of the time, the same consumer is
the focus of all three macroprocesses. Therefore, these macro activities need to be effectively
integrated for an efficient supply chain. All supply chain operations inside an organisation may
be linked to one of these three major procedures.

46 DDE, Pondicherry University, Pondicherry

CHAPTER 3  Role of IT in Supply Chain Management

Notes Let us now discuss each of these macro processes.

3.6.1 Customer Relationship Management (CRM)

Customer satisfaction is the prime objective of any organisation, as its level often defines
the success of an organisation. Thus, it is imperative from an organisation’s point of view to

Y
build a healthy rapport with the customers, and identify their requirements and expectations.
Maintaining successful relationships with customers helps organisations to attract new

IT
prospects and gain market share. CRM is a tool that plays a vital role in establishing and
determining mutually-beneficial goals between the organisation and its customers. A CRM
system helps an organisation to gather relevant information related to its existing as well

S
as potential customers. CRM also generates information related to individual customer’s
preferences and compiles its feedback in an organised form; thereby, facilitating customer

R
interaction.

E
3.6.2 Supplier Relationship Management (SRM)

IV
SRM is a process that helps organisations to manage the delivery of raw goods and services
to customers. SRM can be implemented in an organisation through various software tools.

N
These tools enable organisations to carry out their business transactions electronically, for
example, sending requests for goods or services online, thereby automating the entire process
U
of communication between the organisation and its suppliers.

SRM connects many organisational divisions, including marketing, manufacturing, and

Y

others, and is a component of the supply chain management process as a whole. These
divisions have direct communication with the company’s outside vendors. Moreover, SRM
R

gives businesses the ability to draught documents—like requests for proposals (RFPs) or
information requests—that are pertinent to the procurement process or supplier orders (RFI).
R

3.6.3 Basic Enterprise Resource Planning (ERP)

E
H

ERP is one of the most popular functional information systems that spans across the various
departments of an organisation. An ERP system is the macro process that integrates all the
IC

core business processes, such as purchase, inventory, production and distribution management.
A common database is created for all these business processes, which share a centralised
database. An ERP system has the following benefits:
D

‹‹ Integrates all the business processes of an organisation

N

‹‹ Provides qualitative information to all the business processes

‹‹ Enables managers in effective decision making by having access to enterprise-wide
O

information
‹‹ Supports organisational change and provides flexibility of business processes
P

Many organisations, such as Microsoft, Cisco and Coca-Cola, have adopted and implemented
the ERP system to increase operational effectiveness, although installing an ERP system
incurs heavy costs for an organisation as well.

DDE, Pondicherry University, Pondicherry 47

Information System in Supply Chain Management

Notes Self-Assessment Questions

13. ________ plays a vital role in establishing and determining mutually-beneficial goals
between an organisation and its customers.

14. SRM is one of the most popular functional information systems that spans across the
various departments of an organisation. (True/False)

Y
15. ERP stands for ________.

IT
Activity
Discuss the impact of an effective CRM on the success of an organisation.

S
R
3.7 Summary

E
‹‹ Information technology enables the development of efficient information systems,

IV
which are capable of generating speedy and accurate information.
‹‹ IT helps in restructuring the entire supply chain distribution set up and enables an
organisation to achieve higher service levels, maintain lower inventory, and incur lower

N
supply chain costs.
‹‹ Introduction of IT in inventory management has revolutionised its functioning.
U
‹‹ Implementation of technologies, such as automatic scanners and radio frequency
identification chips (RFID) enable organisations to keep track of their inventory.
Y

‹‹ Transportation is one of the most significant processes of a supply chain. It refers to

the movement of products from one location to another through various modes, such
R

as trucks, ships, airplanes, etc.

R

‹‹ The macro processes are related to managing the flow of information, products and
funds within an organisation.
E

3.8 Glossary
H

‹‹ Customer Relationship Management (CRM ): A tool that plays a vital role in

IC

establishing and determining mutually-beneficial goals between an organisation and

its customers.
‹‹ Electronic Data Interchange (EDI): A technology used for computer-to-computer
D

exchange of business documents in pre-defined standard formats.

N

‹‹ Global Positioning System (GPS): A set of devices that operates on the space-based
satellite navigation system, also called GPS, to determine the exact location of a person,
O

vehicle, or any asset to which it is attached.

‹‹ Radio Frequency Identification Chips (RFID): One of the most used applications for
P

tracking the movement of assets (and people carrying those assets) in and out of the
premises of an organisation.
‹‹ Supplier Relationship Management (SRM): A process that helps organisations to
manage the delivery of raw goods and services to customers.

48 DDE, Pondicherry University, Pondicherry

CHAPTER 3  Role of IT in Supply Chain Management

Notes
3.9 Terminal Questions
1. Explain the different types of information systems.
2. Briefly discuss various developments in IT and their impact on supply chain operations.
3. Discuss the implementation and use of GPS in a supply chain.
4. Explain the significance of transportation in supply chain. Name the three key players

Y
that affect transportation decisions.

IT
5. Explain in brief the three macro processes in a supply chain IT framework.

3.10 Answers

S
Q. Self Assessment Questions

R
1. Intra-firm

E
2. True

IV
3. b. Transportation management system

4. Electronic Data Interchange

N
5. False U
6. False

7. True
Y

8. Smart card
R

9.. Global Positioning System

10. Shipper, carrier and consignee

R

11. Air is the fastest and water is the slowest mode of transportation
E

12. d. Trucks
H

13. CRM
IC

14. False

15. Enterprise Resource Planning

D

Q. Terminal Questions

1. Information technology enables the development of efficient information

N

systems, which are capable of generating speedy and accurate information. Refer
to section 3.2 Information Systems.
O

2. IT helps in restructuring the entire supply chain distribution set up and enables
P

the organisation to achieve higher service levels, maintain lower inventory, and
incur lower supply chain costs. Refer to section 3.3 The Role of IT in Supply
Chain.

3. A Global Positioning System (GPS) tracking unit is a set of devices that operates
on the space-based satellite navigation system. Refer to section 3.4 Applications
of IT in Inventory and Supply Chain Management.

DDE, Pondicherry University, Pondicherry 49

Information System in Supply Chain Management

Notes 4. Transportation is one of the most significant processes of a supply chain. Refer
to section 3.5 Transportation and Facilities within a Supply Chain.

5. The supply chain process is classified into three macro processes. These macro
processes are related to managing the flow of information, products and funds
within the organisation. Refer to section 3.6 Macro Processes in the Supply
Chain IT Framework.

Y
IT
3.11 Case Study: Role of IT in Amul
In India, Amul is a well-known food brand. Products like as milk, milk powder, butter, ghee,

S
cheese, chocolates, Shrikhand, ice cream, and many more are available. The Sanskrit word
Amoolya, which means valuable, is the source of the brand name AMUL. In 1955, the Amul

R
brand’s first goods were introduced. Since then, millions of houses across India and abroad
have used them. Amul is a sign of many things these days: availability, service, and high-

E
quality goods offered at fair pricing. Amul is the first food firm in Asia to achieve the HACCP

IV
Certification, having received accreditation with both ISO 9001 and HACCP from QAS,
Australia.

One well-known and current example of effectively using IT is “Amul.” Gujarat Co-operative

N
Milk Marketing Federation was the highest co-operative organisation established by Amul,
which was founded in 1946 and started the dairy cooperative movement in India (GCMMF).
U
Currently, this effort is being repeated in more than 200 districts and 70,000 villages throughout
India, completely changing the country’s rural landscape. India is now the world’s greatest
producer of milk thanks to the cooperative movement. In India, Amul is among the biggest
Y

and most well-known food companies. GCMMF distributes its goods via a network of 4,000
stockists who in turn serve 500,000 retail locations. It advertises its products via 50 sales
R

offices located across India. Millions of litres of milk must be gathered from many sources
among millions of village residents to illustrate the complexity of logistics. It’s interesting to
R

note that milk is a perishable product; thus, it need significant coordination to store, process,
and distribute the milk within the allotted period.
E
H

GCMMF: An Overview
IC

Members: 12 district cooperative milk producers’ Union

No. of Producer Members: 2.28 million

D

No. of Village Societies: 11,132

N

Milk collection (Total - 2002-03): 1.86 billion litres

Milk collection (Daily Average 2002-03): 5.08 million litres

O

Milk Drying Capacity: 510 metric Tons per day

P

Sales Turnover (2002-2003): Rs 27457 Million

Simply put, the movement has resulted in effective milk collecting, but more significantly, it
has leveraged IT to increase milk farmers’ earnings, which makes the Amul supply chain case
study notable.

50 DDE, Pondicherry University, Pondicherry

CHAPTER 3  Role of IT in Supply Chain Management

Notes IT has been essential to the growth of the Amul brand. The logistics of coordinating the
daily collection of almost six million litres of milk from many village co-ops throughout
Gujarat, as well as the storage, processing, and manufacturing of milk products at multiple
district dairy societies, are done with clockwork accuracy. Within them, IT is essential.
Ensuring fairness and transparency throughout the organisation has been made possible by
the installation of approximately 3,000 Automatic Milk Collection System Units (AMCUS) at

Y
village societies. These units record member identity, milk fat content, volume collected, and
amount owed to each member.

IT
Amul made the strategic choice to rethink and reorganise the current software applications
in 1994 in order to handle the demands of expanding its company. The Enterprise-wide

S
Integrated Application System (EIAS) ERP software development project, which covers a
variety of operations like market planning, advertising and promotion, distribution network

R
planning, stock control, sales and accounting, budgetary control, quality control management,
and cooperative service management, was thus assigned by Amul. Every Amul office has

E
an email connection, and they all provide the main system with a daily report on sales and

IV
inventories. Additionally, GCMMF’s wholesale distributors, C&F locations, and sales offices
are all linked online to facilitate prompt information sharing. Amul is also in the process of
putting the whole supply chain online so that it may get important data right away and use

N
it in its decision-making. Transporters, member-manufacturing units, oil packing stations,
suppliers, depots, and the whole field force would all fall under this category.
U
To pique consumers’ interest and build nationwide brand awareness, a website (http://www.
amul.com) has been developed with sports-related content, quizzes, recipes, and business-to-
Y
consumer order placing. Email addresses such as [email protected] and [email protected]
are used by Amul’s consumer feedback channel for cheese and butter goods, respectively. At
R

the supply and distribution ends of AMUL’s business, e-competency has been shown.
(Source: Amul Case Study 1169465.html, http://www.studymode.com/essays)
R

Discussion Questions
E
H

1. Explain the role of IT in the globalisation of the Amul brand.

(Hint: Storing, processing and producing milk products at various district dairy
IC

societies)

2. Discuss the measures taken by Amul to meet the challenges of its growing business.
D

(Hint: Redesign and reorganise the existing software applications)

N

3.12 References and Suggested Readings

O

‹‹ Hazen,J., & Lynch, C. (2008). The role of transportation in the supply chain (1st ed.).
Memphis, TN: CFL Pub.
P

‹‹ Olson, D. (2012). Supply chain information technology (1st ed.). [New York, N.Y.] (222
East 46th Street, New York, NY 10017): Business Expert Press.

DDE, Pondicherry University, Pondicherry 51

Information System in Supply Chain Management

Notes E-references
‹‹ Mbaskool.com. (2014). Role of Information Technology In Supply Chain Optimization
| Business Article | MBA Skool-Study.Learn.Share. from http://www.mbaskool.com/
business-articles/operations/2083-role-of-information-technology-in-supply-chain-
optimization.html

Y
‹‹ HubPages,.
(2014). INFORMATION TECHNOLOGY AND SUPPLY CHAIN
MANAGEMENT. from http://prala.hubpages.com/hub/INFORMATION-

IT
TECHNOLOGY-AD-SUPPLY-CHAIN-MANAGEMENT-

S
R
E
IV
N
U
Y
R
R
E
H
IC
D
N
O
P

52 DDE, Pondicherry University, Pondicherry

chapter

4 IT and Supply

Y
Chain Management

IT
S
R
E
Structure

IV
4.1 Introduction

N
Learning Objectives U
4.2 Internal Supply Chain Management

4.3 Supply Relationship Management

Y

4.4 Transaction Management

R

4.5 Applications of Data Mining in a Supply Chain

4.6 Summary
R

4.7 Glossary
E

4.8 Terminal Questions

H

4.9 Answers
IC

4.10 Case Study: Using Data Mining to Predict Demands at DCX

4.11 References and Suggested Readings

D
N
O
P
Information System in Supply Chain Management

Notes Learning Objectives

After completing the chapter, you will be able to:
 describe internal supply chain management
 explain supplier relationship management
 discuss transaction management

Y
 discuss the applications of data mining in a supply chain

IT
4.1 Introduction
Supply chain is a customer-oriented service, its main objective being the delivery of the

S
required product or service to the final consumer (the source of revenue in the chain). A
supply chain moves through a series of complex procedures within and across organisations

R
and any weak link in the entire chain can prevent an organisation from attaining its true
competitive potential. Simply put, it is not the organisations that are competing with each

E
other but the underlying supply chains that are the major competing forces in the scenario.
The activities in a supply chain are both external and internal. In other words, they take place

IV
both within the organisation, such as manufacturing products, controlling inventory, etc. and
outside the organisation, such as delivering the right products at the right place at the right
time, managing good relations among various entities of the supply chain.

N
You have already learned about the role of IT and its applications in the various aspects of
U
the supply chain management. We have covered some of these aspects in the previous chapter.
In this chapter, you will first study the concept of internal supply chain management. Next,
you learn about Supply Relation Management (SRM) and its importance in the success of
Y
a supply chain. In addition, the chapter explains the concept of transaction management in
a supply chain. Towards the end, the chapter explains the technique of data mining and its
R

applications in a supply chain.

4.2 Internal Supply Chain Management

R
E

Supply chain is mostly considered as a set of external activities, such as manufacturing,

packaging, dispatching, and delivering of raw materials and finished products. However, in
H

reality, a supply chain has as much a role inside the premises of an organisation as outside it.
An internal supply chain can be defined as a set of activities or functions that are carried out
IC

within an organisation and conclude with providing a product to the customer. The functions
that are part of an internal supply chain span across departments of an organisation and can be
integrated for excellent customer service and company performance.
D

The main objective of supply chain management has always been to satisfy the needs and
requirements of customer service level optimally in targeted markets/segments. The supply
N

chain management also aims at optimising the total investment and cost incurred in the whole
process. The service/cost approach remains the prime focus of the supply chain management
O

nearly at every level of the supply chain cycle.

Most organisations have an Enterprise Resource Planning (ERP) system in place for controlling
P

the internal operations. This ERP system contains data such as details about customers,
suppliers, raw materials, components, purchased parts and finished goods. Some of the functions
performed by an ERP system are entering sales orders, generating purchase orders, generating
invoices, controlling inventory flow, distributing and manufacturing work orders. In other
words, you can say that the ERP system performs almost every activity right from the time raw
materials are procured till the time finished goods are delivered to the customers.

54 DDE, Pondicherry University, Pondicherry

CHAPTER 4  IT and Supply Chain Management

Notes Fig. 4.1 shows the list of internal functions of a typical sales and purchase supply chain:

SALES SUPPLY CHAIN PURCHASE SUPPLY CHAIN

Sales Order Purchase Order
Picking Receiving
Packing Quality Assurance Inspection

Y
Shipping Inventory  
Invoicing (Accounts Receivable) Manufacturing

IT
Sales Commissions Distribution
Returns Processing Invoicing (Accounts Payable)

S
Fig. 4.1: Internal Functions of a Sales and Purchase Supply Chain

R
As you can notice, all the activities shown in Fig.4.1 take place within an organisation and
thus form a part of the internal supply chain. These functions highlight the movement of

E
raw materials, finished goods, and revenue from a department dealing with “supplier” to a
department dealing with “customer”.

IV
Self-Assessment Questions
1. An _______ supply chain can be defined as a set of activities or functions that are

N
carried out within an organisation.
U
2. ERP stands for an Enterprise Resource Procurement. (True/False)

3. The _______ approach remains the prime focus of the supply chain management
nearly at every level of the supply chain cycle.
Y
R

Activity
List all the activities carried out in a supply chain process and categorise them as internal
R

or external.
E

4.3 Supply Relationship Management

H

The success of an organisation depends a great deal on the quality of relations it maintains
IC

with all the entities in its supply chain, particularly the suppliers. Supplier Relationship
Management (SRM) is the study of the discipline dealing with the practices and processes an
organisation employs to interact with its suppliers and the strategies it could take to maximise
D

the value of such interactions. SRM includes all of the procedures, business processes,
software, talks, and methods used to build and maintain a friendly connection between an
N

organisation and its suppliers.

An effective SRM between these two entities results in lower costs, higher quality, better
O

forecasting and mutually cordial environment that produces a win-win relationship for both.

SRM is similar to Customer Relationship Management (CRM) in its approach. CRM is

P

intended to streamline and make the relationship between an organisation and its customers
cordial; similarly, SRM also strives to make the relations between an organisation and its
suppliers more effective. The success of SRM depends on the efforts of both the parties—
organisation and supplier. The following elements define the value dimensions of this kind
of relationship:

DDE, Pondicherry University, Pondicherry 55

Information System in Supply Chain Management

Notes ‹‹ Commitment
‹‹ Trust
‹‹ Cooperation
‹‹ Mutual goals
‹‹ Interdependence and power
‹‹ Performance and satisfaction

Y
‹‹ Structural bonds
‹‹ Comparison level of alternatives

IT
‹‹ Adaptation
‹‹ Shared technology

S
‹‹ Social bond

Fig.4.2 shows the transitional path of an organisation-supplier relationship:

R
E
Confrontation Cooperation Coordination Collaboration

IV
Fig. 4.2: The Organisation-Supplier Relationship Path

N
Exhibit
Types of SRM Relationships
U
Approximately 145 distinct types of official and informal connection ties between suppliers
and purchasers were found by Dr. Cavinato’s investigation. Every single one is a chain of
Y

relationships. These may be broadly categorised into eleven partnerships, ranging from
complete integration to none at all:
R

1. Never heard of the provider, thus there’s no need to work with them
2. Unaware of their existence, may use them
R

3. Arm’s length pricing correlation

E

4. Price correlation, informal cooperation for efficiency at the operational level

5. Relationship between price and formal cooperation for longer-term efficiency
H

6. Relationship for total cost

7. Sources of opportunities
IC

8. Innovation and revenue-driven, top-line relationships

9. Cooperative enterprise
D

10. When one invests in the other, they both profit from it.
11. One vertically integrates by purchasing the other.
N

12. SRM is often associated with relationships three through six.

The focus is on controlling those areas of the partnership and determining what performance
O

qualities are desired from the provider. The process of looking through the supplier market
without having an immediate need to source is known as opportunity sourcing (number 7).
P

This is an effort focused only on discovery to find existing resources and assess what may be
valuable for an invention or new application.
Every kind of connection has various needs in terms of management and leadership, as
well as varied outcomes. The connections become stronger and more distinct when one
shifts from an arm’s length pricing relationship to a joint endeavour, and the advantages get
deeper and more extensive.
(Source: http://www.ism.ws/tools/content.cfm?ItemNumber=20233)

56 DDE, Pondicherry University, Pondicherry

CHAPTER 4  IT and Supply Chain Management

Notes SRM is not an easy task and like other aspects of business, it requires lots of commitment and
hard work to make it a success. A strong alliance and mutually agreed upon common goals
between the organisation and its key suppliers are the essence of a successful SRM. Openness
and honesty on both sides is sure to pay long term dividends to both the parties.

Implementation of IT applications in SRM practices helps to automate and streamline many

macro and micro processes of the supply chain.

Y
In Fig. 4.3, a macro process shows the raw material flowing from the source to the final

IT
consumer through various stages:

S
Source Processors Retailers

R
E
[products & services]

IV
[ Information flow ]
[ Funds flow ]

N
U
Suppliers Distributors Consumer
Y

Fig. 4.3: Functions in a Macro Process

R

A micro process in a supply chain includes a set of functions, whose number may vary
R

according to the complexity of the process. Fig. 4.4 shows the five typical functions of a
micro process:
E
H

buy make store move sell

IC

Fig. 4.4: Functions in a Micro Process

To cater to the growing demand of IT applications in SRM, many companies have come up
D

with specialised SRM software. Some popular SRM software vendors are 12 Technologies,
Manugistics, PeopleSoft, and SAP.
N

The following are some benefits of implementing SRM software:

O

‹‹ Enables better coordination and sharing of information between orgnisations and

suppliers leading to reduced production, inventory, and warehousing costs.
P

‹‹ Improves supply chain performance by collaboration and integration among

departments within and across the organisation.
‹‹ Enables organisations and suppliers to identify current market trends and customers’
demand more quickly and take timely actions.
‹‹ Automates the process of billing; thereby, saving time and reducing chances of errors.

DDE, Pondicherry University, Pondicherry 57

Information System in Supply Chain Management

Notes Exhibit
SRM for a Fortune 100 Pharmaceutical Company

It was a challenge to strengthen ties with important suppliers and contract manufacturers
for a major, multifaceted pharmaceutical and life sciences corporation in the United States.
The client hired Archstone, a business adviser and consultancy company, to improve

Y
comprehensive visibility within their global supply chain, particularly from international
suppliers, in response to growing market pressure over material sourcing.

IT
‹‹ The Challenge: A thorough Supplier Relationship Management (SRM) programme
must be established and executed across the direct material supplier base of the

S
organisation. The business must also be aware of the main weaknesses, difficulties,
and chances in the current SRM procedures. Along with developing a customised

R
SRM model that incorporates its procedures, resources, and template, it must also
bring stakeholders into line and win their support for the introduction and execution

E
of a formal SRM programme and vision.

IV
‹‹ The Solution: In order to define the stratification process and strategically reallocate
resources, Archstone first examined stakeholder needs, supplier input, and available
resources before developing a customised and successful SRM programme. In order

N
to facilitate implementation, this also included creating a supplier development
programme, governance procedures, training specifications, and a communication
U
strategy.
‹‹ The Results: For important suppliers of raw materials, a new pilot programme was
Y

put into place. With the help of this new procedure, the client was able to detect
and address a possible quality issue, improving risk management outcomes with a
R

significant strategic contract manufacturer. There was a thirty percent decrease in

the total base of raw material suppliers.
R

(Source: http://www.archstoneconsulting.com/services/sourcing-procurement/case-studies/supplier-relationship-management.jsp)
E

Self-Assessment Questions
H

4. An effective SRM between these two entities results in lower costs, higher quality,
better forecasting and mutually cordial environment that produces a ______
IC

relationship for both.

5. CRM deals with the relationship between an organisation and its:

D

a. customers
N

b. suppliers
c. retailers
O

d. managers
P

6. Name two elements that define the value dimensions of SRM.

7. Implementation of IT applications in SRM practices helps to automate and streamline

many ________ processes of the supply chain.

8. Name five functions of the micro process of a supply chain.

58 DDE, Pondicherry University, Pondicherry

CHAPTER 4  IT and Supply Chain Management

Notes Activity
Use the Internet to explore and explain various aspects of supply relationship management.

4.4 Transaction Management

Y
A supply chain is a network of transactions, be it of information, raw materials, finished
products, or payments. Transaction management is one of the integral processes of supply

IT
chain management. The functions of transaction management are similar to that of FedEx or
UPS, i.e. managing movement of goods/parcels from the source to the designated location. It
involves payment terms, tagging parcels, deciding routes, monitoring/tracking parcels on the

S
way and finally confirming the delivery at the designated location. The parcel or the package
generally moves through multiple distribution centers before reaching to its final destination.

R
The receipt and further delivery of the package is confirmed at each distribution center it
passes through. A final confirmation is sent when the package reaches its final destination.

E
The operations that make up transaction management include entering order data, keeping

IV
track of inventory balances, choosing orders, allocating, and shipping payables and receivables.
Use of IT in transaction management has automated all these activities; thereby saving
valuable time, cost, and efforts. IT applications help in entering, organising, and retrieving

N
transactional data; keeping records; enforcing rules governing transaction data entry and
maintaining database.
U
A computerised transaction, in order to be successful, must possess the following characteristics:
‹‹ Atomicity
Y

‹‹ Consistency
R

‹‹ Isolation

‹‹ Durability
R

These characteristics are known as ACID properties and are explained as follows:
E

‹‹ Atomicity: The atomicity property of a transaction defines that the transaction is

atomic, i.e, either it is fully completed or has not begun at all.
H

‹‹ Consistency: The consistency property of a transaction enforces consistency in the

IC

system state. It ensures that at the end of every transaction, the system is in a valid
state.
‹‹ Isolation: The isolation property of a transaction states that when a transaction runs
D

in isolation, it appears that the system is carrying out only that action.
N

‹‹ Durability: The durability property of a transaction states that a transaction is durable

once it has been successfully completed and all the changes it made to the system are
O

permanent.

There are various costs that are incurred in a transaction. These transaction costs fall into
P

three main categories:

‹‹ Search and information costs: Search and information costs are incurred in
determining if the required product is available in the market, the comparative pricing,
the relative utility and functionality of the product with regards to its usage and the
service costs incurred on the continuous use of the product.

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Information System in Supply Chain Management

Notes ‹‹ Bargaining costs: The process ofdrafting a suitable contract and coming to a mutually
agreeable agreement with the opposing party to the transaction involves bargaining
expenses.
‹‹ Policing and enforcement costs: Costs associated with policing and enforcing the
contract are expended to make sure the other party abides by its terms and to take
necessary action in the event that they are not.

Y
Self-Assessment Questions

IT
9. A supply chain is a network of________, be it of information, raw materials, finished
products, or payments.

S
10. Name two activities of the transaction management process in a supply chain.

R
11. A computerised transaction, in order to be successful, must possess the following
characteristics:

E
a. Atomicity, consistency, implementation and durability

IV
b. Assessment, consistency, isolation and durability
c. Atomicity, consistency, isolation and durability

N
d. Atomicity, consistency, isolation and delivery
U
Activity
Discuss ACID properties and how their implementation help in transaction management.
Y

4.5 Applications of Data Mining in a Supply Chain

R

The function of information systems in gathering and analysing data has previously been
R

covered. There is an equal explosion in data and the need to analyse it as a result of the
explosion in data acquired via different sources. Such information has often been utilised to
E

respond to frequently asked user questions. But since there is so much of it, there is a growing
need to “mine” it for more insightful and practical data.
H

The process of analysing data while considering the many contexts in which it might be used
IC

and condensing it into actionable insights that can be further leveraged to boost profits, reduce
expenses, or do both is known as data mining. There is software on the market specifically
designed to do data mining on both small and big datasets. Organisations may analyse data
D

from a variety of dimensions or angles and from a variety of views thanks to this software.
After analysis, the data is categorised and summarised to identify any correlations that were
N

found. Therefore, the act of finding patterns or connections between the many fields of huge
relational databases is known as data mining. Another way to describe it is as a method for
O

drawing fresh concepts and knowledge out of the already-existing data repository.

Data mining uses a discovery-based approach wherein a key relationship is established between
P

data by using pattern matching and other algorithms. It also defines various steps that must
be taken to ensure meaningful results on application of these algorithms.

Supply chain management usually deals with a large amount of data. Sorting, collating,
and processing such a huge amount of varied data need almost colossal human efforts. The
implementation of data mining technology along with the use of business intelligence (BI)

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Notes tools provides efficient solutions for these problems in addition to providing accurate and
upto-date information for better inventory management decisions.

The supply chain model of any industry typically contains various components like suppliers,
manufacturers, distributors, retailers and customers. Let us have a look at the effects of
applying data mining techniques on some of these components:
‹‹ Retailers: In a supply chain, retailers receive forecasts primarily from two sources:

Y
directly from individual customers and also from small- to medium-sized organisations.
The actual consumption from these two entities, namely individual customers and

IT
small and medium-sized organisations, is also considered. The disparity between the
forecast and the actual consumption is termed as the variance in demand. Likewise, the

S
discrepancy between the demand and the supply is known as the variance in supply.
The role of data mining at this point can be illustrated in the following ways:

R
 Using data mining tools the market can be segmented depending on the service

E
needs of distinct groups.
 Using data mining tools, the retailers can try to understand the buying behavior of

IV
the customers also called the market-basket analysis.
 Using data mining tools, the promotions of products can be targeted at specific

N
customers with the use of a computerised approach and an extensive database.
‹‹ Distributors: In a supply chain, distributors receive forecasts from retailers and large
U
organisations. These received projections are subsequently compared with the actual
consumption by these sources, namely retailers and large organisations. The variance
between the forecast and the actual consumption is denoted as the demand variation.
Y

Likewise, the difference between the request and the supply is termed as the supply
variation.
R

 The role of data mining in this scenario can be illustrated in the following ways.
R

Data mining can be used to:

 Predict the uncertainties of supply at the supplier level and at the item level
E

 Predict uncertainties in the entire process to avoid loss and item obsolescence
H

 Predict uncertainties in demand taking into consideration the factors such as

volume of demand, periodicity, and variations by retailers and big customers
IC

 Predict stock out at the warehouse

 Implement strategy in logistics to help accomplish corporate strategic objectives
D

‹‹ Manufacturers: In a supply chain, manufacturers receive the forecasted demand from

N

both distributors and directly from retailers. At this juncture, manufacturers relay the
retailer’s demand to their affiliated partners, aiming to fulfil solely the distributor’s
O

demand. The discrepancy between the anticipated demand from distributors and the
real consumption is termed as the variance in demand. Likewise, the disparity between
the committed and actual supply from suppliers results in the variance in supply for
P

manufacturers.
 The role of data mining in this scenario can be illustrated in the following ways.
Data mining can be used to:

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Notes  Predict the uncertainties in supply for manufacturers at the supplier level and at
the item level
 Predict uncertainties in the entire process due to machine breakdown, poor
performance and maintenance schedules
 Predict uncertainties in demand based on distributor, item, location, etc

Y
 Predict future trends in demand of the product
‹‹ Mass Customisation: Mass customization is another domain where data mining can be

IT
employed to pinpoint the products that can be customized for the masses. It is executed
at the delivery end. Organizations implement mass customization by consolidating
unique customer orders from a vast array of products, while attempting to minimize

S
the inventory of product components. In this scenario, data mining aids in identifying
and analyzing the demand pattern for these permutations.

R
Self-Assessment Questions

E
12. In data mining, the analysed data is categorised and summarised to define any

IV
identified relationships. (True/ False)

13. Data mining uses a discovery-based approach wherein a key relationship is established

N
between data using pattern matching and other________.

14. List the components of a supply chain model.

U
Activity
Y

Use the Internet to find various applications of data mining that can be applied to automate
the supply chain process.
R
R

4.6 Summary
E

‹‹ Supply chain is a customer-oriented service; its main objective being the delivery ofthe
required product or service to the final consumer (the source of revenue in the chain).
H

‹‹ An internal supply chain can be defined as a set of

activities or functions that are carried
out within an organisation and conclude with providing a product to the customer.
IC

‹‹ Supplier Relationship Management (SRM) is the study of the discipline dealing with
the practices and processes an organisation employs to interact with its suppliers and
D

the strategies it could take to maximise the value of such interactions.

‹‹ Transaction management consists of various activities, such as order details entry,
N

inventory balance maintenance, order selection, allocation and shipment of payables

and receivables.
O

‹‹ Data mining is defined as the process of analysing data keeping in mind the different
perspectives where it can be implemented and summarising it into useful information
P

that can be further utilised to increase revenue, cut costs, or both.

‹‹ A supply chain model mainly consists of the following components: suppliers,
manufacturers, distributors, retailers and customers.

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Notes
4.7 Glossary
‹‹ ACID: Stands for the four properties of a transaction, which are atomicity, consistency,
isolation and durability
‹‹ Customer Relationship Management (CRM): An approach intended to streamline
and strengthen the relationship between an organisation and its customers.

Y
‹‹ Enterprise Resource Planning (ERP): A system that controls the internal operations
of an organisation, such as details about customers, suppliers, raw materials, components,

IT
purchased parts and finished goods.
‹‹ Mass customisation: An aspect of a supply chain dealing with the identification of

S
products that can be customised for the masses.

R
4.8 Terminal Questions

E
1. Explain the concept of Internal Supply Chain Management.

IV
2. Discuss the importance of maintaining a good organisation-supplier relationship.

3. What are ACID properties? Explain their role in transaction management.

N
4. Discuss the effects of applying data mining techniques on the components of a supply
chain.
U
4.9 Answers
Y

Q. Self Assessment Questions

R

1. Internal
R

2. False
3. Service/cost
E

4. Win-win
H

5. a. customers
6. Commitment and mutual goals
IC

7. Macro and micro

8. Buy, make, store, move and sell
D

9. Transactions
N

10. Order details entry, inventory balance maintenance

11. c. Atomicity, consistency, isolation and durability
O

12. False
P

13. Algorithms
14. Suppliers, manufacturers, distributors, retailers and customers

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Notes Q. Terminal Questions

1. An internal supply chain can be defined as a set of activities or functions that are
carried out within an organisation and conclude with providing a product to the
customer. Refer to section 4.2 Internal Supply Chain Management.
2. The success of an organisation depends a great deal on the quality of relations it

Y
maintains with all the entities in its supply chain, particularly the suppliers. Refer
to section 4.3 Supply Relationship Management

IT
3. A computerised transaction, in order to be successful, must possess ACID
properties. Refer to section 4.4 Transaction Management

S
4. The supply chain model of any industry typically contains various components
like suppliers, manufacturers, distributors, retailers and customers. Refer to

R
section 4,5 Applications of Data Mining in Supply Chain

E
Case Study: Using Data Mining to Predict
4.10

IV
Demands at DCX
Applications for data mining are distinguished by their capacity to handle the rapid changes

N
in the market and the proliferation of corporate data. These qualities aid in giving decision-
makers effective tools. Not only statisticians, but also business users may utilise these tools
U
to analyse vast amounts of data in search of patterns and trends. Business intelligence is the
term used to describe data mining methods used in business-oriented applications (BI). Any
BI solution’s capacity to extract knowledge from data serves as a yardstick. Finding patterns,
Y

trends, rules, and correlations in data quantities too big for human analysis to handle alone is
a problem.
R

The purpose of this case study is to illustrate the applicability of data mining methods to the
R

automotive industry. Although there is little direct customer interaction in the automotive
manufacturing sector, survival in the cutthroat industry depends on a basic grasp of the
E

industry, including its trends, moods, and shifting consumer tastes and preferences.

The automaker DCX made the decision to use data mining to determine which car models
H

sell the least quickly. Additionally, DCX wanted the inventory managers to shift cars more
quickly. It has to determine which cars move more quickly and which automobiles remain in
IC

stock for a longer period of time in order to do this. Additionally, DCX aimed to provide an
early indication of the car configurations that would probably sell well when the new cars
are introduced. The reason these analyses are connected is because they all need data to be
D

gathered, cleaned, stored, mapped, and then aggregated for study and analysis.
N

The following information is gathered in order to produce DCX’s automotive data mining
O

Solution:
P

‹‹ Supply chain process information (collected from sales, inventory, orders, and production
plans)

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Notes ‹‹ Manufacturing information (collected from car configurations/packages/options codes

and descriptions)
‹‹ Marketing information (collected from dealers, business centers, etc.)
‹‹ Customers’ trends information (collected from various websites and Web-activities)

In order to better analyse and forecast car sales, manage vehicle inventory, and schedule car

Y
manufacturing, an enterprise data warehouse is designed to store Web data, inventory data,
demand data, and sales data. A strategic tool that business users may use to increase sales

IT
demand forecasting, model/trim level mix planning, alter body model/trim level mix with
inventory data, and decrease days on lot is a data warehouse that integrates online and offline
behavioural data for decision-making.

S
A launch analysis is also done to gather the following information:

R
‹‹ Early indicator of the customers’ interest of newly launched vehicles (“what the
customer wants”).

E
‹‹ Comparison analysis between “what the customer wants” and “what supply chain is

IV
providing” by comparing Web-activities to inventory, order, sale and production plan.

The fundamental idea behind the launch analysis is to evaluate the effectiveness of the online
activity “Build and Price,” which allows users to create their own car models on the DCX

N
website. It also takes into account each configuration created and gauges customer interest in
a given vehicle or vehicles before comparing the results to the production schedule, inventory
U
sales, and dealer orders to identify any potential supply chain problems. Customers could, for
instance, need more configurations or capacity for a particular model than what dealers ask
for or what the manufacturing schedule provides.
Y

This research used the “Build and Price” activity as an early indicator of future consumer
R

demand, which gave brand managers and inventory managers critical numbers during
the introduction of a new car. Stated differently, launch analysis facilitated the process of
R

determining “what the client wants” and “what the supply chain is really offering.” This
technique also assisted in classifying automobiles at various levels of the vehicle configuration
E

hierarchy and identifying cars that do not sell quickly. With the use of this information,
DCX was able to better understand client expectations, anticipate consumer purchase trends,
H

provide responsive vehicle launches, and manage customer relationships.

(Source: http://www.academia.edu/190451/Using_Data_Mining_for_Predicting_Future_Car_Market_Demand_DCX_Case_Study)
IC

Discussion Questions
D

1. What kind of information is gathered in order to generate DCX’s automotive data

mining solution? Also cite the sources from where this information is collected.
N

(Hint: Supply chain process information (collected from sales, inventory, orders, and
O

production plans)

2. Describe the insights and knowledge gained by DCX through launch analysis.
P

(Hint: Launch analysis helped DCX to predict consumer purchasing behavior and
understand consumer demands.)

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Notes
4.11 References and Suggested Readings
‹‹ Schuh, C., Strohmer, M., Easton, S., Hales, M., & Triplat, A. (2014). Supplier relationship
management (1st ed.). Berkeley, CA: Apress.
‹‹ Yin, Y. (2011). Data mining (1st ed.). London: Springer

Y
E-references

IT
‹‹ Bucki, J. (2014). Supplier Relationship Management (SRM) - Definition. About. from
http://operationstech.about.com/od/glossary/g/SRM_SuppRelMgt.htm

S
‹‹ Anderson.ucla.edu,. (2014). Data Mining: What is Data Mining? from http://www.
anderson.ucla.edu/faculty/jason.frand/teacher/technologies/palace/datamining.htm

R
E
IV
N
U
Y
R
R
E
H
IC
D
N
O
P

66 DDE, Pondicherry University, Pondicherry

chapter

5 Future of IT in Supply

Y
Chain Management

IT
S
R
E
Structure

IV
5.1 Introduction

N
Learning Objectives U
5.2 Recent Developments in IT

5.3 Changing Supply Chain Landscape

Y

5.4 Challenges in Supply Chain Management

R

5.5 Supply Chain: A Future Perspective

5.6 Summary
R

5.7 Glossary
E

5.8 Terminal Questions

H

5.9 Answers
IC

5.10 Case Study: Analytics in Supply Chain of a Contact Lense

Manufacturer
D

5.11 Suggested Readings and E-references

N
O
P
Information System in Supply Chain Management

Notes Learning Objectives

After completing this chapter, you will be able to:
 discuss the recent developments in IT in supply chain
 explain the changing supply chain landscape
 describe the challenges in supply chain management

Y
 discuss the future of IT applications in supply chain management

IT
5.1 Introduction
In the previous chapter, you studied about information technology (IT) and how its applications

S
can help in better managing the supply chain activities. Now, let us move forward and study
the future of IT in supply chain management.

R
IT plays a very crucial role in managing the supply chain processes of an organisation. It

E
allows information sharing, integration of different parts of the supply chain, and efficient
flow of information and goods throughout the supply chain. Companies, such as Apple,

IV
Amazon.com, Unilever, P&G, Samsung, Cisco, Coca Cola, Nike, Walmart, etc. have leveraged
technology and built a highly efficient supply chain. However, supply chain practices
change with the changing business landscape. For example, supply chain management went

N
through revolutionary changes after the introduction of e-commerce. In today’s competitive
environment, the efficiency of supply chain has become a very important differentiating factor
among companies.
U
Organisations look for technological changes that can be implemented to improve supply
chain. For example, implementation of Radio Frequency Identification (RFID) technology
Y

not only saved time and cost but also significantly improved the efficiency of the supply chain.
R

IT applications, such as Big Data Analysis and analytics are also going to change the way IT
helps in making supply chains more effective.
R

The global business environment is going through a rapid transformation. Competition has
increased, customer taste and preferences have changed, the modes of delivering products and
E

services have evolved. With the changing business environment, the supply chain practices
of a company also need to evolve. The evolution of supply chain is facilitated by continual
H

technological innovation. Future technological trends will determine the future path of
supply chain management as practised by organisations.
IC

In this chapter, you will study some of the recent developments in IT in supply chain. Next,
the chapter will elaborate on the changing supply chain landscape. In addition, you will study
D

the challenges faced by organisations in supply chain management. Towards the end, the
chapter discusses the future of IT applications in supply chain management.
N

5.2 Recent Developments in IT

O

The information technology industry is advancing at a quick pace, which is characteristic of

P

the 21st century. Technology is becoming a necessary component of both everyday living
and corporate operations. Organisations need a variety of abilities to establish themselves and
remain viable in the cutthroat, worldwide market of today. Understanding and being able to use
and exploit the enormous potential of information technology is one of these most important

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Notes abilities. According to the Information Technology Association of America, information

technology is defined as “the study, design, development, application, implementation, support
or management of computer-based information systems.”

Information technology has proved to be a revolutionary change agent in different aspects of

business and society. For example, it has changed the way different departments or different
branches in an organisation communicate, the way information is collected, stored and shared,

Y
the way products and services are delivered to customers and the way payment is received.

IT
Effective supply chain management now has a plethora of different options thanks to recent
IT advancements. Let’s now examine a few recent IT developments:

S
5.2.1 Cloud Computing

R
One of the most discussed IT applications is cloud computing. The process of using computer

E
services, such as software and hardware, as a service across a network is known as cloud
computing. Put differently, cloud computing is the process of providing computing as a service

IV
instead of a product, wherein different kinds of information, software, and computational
resources are made available to computers and other devices as network utilities. All of these
tools and resources are kept in a cloud and made available to customers over the Internet. A

N
collection of hardware, networks, storage, services, and interfaces that aid in the delivery of
computer services is referred to as a cloud. For its users, it serves as a central location for all
of their computer requirements.
U
Fig. 5.1 represents the concept of cloud computing:
Y
R

Rajesh
R

Tablet Document Training Notebook

E

Calendar Database Presentations

H

Collaboration Finance
Storage
Contacts
IC

Spreadsheets
Email
Rajesh
D

Smartphone
Desktop
N

Cloud Computing
Having secure access to all your applications and data from
O

any network device

Fig. 5.1: Representation of Cloud Computing

P

In Fig. 5.1, you can see that the resources stored in a cloud are accessed by various clients,
according to their individual requirements. Earlier, people used to run applications or programs
after downloading software on their computers or servers. Cloud computing enables them

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Information System in Supply Chain Management

Notes to access and work on applications and programs on the Internet itself. These days, many
businesses are moving to the cloud because of its various benefits.

An essential factor in boosting a supply chain’s efficiency will be cloud computing. As we’ve
previously stated, an organisation requires more effective ways to collaborate, communicate,
share risk, and orchestrate supply chains in order for them to reach their maximum potential.
In order to provide comprehensive insights into how cloud computing platforms and apps

Y
might enhance supply chain efficiency, SCM World has produced a paper titled “Supply Chain
and The Future of Applications” (Columbus, L. (2014). Lessons From The SCM World:

IT
Where Cloud Computing is Increasing Supply Chain Performance. [Online] Forbes.] The
four supply chain methods that are most cloud-friendly, according to the survey, are Spare
Parts Management, Store Shelf Optimisation, Transportation Management Systems (TMS),

S
and Sales & Operations Planning (S&OP). The network effect may be most effectively delivered
across a supply chain using these tactics.

R
Some ways in which cloud computing can benefit supply chain management are:

E
‹‹ Stores all data at one place (centralisation of information) where it can be accessed by

IV
all the concerned entities of a supply chain
‹‹ Increases collaboration by enabling organisations to work on documents and shared
apps with other organisations, suppliers or retailers, irrespective of their geographical

N
locations. This helps everyone in the chain to remain updated of the recent developments.
A survey conducted by Frost & Sullivan has revealed that organisations that invested in
U
collaboration technology gained a 400% return on investment.
‹‹ Allows organisations to track movements of their packages and the persons/vehicles
carrying them. This helps to resolve many potential thefts and disasters.
Y

‹‹ Provides a competitive edge in the market as organisations using cloud services can
R

provide better and faster services to their consumers.

R

Salesforce.com and eBay are some well-known companies that use cloud services. eBay is a
well-known auctioneer of items on the Internet and provides services to around five lakh
E

small businesses.
H

5.2.2 Mobile Applications

IC

This is a very important emerging trend in information technology. In simple words, mobile
applications refer to the various software applications on smart phones and tablet computers.
Mobile applications or apps are available for download from various mobile operating
D

systems, such as iOS, Windows OS, and Android. Software companies, such as Oracle, have
been developing a number of mobile applications to execute various supply chain functions.
N

For example, Oracle Mobile Supply Chain offers comprehensive information and process
automation. Similar to this, managers may oversee the supply, production, warehousing,
O

logistics, and customer-related components of a company’s supply chain from a distance with
the help of Sky Technology’s mobile SCM solution. These programmes may be distributed to
P

any quantity of users on all popular mobile devices and operate on the SkyMobile platform.

Fig. 5.2 shows some important supply chain functions that can be executed with the help of
mobile applications:

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Notes Goods receipt

Supplier Raw materials management

Production planning Goods issue

Manufacturing Quality control Production recording

Y
Inspections

IT
Goods receipt Inventory/warehouse
Warehouse Management

S
Weighbridge automation
Distribution
Transport Tracking/proof of delivery

R
Point of sale

E
Mobile payments
Customer Returns management

IV
Fig. 5.2: Mobile Applications Managing Supply Chain

N
As you can see in Fig. 5.2, mobile applications can help in managing and executing different
supply chain functions, such as receiving goods, managing raw materials, planning production,
U
controlling quality, receiving payments, tracking delivery, and managing returns. Mobile
applications also enable managers in tracking and controlling supply chain activities remotely.
Y

5.2.3 Analytics
R

“Analytics is the combustion engine of the twenty-first century, and information is its oil.”
Gartner Group’s Peter Sondergaard. Data is being created at an alarming pace in the true
R

information age that we live in. Big Data is a phrase used to describe this enormous volume
of data. Businesses rely on data from a variety of sources to manage their operations. To
E

comprehend and evaluate market trends, research consumer behaviour, and make financial
H

judgments, they analyse data. These days, big data is a commonly used word, especially in
the IT sector, where it has created a number of employment prospects. Datafication is the
IC

process of obtaining or gathering Big Data. Big Data is datafied in order to make it useful.
Big Data can only be helpful if we know what to do with it; organising it is not enough to
make it valuable.
D

Analytics refers to the process of studying large amounts of data (Big Data) to find new
patterns and information trends, which help an organisation to take better decisions, analyse
N

the effects of certain events and previously-taken decisions, evaluate the performance of a
given tool or application. Analytics can be extensively implemented and utilised in supply
O

chain operations.
P

Supply chain is a field in which analytics can be extensively implemented. According to an

article on EBN online, “Some industry experts claim that the day for real-time supply chain
practices has come -- and is on the verge of being more mainstream, thanks to a multitude of
cloud data management tools and increased corporate adoption of new supply chain software

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Notes platforms coming to MARKET. However, there’s also acknowledgement that a necessary
foundation for moving efficiently at real-time speed -- supply chain analytics -- is still very
much at the beginning stages of development at many companies, and will take time to build
out.” (Ebnonline.com, (2014). EBN - Logical Link - Betting on Analytics as Supply Chain’s
Next Big Thing. [Online] Available at: http://www.ebnonline.com/author.asp)

The following are some benefits of performing data analysis in a supply chain:

Y
‹‹ Allows integrated storage of data

IT
‹‹ Allows analysis of data so that it can be used productively by an organisation
‹‹ Helps enhance efficiency as all the stakeholders in a supply chain are better informed
and know what to do and how to do it

S
‹‹ Improves the quality of products through analysis of feedback data

R
‹‹ Personalises products and services by knowing the customer’s requirements

E
‹‹ Improves customer satisfaction and experience as organisations are able to fulfil
customer requirements on time

IV
Exhibit

N
What’s Behind the Supply Chain Analytics Revolution?

by Clint Reiser
U
July 30th, 2014

Information on the current analytics and big data revolution in business is abundant,
Y

almost infinite. I just read an article in the Wall Street Journal by Billy Beane, the general
manager of the Oakland A’s who is most known for being Brad Pitt’s character in the
R

movie Moneyball, about a tech-driven revolution in sports. That essay offered an intriguing
viewpoint on how technology and analytics are developing in sports, in my opinion. It
R

also inspired me to write this essay explaining how I see the supply chain management
analytics revolution. In essence, I believe that the analytics revolution is being propelled by
E

advancements in supporting factors like data capture, data availability, calculation speed,
H

and storage capacity rather than by modifications in calculations (an average is still an
average, and a standard deviation is still a standard deviation) or even analytics software.
These elements have made it possible to analyse more characteristics and behaviours more
IC

often, more granularly, and with less delay, yielding more timely and useful descriptive and
predictive data.
D

Data Capture and Availability

N

The most significant contributing element to the increasing complexity and ubiquity of
analytics may be the vast volume of data pertinent to supply chain management. Supply
O

chain partners are sharing and using traditional point of sale (POS) data more often,
and e-commerce transactions lend themselves readily to data collection and analysis.
P

Meanwhile, consumer information and purchasing habits are added to sales data via online
accounts and customer loyalty programmes, enabling businesses to do product substitution
research for demand shaping initiatives. Radio frequency technology is increasingly
widely used in fulfilment to provide real-time inventory information in warehouses. Fleet
telematics’ declining cost in transportation has led to a rise in its application, which has

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Notes provided more regular location data that may be used for delivery time estimations, fleet
scheduling, and enhanced visibility of merchandise that is moving between locations.

Calculation Speed and Storage Capacity

While keeping prices down, the continuous exponential rise in computer hardware

Y
capabilities has led to significant gains in processing and storage speed as well as capacity.
This makes it possible to significantly expand data storage and analyse enormous volumes

IT
of fine-grained data rather than just data aggregates. Data aggregation has previously
obscured differences, but examination of “disaggregated data” reveals them. Sales at the
shop level, for instance, provide more information than sales at the distribution centre

S
level. Monthly sales data is not as good as daily or weekly sales data for providing timely
and precise inputs to projections. Lastly, research based on Stock Keeping Units (SKUs)

R
yields more insightful results than research based on product categories. In summary,
finer-grained data may provide more insightful information than combined data. My

E
college statistics professor once stated, “Statistics may give insight, but are in essence a
type of data annihilation.” It brings back memories of that statement. Better analytical

IV
options are presented by increased granularity.

N
Today’s Supply Chain Analytics
These factors allow transportation routing to be updated dynamically to accommodate
U
shifting workloads or unforeseen traffic jams; supply chain planning and visibility
applications now capture inventory at DCs, in-transit, and at store locations; forecasting
is now done in-memory, allowing for demand sensing inputs that facilitate forecasts for
Y

each SKU, at the store level, on a daily basis; and warehouse analytics can provide visibility
into current inventory status and improved worker productivity measurement. There is
R

a lot of room for improvement in supply chain operations thanks to these technologies.
Crucially, analytics offers innovative, creative thinkers a method to use data to run their
R

businesses in fresh and efficient ways, much as the Oakland A’s did with Moneyball.
E

(Source: Logisticsviewpoints.com, (2014). What’s Behind the Supply Chain Analytics Revolution? :: Logistics Viewpoints: A Blog for
Logistics, Supply Chain, and 3PL Executives.)
H
IC

Self-Assessment Questions
1. Mention some recent developments in IT that have wide application in supply chain
management.
D

2. We can define __________as a technique of utilising computing services, such as

N

software and hardware as a service over a network.

3. _______refers to the process of finding important patterns from a large amount of data.
O

4. List two benefits of performing data analysis in a supply chain.

P

Activity
With the help of the Internet, explore some recent trends in IT (other than given in the
chapter) that may make a supply chain more efficient.

DDE, Pondicherry University, Pondicherry 73

Information System in Supply Chain Management

Notes
5.3 Changing Supply Chain Landscape
In the last two decades, a number of related disciplines, such as supply chain management,
market channels of distribution, and logistics and purchasing have emerged and evolved.
Initially, companies mainly focused on the quality of products to stay competitive in the market.
This is the reason why in early 1980s, most American companies adopted quality improvement

Y
techniques, such as TQM, Six Sigma, Kanban, etc. However, companies soon realised that in
order to reduce cost and cut competition, they need to make the distribution channels more

IT
effective and efficient. In other words, they need to manage supply chain operations really
well. In view of this realisation, companies then started optimising the performance of their
supply chains. For example, in the 1980s and 1990s, most companies were producing and

S
distributing in the domestic market. However, towards the end of 1990s, the emergence of
outsourcing changed the way companies handled many of their business operations. The need

R
to outsource work and distribute goods globally made organisations realise the importance of
developing and managing an effective supply chain network. In case of most organisations,

E
the costs of merchandises are heavily dependent on the efficiency of their supply chains. For

IV
example, Walmart, the largest retailer in the world, sources goods from all over the world.
One of the most important reasons the company can fulfill its promise of delivering goods at
cheaper rates than its competitors is its highly efficient global supply chain.

N
Supply chain processes are continuously evolving owing to rapid technological advancements,
high level of competition, globalisation, and emergence of e-commerce. New technologies
U
have greatly revolutionised almost all the ways of handling and managing supply chain
operations both within and outside the organisations. For example, introduction of Radio
Frequency Identification (RFID) technology automated the process of labeling and tracking
Y

of products; thereby saving significant time, cost, and effort. Walmart was one of the first
retailers to implement RFID in its merchandise. Creating a place and sustaining in this highly
R

competitive and ever changing market require organisations to be always on the lookout of
innovative and more advanced ways of doing things. This is all the more applicable in supply
R

chain management considering the impact its success or failure can have on the health of an
entire organisation.
E

Cost is a very important differentiating factor in a highly competitive market. Even small
H

companies having a more efficient supply chain network can cut costs and beat their bigger
counterparts. Globalisation has helped supply chains extend their boundaries and become
IC

more global. Today, retailers source products from all over the world to reduce costs. In
addition, the scope of the distribution of products has also gone beyond national boundaries.
Large online retailers, such as Amazon.com ships products all over the world to its customers.
D

The emergence of e-commerce represents a significant shift in the supply chain. It refers
N

to performing trades and commerce online. Electronic commerce is primarily driven by its
ability to reduce costs associated with buying, inventory, cycle times, and customer service. It
O

also creates new possibilities for sales and lowers costs associated with marketing and sales.

Table 5.1 lists the areas of a supply chain that can benefit from the application of e-commerce:
P

74 DDE, Pondicherry University, Pondicherry

CHAPTER 5  Future of IT in Supply Chain Management

Notes Table 5.1: Applications of E-commerce in Supply Chain

Areas of Supply Chain Benefits of Applying E-commerce
Marketing and Sales ˆˆ On line product information

ˆˆ Electronic selling
ˆˆ Product offerings/e-supermarkets

Y
Procurement/Logistics ˆˆ Electronic auctioning/bidding
ˆˆ Low cost transportation

IT
ˆˆ Point-to-point selling
ˆˆ Point- to-point warehousing

S
Customer Service ˆˆ Repair/return/replacement
ˆˆ On-site fixing

R
ˆˆ Technical support

E
ˆˆ Product usage information
Inventory Management ˆˆ High visibility

IV
ˆˆ Removal of obsolete items
ˆˆ On-line status information on inventory

N
U ˆˆ Spot selling of items

E-commerce in itself is a highly growing industry. One of the most crucial factors for the
survival of e-commerce industries is their ability to provide low cost services and a reliable
distribution network. E-commerce companies need to build highly efficient supply chains to
Y

capture market share and build reputation in the market. Some Indian e-commerce companies
with an efficient supply chain are Flipkart.com and Jabong.com.
R

Using e-commerce applications in a supply chain results in:

R

‹‹ Improved productivity
‹‹ Improved quality
E

‹‹ Improved customer service

H

‹‹ Reduced costs
IC

‹‹ Shortened supply chain

‹‹ Faster Product development
D

‹‹ Reaching new markets

‹‹ Improvement in cash flows
N
O
P

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Information System in Supply Chain Management

Notes Exhibit
How Robotics is Changing Industrial Supply Chain Landscape

Y
IT
Although recent advancements have shown that robotic technology may further alter the

S
structure of the supply chain network, it has long been an essential component of the

R
industrial supply chain. As a result, the units themselves have more adaptability and flexibility,
allowing them to perform more complex jobs. Robotics offers chances that your supply

E
chain may capitalise on, allowing your manufacturing process to become more optimised
and more competitive in a rapidly changing market. Automation of supply chain processes

IV
is now feasible for more businesses thanks to advancements in a number of critical areas.

Robots on the manufacturing floor may now be “scheduled” by developers, allowing them
to operate alongside humans without interfering with the industrial supply chain. Not only

N
is it necessary to maintain a specific safety distance between workers and the machinery,
but there are productivity gains as well. Robot choreography scheduling enables seamless
U
operations under time limits, such as paint applications or shift ends, when task assignments
must be completed within a certain period of time.
Y

The main issue with robots in the past has been their tendency to disrupt labour processes.
It must be possible for human workers to enter and exit a location without needing to turn
R

off a robotics cell. In a similar spirit, the requirement to maintain a safe distance between
the robots and people sometimes limited the motion of the earlier generation of robots.
R

The deployment of robots in formerly human-only domains has been made possible by
advances in technology.
E

Cages are no longer required because to developments in robots technology used in

H

industrial supply chain operations. In the past, specific safety barriers were necessary
on the manufacturing floor to guard against potential harm in the event that a person
IC

unintentionally approached too closely. Robotics capabilities are more widely available
when cages are removed, allowing for more human engagement and streamlined production
processes.
D

Businesses are already experimenting with even more sophisticated features, such
dynamically restructuring work routines. When unforeseen production levels or batch size
N

fluctuations occur, this would be quite helpful. Because there is no chance of production
delays and the process is more adaptable to real-world circumstances, work scheduling can
O

be handled more effectively in the cage-free environment.

Demand changes have the potential to affect your manufacturing facilities and have
P

an impact on your whole industrial supply chain, regardless of how meticulously you
predict. Enabling robots in the production process to react instantly to changes in demand
increases the supply chain’s efficiency and responsiveness.
(Source: Afflink, L. (2014). How Robotics Is Changing The Industrial Supply Chain Landscape. [online] Blog.afflink.com. )

76 DDE, Pondicherry University, Pondicherry

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Notes Self-Assessment Questions

5. In the 1980s and 1990s, most companies were producing and distributing in the
______market.

6. In most organisations, the costs of merchandises are not dependent on the efficiency
of their supply chains. (True/False)

Y
7. E-commerce refers to the practice of doing business and conducting transactions:

IT
a. Electronically
b. Independently

S
c. Manually
d. Virtually

R
E
Activity
With the help of the Internet, conduct a research on the major e-commerce companies in

IV
India, the cities they deliver and the estimated delivery times.

N
5.4 Challenges in Supply Chain Management
U
Organisations encounter a variety of issues in managing the diverse activities of their supply
chains due to the evolving environment of supply chain networks. Some of the obstacles that
organisations encounter while attempting to create and oversee a successful supply chain are
Y

as follows:
R

‹‹ Inability to apply the right metrics: One of the biggest problems in supply chain
management is determining and putting into practise the appropriate measurements.
R

There are many different problems, such disagreements about appropriate metrics
between departments, product lines, and supply chains inside an organisation, reaching
E

consensus on definitions and computations, and having an excessive or insufficient

number of metrics.
H

‹‹ Complexity of supply chains: A complicated network of suppliers, manufacturers,

warehouses, and transporters is created when a broad range of goods and services are
IC

offered to various clients. The complexity of a network with such a broad swath makes
it very challenging to identify the location and cause of issues.
D

‹‹ Globalisation of manufacturing operations: Companies are expanding their

manufacturing operations globally to meet the demands of an ever-expanding client
N

base. Due to this globalisation, it is now essential for organisations to have a worldwide
network of procurement specialists that can support and respond to supply chain
demands. Chief Procurement Officers (CPOs) concur that it might be difficult to find
O

and choose a key supplier that can provide manufacturing sites consistent global quality
and dependable local service.
P

‹‹ Shorter lead time, less inventory, and better throughput: With fast changing market
demands, product lifecycles are being shortened. Therefore, most organisations are
always under pressure to shorten their lead time, maintain less inventory and increase
throughput.

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Information System in Supply Chain Management

Notes ‹‹ Consolidating supplier base: Consolidation of supplier base brings many advantages
to a company. Consolidation eliminates supply base variances and overheads. However,
it is a significant challenge to find a supplier having varied solutions and experiences in
supplier-based consolidation processes.
‹‹ Having access to the latest technology: The latest technologies in any field generally
come at a high price. In addition, the world of technology is continuously changing at

Y
a very fast pace due to rapid innovations and developments. Therefore, it is a challenge
for organisations to decide and maintain a balance between their requirement for a

IT
technology and the budget to acquire it.

Self-Assessment Questions

S
8. Mention any three challenges faced by organisations in supply chain management.

R
9. With the shortening of the product life cycles, companies are under pressure to
shorten the lead time. (True/False)

E
10. Globalisation made it crucial for organisations to have a global _______ that could

IV
support and react to the requirements of a supply chain.

Activity

N
Form a group of friends and discuss the main challenges faced by companies in managing
supply chains.
U
5.5 Supply Chain: A Future Perspective
Y

In the previous section, we studied some of the main challenges faced by organisations in
R

supply chain management. Companies are putting efforts to meet these challenges with the
help of innovative technologies. Let us study some of the key features that the future supply
R

chain technologies would require to meet the supply chain challenges:

E

‹‹ Multi Channel Capability: Future software has to meet e-commerce and multi-channel
sales requirements. Owing to the exponential growth in online orders, international
H

shipping, and returns, today’s logistics systems need to be able to respond swiftly to
various order channels and handle order distribution in an orderly and effective manner.
IC

‹‹ Visibility: It all comes down to providing all the parties engaged in the various phases
of a supply chain with access to information, such as orders, shipments, the quantity of
D

units, vehicles, etc. An organisation might gain from increased supply chain awareness
in many ways.
N

‹‹ One-stop-shop solutions: In supply chain management, there is hardly any ‘one- size-
fits all’ solution. In other words, the IT features that are indispensable for one company
O

may be completely irrelevant for another. It all depends upon organisations’s individual
operations and specific business requirements. However, globalisation of supply chain
P

and various trade practices demands streamlining and consistency in managing logistics
and other parameters of the process. Therefore, the future IT solutions must be capable
of providing comprehensive global solutions to supply chain problems.

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Notes Exhibit
The Seeds of Tomorrow’s Global Supply Chains are Being Planted Today
Prominent corporations are executing optimal methodologies that will be merged with
sophisticated analytics and modelling instruments to shape the supply chain landscape of
2025.

Y
Of course, the date is arbitrary. Nonetheless, in an era when outside forces are working
together to thwart multinational suppliers’ attempts to bring goods to market on time, it

IT
is beneficial for managers of today to concentrate on the route to supply-chain excellence.
The quantitative analytical methods that are already commonly used in international
banking will be employed by the next general of supply-chain risk management, according

S
to Anthony Tarantino, a senior supply-chain and operational excellence consultant at
Cisco Systems, Inc.

R
All effective supply-chain initiatives, however, need a combination of technology and

E
modifications to business processes. Speaking at a recent international trade conference
held in Palo Alto, California, and sponsored by the legal firm Pillsbury Winthrop Shaw

IV
Pittman LLP, Tarantino outlined seven best practises that can assist companies in
surviving the storms that they will probably face over the course of the next ten years.
These are as follows:

N
Centers of excellence: This is nothing new; companies have been experimenting with
such programmes for years. They usually feature multidisciplinary groups tasked with
U
solving certain problems. Standardising corporate procedures and ensuring that senior
management get ongoing education are examples of tactics.
Y

However, Tarantino said, a genuine centre of excellence might also serve as a “political
lightning rod.” “Creating a successful one is not a cinch.” It ought to be reported at a
R

somewhat high level within the organisation’s management structure and have significant
executive support.
R

Tarantino said, “A CoE will lack independence to make the hard decisions and oppose the
existing quo if it is buried inside the organisation.”
E

A HYBRID supply-chain organisation: Businesses often oscillate between the extremes

H

of decentralisation, which offers flexibility and faster time to market, and centralisation,
which encourages efficiency and limits costs. The solution may be found in the centre.
Tarantino said, “History has proved that a strict application of either strategy is going to
IC

succeed.” However, striking the ideal balance is a never-ending task for every organisation.
Product segmentation: The reality of the market, which is by its very nature fragmented
D

and necessitates several customised methods, must be reflected in products. Finding the
right balance between the quantity of product kinds and segments is the key, according
N

to Tarantino. Demand volatility, profit margin, supply-chain resilience and risk, as well as
changes in order and production lead times, are defining variables. They decompose into
millions of data points, which is why thorough analytics are required to filter through it
O

all.
P

Tarantino predicted that segmentation would play a crucial role in almost every supply
chain in the future. Businesses need to adapt to the ever-changing marketplace, even if
it means altering the core of their organisation. For instance, Cisco changed its business
model from manufacturing networking gear to offering services and subscriptions.
Furthermore, change is happening faster. He said, “Segmentation cannot be a one-time
event that you do every five years.”

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Information System in Supply Chain Management

Notes Big data analysis and analytics: The majority of organisations have up to now depended
on structured data, including purchase orders, inventory levels, and client refunds.
Unstructured data from other sources, such as books, papers, blogs, polls, and social
media—or, in Tarantino’s words, “anything under the sun”—will be included in the future.
These data pieces have the potential to significantly affect supply networks; they make up
as much as 90% of all company information. However, organisations still need a way to

Y
sort through the noise and find relevant data. Analytics comes to the rescue.

“If segmentation initiatives are to provide a genuine look at consumer feelings and trends,

IT
particularly for new market regions and new items, then this will be crucial,” Tarantino
said.

S
Hybrid OUTSOURCING: Balance is crucial once again. Many businesses have been
widely outsourcing their production capacity during the last 20 years. They received the

R
lower labour costs they had anticipated, but the extra distance between the source and the
sale also added to their uncertainties.

E
They have become more astute in recent times, having gained a deeper comprehension

IV
of the unstated expenses associated with OUTSOURCING and potential hazards
like intellectual property theft. According to Tarantino, contract manufacturing is “a
competitive market” where nominal partners often carry out tasks for direct rivals.

N
Forget about non-disclosure agreements’ dependability and protection from host
U
governments. He said, “The rule of law is only a fantasy in China.” It is often wiser to
locate at least some of your production close to home and to retain your key intellectual
property either in-house or with reliable local partners.
Y

Quantitative analysis for risk management: International agreements like Basel II and
Basel III, as well as American legislation like the Dodd-Frank Wall Street Reform and
R

Consumer Protection Act, set the stage for the banking industry’s use of sophisticated
modelling tools. Supply chain managers must possess the same modelling skills as banks,
R

which are capable of simulating the most uncommon catastrophic occurrences, sometimes
E

known as “Black Swans.” According to Tarantino, “the future generation of supply-chain

risk management will use these methodologies and technologies.” There will be a tonne of new
H

positions available for quants.

Managing IP and patent protection: Piracy and IP theft will only increase. They provide
IC

foreign rivals with an inexpensive means of entering EMERGING MARKETS. In such

nations, as well as in China, western ideas of commercial ethics are basically meaningless.
D

According to Tarantino, “supply chains of the future will have to include IP risk into their
sourcing and TRADE choices.” He referenced Apple’s choice to OUTSOURCE production to
N

“IP-challenged” nations like China, in contrast to Seagate Technology, which manufactures

disc drives in its own plants in Southeast Asia.
O

In a similar vein, effective patent risk management may protect businesses against
costly patent disputes and trolls that attempt to appropriate even the most fundamental
P

technological concepts for their own personal use.

The increasing interdependence of multinational corporations and their many partners is

the common thread that runs through all of these best practises. “I don’t believe there is such
a thing as a local supply chain anymore,” said Tarantino.
(Source: http://www.supplychainbrain.com/content/nc/technology-solutions/supplier-relationship-mgmt/single-article-page/
article/seven-best-practices-for-supply-chains-in-2025/)

80 DDE, Pondicherry University, Pondicherry

CHAPTER 5  Future of IT in Supply Chain Management

Notes Self-Assessment Questions

11. List two features that would be required to meet the supply chain challenges in the
future.

12. Future IT solutions must be capable of providing ________solutions to supply chain

problems.

Y
5.6 Summary

IT
‹‹ The 21st century is characterised by the rapid advancement in the field of information
technology.

S
‹‹ Cloud computing is the technique of delivering computing as a service rather than a

R
product, in which various computing resources, software, and types of information are
provided to computers and other devices as utilities over a network.

E
‹‹ Mobile applications refer to the various software applications on smart phones and

IV
tablet computers. Mobile applications or apps are available for download from various
mobile operating systems, such as iOS, Windows OS, and Android.
‹‹ Analytics refers to the process of studying large amounts of data (Big Data) to

N
find new patterns and information trends, which help an organisation to take better
decisions, analyse the effects of certain events and previously-taken decisions, evaluate
U
the performance of a given tool or application.
‹‹ Supply chain processes are continuously evolving owing to rapid technological
Y
advancements, high level of competition, globalisation and emergence of e-commerce.
‹‹ Cost is a very important differentiating factor in a highly competitive market. Even
R

small companies having a more efficient supply chain network can cut costs and beat
their bigger counterparts.
R

‹‹ Globalisation made it crucial for organisations to have a global procurement network

E

that could support and react to the requirements of a supply chain.

H

5.7 Glossary
IC

‹‹ Big data: Huge amount of data generated by organisations through various means
‹‹ Cloud computing: A technique of utilising computing services, such as software and
hardware over a network
D

‹‹ Mobile applications: Software applications that are available for download from
N

various mobile operating systems

‹‹ RFID: A technology that uses radio waves to identify objects.
O

5.8 Terminal Questions

P

1. What is cloud computing? List some ways in which cloud computing can benefit supply
chain management.

2. Discuss the ways in which e-commerce can contribute to supply chain management.

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Information System in Supply Chain Management

Notes 3. Discuss the challenges faced by organisations in their efforts to develop and manage an
effective supply chain network.

4. List some of the key features that the future supply chain technologies would require to
meet the supply chain challenges.

5.9 Answers

Y
Q. Self Assessment Questions

IT
1. Analytics, Mobile applications, and cloud computing
2. Cloud computing

S
3. Analytics

R
4. Allows integrated storage of data, Improves customer satisfaction and experience
5. Domestic

E
6. False.

IV
7. a. Electronically
8. Inability to apply the right metrics, complexity of supply chains, globalisation of

N
the manufacturing operations
9. True
U
10. Procurement network
11. Multi channel capability, visibility, one-stop-shop solutions
Y

12. Comprehensive global

R

Q. Terminal Questions
1. Cloud computing is the technique of delivering computing as a service rather
R

than a product, in which various computing resources, software, and types of

information are provided to computers and other devices as utilities over a
E

network. Refer to section 5.2 Recent Developments in IT

H

2. Emergence of e-commerce is a very important development in supply chain. It

means doing business and conducting transactions electronically. Refer to section
IC

5.3 Changing Supply Chain Landscape

3. Some challenges faced by organisations in managing an effective supply chain are
the inability to apply the right metrics and complexity of supply chains. Refer to
D

section 5.4 Challenges in Supply Chain Management

N

4. Some key features that the future supply chain technologies would require to
meet the supply chain challenges are multi channel capability, visibility and one-
O

stop-shop solutions. Refer to section 5.5 Supply Chain: A Future Perspective

P

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CHAPTER 5  Future of IT in Supply Chain Management

Notes
Case Study: Analytics in Supply Chain of a Contact
5.10
Lense Manufacturer

Y
IT
S
R
E
IV
Organisations must develop an integrated supply chain model to reduce costs and time to

N
market in order to outperform competitors in the market. The use of business intelligence
analytics throughout a contact lens manufacturer’s supply chain integration initiative is the
U
subject of the ensuing case study. Analytics implementation produced a rapid return on
investment by increasing supply chain efficiency and lowering expenses.

With operations in over 30 countries, the customer is a prominent maker of contact lenses
Y

and lens care products. The client desired to solve the following business and technology
R

concerns by transforming its supply chain in the Asia Pacific region:

‹‹ There was lack of standardisation in production planning, executing processes, and key
R

performance metrics.
E

‹‹ Poor visibility in inventory management resulting in high inventory cost

H

‹‹ High production costs

‹‹ Lack of automation in intercompany transfer and billing processes resulting to
IC

backorder issue.
‹‹ A large number of legacy and reporting systems
D

‹‹ Limited use of analytics to give visibility to the Decision Support System (DSS)
N

‹‹ Poor design of the data warehouses, leading to data redundancies and inconsistencies
‹‹ Master data management issues resulting in poor quality of reports.
O
P

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Information System in Supply Chain Management

Notes The main objective of the company in persuing the transformation program was to harmonise
and redesign the supply chain processes and give visibility to the key supply chain performance
metrics and some other performance indicators. The company identified the following main
areas of focus:
‹‹ Standardising the production execution processes and analytics
‹‹ Consolidating the BI system to deliver single and standardised information

Y
‹‹ Implementing analytics in some supply chain areas, such as inventory management,

IT
production planning and execution, order to cash processes and spend analysis.

Indian IT firm Infosys designed and implemented the analytical solution by using its supply

S
chain analytics framework. The BI team of Infosys worked alongside the business and process
teams of the customer to closely observe the business processes and analyse the strategic

R
business objectives of the company. The Supply-Chain Operations Reference (SCOR)
model was used by Infosys to identify the key performance indicators and the metrics for

E
improving supply chain performance. Infosys conducted the following activities as a part of

IV
the implementation process:
‹‹ Analysing the supply chain processes and systems of the customer

N
‹‹ Developing information architecture and delivery strategy for global convergence
‹‹ Standardising KPI and building global standard reporting template
U
‹‹ Constructing workshops for users

The following figure shows the supply chain analytics implementation framework of Infosys:
Y
R

Define Strategy Convergence Towards Solution Defination Implement and Measure

R

As is Process Strategy Implementation Flexible and Scaleable

Analysis, Issue To be process and Accelerators Data Model
Analysis Analytics Defined Data Quality Do not limit to ‘current’
E

Inputs from Executive Workshops to acheive Monitoring requirements only fo

sponsors, Industry convergence towards Assess effectiveness model
Trends, Balanced new Strategy of Solution Global Considerations
H

Scorecard Approach Process Maps, Data Information Delivery

Tenets for to be Maps and Management
Processes and Global Template Strategy
Analytics Defination Data Quality
IC

Business Measures Monitoring Solutions

Defined
Leading KPIs identified
D
N

The analytics solution was implemented with proven accelerators. Following are some of the
O

important highlights of the solution:

P

‹‹ Infosys accelerated the implementation to reduce development efforts and time

‹‹ Infosys supported ‘on time’ data availability
‹‹ Infosys considered upfront performance

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CHAPTER 5  Future of IT in Supply Chain Management

Notes After the implementation of the business process and analytics, the supply chain costs of the
supplier was significantly reduced. Following are some of the key benefits to the supplier
from the implementation:
‹‹ Visibility
in standardised supply chain metrics in production planning, inventory
management, and purchasing and implementation of sales functions
‹‹ Inventory levels reduced due to better visibility

Y
‹‹ Production throughput time reduced

IT
‹‹ Reduction in yield loss during the production process because of better monitoring
and control

S
‹‹ Improvement in data quality and global reporting system

R
Discussion Questions

E
1. From the above case study, identify the main issues faced by customers that led to the

IV
implementation of analytics.

(Hint: Lack of standardisation, high production cost, low visibility)

N
2. On the basis of the case study, discuss the implications of analytics on the supply chain
of a company.
U
(Hint: Improvement in data quality and visibility)
Y

5.11 References and Suggested Readings

R

‹‹ Simchi-Levi, D., Kaminsky, P. and Simchi-Levi, E. (2000). Designing and managing the
R

supply chain. 1st ed. Boston: Irwin/McGraw-Hill.

E

E-references
H

‹‹ Logisticsviewpoints.com, (2014). What’s Behind the Supply Chain Analytics Revolution?

IC

:: Logistics Viewpoints: A Blog for Logistics, Supply Chain, and 3PL Executives.
‹‹ Mckinsey.com,(2014). Building the supply chain of the future. [online] Available at:
D

http://www.mckinsey.com/insights/operations/building_the_supply_chain_of_the_
future
N

‹‹ Ism.ws, (2014). ISM - Publications -eSide Supply Management - The Future of Supply
Chain Management. [online] Available at: http://www.ism.ws/pubs/eside/esidearticle.
O

cfm?itemnumber=20132 [Accessed 29 Aug. 2014].

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Notes ‹‹ http://www.supplychainbrain.com/content/nc/technology-solutions/supplier-
relationship-mgmt/single-article-page/article/seven-best-practices-for-supply-
chains-in-2025/
‹‹ Afflink, L. (2014). How Robotics Is Changing The Industrial Supply Chain Landscape.
[online] Blog.afflink.com.

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86 DDE, Pondicherry University, Pondicherry

chapter

6 Information Technology

Y
and Business Processes

IT
S
R
E
Structure

IV
6.1 Introduction

N
Learning Objectives U
6.2 Business Processes

6.3 IT in Different Business Processes

Y

6.4 Management Information System

R

6.5 Summary

6.6 Glossary
R

6.7 Terminal Questions

E

6.8 Answers
H

6.9 Case Study: Implementation of MIS in Massachusetts General

Hospital
IC

6.10 References and Suggested Readings

D
N
O
P
Information System in Supply Chain Management

Notes Learning Objectives

After completing the chapter, you will be able to:
 describe the concept of business processes
 discuss the role of IT in different business processes
 explain management information system

Y
6.1 Introduction

IT
You are already aware that supply chain is not a single activity but a complex set of processes,
such as procurement, inventory management, production, transportation, distribution, etc. In

S
organisational terms, these processes are also called business processes as their execution is
essential for running a business enterprise.

R
A business process can be defined as a series of goal-oriented, related and structured activities

E
or tasks such as planning, manufacturing, or marketing that are performed to achieve certain
desired outcomes. These activities can run sequentially as well as parallel to each other. For

IV
example, a car production company may start promotion and marketing activities while the
car is still under the manufacturing process.

N
Each of these processes is independent in itself yet interdependent. This interdependency is
due the fact that all the business processes are directed towards a single common goal. The
U
organisation’s focus must be on the entirety of all the tasks and how they combine together
and contribute towards a complete business process.

In the previous unit, we learned about the role and importance of information technology
Y

(IT) in supply chain management. We also discussed how innovations in IT can enhance the
operations of various business processes in a supply chain. In this chapter, you first learn
R

about business processes and their overall importance in accomplishing organisational goals.
Next, you learn about the role of IT in various business processes. Towards the end, the
R

chapter discusses about the management information system in detail.

E

6.2 Business Processes

H

A business process is an assortment of interlinked tasks that aims to accomplish some

organisational goal, such as delivering a service or product to a client. An integrated business
IC

process must have well-defined inputs and a single goal-oriented output. All the inputs are
targeted towards the factors that contribute (either directly or indirectly) to the value of a
service or product. Fig. 6.1 shows the three types of business processes:
D
N
O
P

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CHAPTER 6  Information Technology and Business Processes

Notes
Business Processes

Management Operational Supporting

processes processes processes

Y
IT
Corporate Strategic Recruitment-
Manufacturing Advertising Accounting
governance management related tasks

S
Fig. 6.1: Types of Business Processes

R
Depending upon the scope and complexity, a project may contain one or multiple business
processes. The successful execution of each of these processes is crucial for the success of

E
the entire project. Typically, every process is initiated by some event, such as receiving an
order from the supplier, checking the inventory level, and arranging for proper transportation

IV
to dispatch products. Each process step is carried out by a different department of the
organisation. For the smooth functioning of the overall process, it is very important to
maintain effective communication and collaboration among departments.

N
Let us take a scenario of a car manufacturing company. If the paint department can handle
only 5 cars per day, then it is futile to have 10 cars per day ready to be painted. This principle
U
applies as much to the smooth functioning of a supply chain as it does to manufacturing in
any organisation. It is a waste to produce 50 pieces of a product per week when the actual
consumption is only about 20-30 pieces. Thus to have an effective business process in place, all
Y

the departments of an organisation must work in tandem with each other.

R

The foundation of any organisation is built mainly on the following three pillars:
R

‹‹ People: The performance of an organisation is primarily dependent on its workforce.

Thus, having the right people for the job, keeping them motivated and retaining them
E

are some key objectives of an organisation.

‹‹ Technology: The right people need the right kind of tools and technologies to do
H

their jobs in the right way. The implementation of IT applications in various business
processes has greatly revolutionised the way they are performed, making the overall
IC

process much faster and accurate.

‹‹ Process: The third and the most important pillar of an organisation is process. Almost
D

every process is independent yet interdependent on some other process. Let us take
an example of a sales process that starts from the sales and marketing department
N

(setting the sales targets and the price of a product), Once the sales department closes
the deal, it goes to the accounts department (for generating the invoice). Meanwhile,
O

the production department is given the target to manufacture the required amount of
goods. Thus you can see that a business process triggered by the sales department also
encompasses and moves through other departments of the organisation.
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Information System in Supply Chain Management

Notes Exhibit
Identifying Inefficient Business Processes in Decoma

Decoma, an automotive components supplier from Altbach, Germany, specialises in

bumpers, side Decorative strips, radiator grilles, sills, and other parts that provide an
automobile a striking external look from the front and back. The business is a part of

Y
the Canadian Magna Group, which has 54 locations and employs over 16,000 people. Like
many other automobile dealers, Decoma zealously controls the identities of the businesses

IT
who purchase from them. Although these specifics are being kept under wraps, it is well
known that the automobile sector is characterised by intense rivalry, with only well-
managed businesses standing a chance of surviving.

S
Decoma’s management strategy is based on “Six Sigma” thinking because of this.

R
Initiatives for quality control and improvement are centred on Six Sigma, with an emphasis
on process error removal and cost reduction in an effort to raise customer satisfaction

E
and boost profit-turnover ratios. The decision-makers at Decoma “spin-off ” to investigate
whether a different approach—Lean Management—is more successful. With the help

IV
of iGrafx® ProcessTM for Six Sigma, users may map, model, and analyse processes

according to the BPM principle, which offers tremendous assistance (Enterprise Process

N
Management). Similar to Six Sigma’s DMAIC (Define, Measure, Analyze, Improve, and
Control) approach, business process management describes the documentation, analysis,
optimization, and control of processes. Because of this, iGrafx can provide a comprehensive
U
solution for every stage of a Six Sigma project.

When the client inquiry throughput times did not always meet the specific needs of the
Y

organisation, Decoma found itself in a precarious situation. The client unit in the UK
was identified as the “problem kid.” The staff members here get a lot of inquiries from
R

automakers on technical specifications, which include every detail of individual parts.

Coordination issues were found at the point of contact between the workers of the client
R

unit and the production centres. When the details of new items were still unknown,
delays usually happened. From a customer’s inquiry to the final response, there is a
E

very complicated procedure involved. After all, this process involves input from several
divisions inside the firm. It was determined to use the iGrafx Process for Six Sigma to
H

address this issue by first isolating it and then solving it. During the analysis stage of
Six Sigma projects, iGrafx Process for Six Sigma provided the critical insight into all the
IC

possible outcomes via its visual depiction of the numerous processes.

During the succeeding “improvement” phase of the Six Sigma project, the actual power
D

of iGrafx Process for Six Sigma was exposed. It was feasible to assess the effectiveness
of current processes using iGrafx, and to use the simulation to test modifications in a
N

virtual environment and see how they would affect process capabilities. The real process
is generated quickly because the user may see all the tasks that are crucial to the modelling
O

process simultaneously on a single screen. The option to import empirical data from the
MINITAB programme and utilise it for the simulation was another feature that proved
P

helpful for Decoma.

The last step—checking the suggested remedy for the Decoma problems—was
accomplished swiftly with the aid of the iGrafx programme. Thus, the pursuit of maximum
customer satisfaction—the primary goal of the Six Sigma method—has been sustained.
(Source: http://www.igrafx.com/resources/case-studies/Automotive-Decoma)

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CHAPTER 6  Information Technology and Business Processes

Notes There are certain guidelines that almost all business processes, procedures and standards
need to follow to fit into an organisation’s overall framework. For the smooth and efficient
functioning of an organisation, all its business processes, procedures and standards:
‹‹ must be well-documented
‹‹ must be oriented towards a vision and strategy of the business

Y
‹‹ must clearly state the general business procedures as well as role-specific procedures
‹‹ must form part of the staff training program and should be made available to staff

IT
members in a user-friendly format (e.g. on paper or electronically as a PDF)
‹‹ must be practiced by management, so that other staff has no problem in emulating

S
them
‹‹ must be discussed regularly in meetings

R
‹‹ must be flexible and with the scope of improvement

E
‹‹ must be designed to empower and make information available, rather than constrain
staff

IV
‹‹ must have a regular review and updation schedule in place

N
Self-Assessment Questions
1. An integrated business process must have _______inputs and a single ________
U
output.

2. Name the three pillars of an organisation.

Y

3. All the business processes, procedures and standards of an organisation must be well-
documented. (True/False
R
R

Activity
Visit an organisation and collect details about the various business processes implemented
E

there.
H

6.3 IT in Different Business Processes

IC

An organisation has various types of business processes such as Finance, Sales, Marketing
or Human Resources. All these processes are integral to an organisation and either add value
D

directly to the end consumer, or being part of an internal support function, contribute to
the overall workflow of an organisation. Use of IT applications in these processes helps to
N

enhance this value addition to the organisation, its services or products.

O

Some business processes that can be enhanced by using IT applications are shown in
Fig. 6.2:
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Information System in Supply Chain Management

Notes Financial Management

Marketing

Production

Y
IT
Human Resources

S
Fig. 6.2: Business Processes in an Organisation

R
Let us study the role of IT in all these business processes.

E
6.3.1 Financial Management

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IT helps an organisation’s financial decision-making process. It offers assistance with a number
of tasks, including cash management, investment management, and financial forecasting.

N
These actions determine both an organization’s present financial success and its potential for
future expansion.
U
Let us now discuss the role of IT in each of these activities:
‹‹ Financial forecasting: It refers to the planning phase in which an organisation
Y

takes decisions regarding investments. Financial forecasting helps an organisation to

anticipate the probable cash flows during various operations. This helps in preventing
R

any financial crises and ensuring the availability and optimum utilisation of financial
resources. Apart from this, financial forecasting also determines the future financial
R

liquidity and profitability of an organisation over a fixed period of time. Proper

financial forecasting helps organisations to better visualise future prospects and achieve
E

their long-term goals.

‹‹ Investment management: It is another essential part of financial management. An
H

organisation needs to take various crucial decisions related to investments for its
survival. Use of IT applications in various financial operations helps organisations to
IC

take accurate and fruitful decisions by inferring from the previous trends and predicting
future demands.
D

‹‹ Cash management: Availability of adequate cash and its proper management are
crucial to an organisation’s survival. Cash is required to cater to the requirements of
N

the present projects as well as planning the future ones.

IT applications have revolutionised the manner in which cash is handled and managed by
O

organisations. Now, all the records of transactions, payments, inventory and accounts are
automatically controlled by information systems designed chiefly for this purpose.
P

6.3.2 Marketing

IT helps in developing a computerised system that is designed to provide an organised

flow of information and support marketing activities of an organisation. There is a set of

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CHAPTER 6  Information Technology and Business Processes

Notes effective IT practises and methods that support businesses in gathering, assessing, classifying,
and producing reports in order to make wise marketing choices. IT assists in obtaining the
following market-related data:
‹‹ Recurring information: Pertains to data generated periodically, such as every 15 days.
Examples of recurring information include customer expectations, evolving needs, and
product market share. This information is essential for daily organizational operations.

Y
‹‹ Monitoring information: Encompasses market-related data acquired through regular
scrutiny of information sources. These sources may include magazines, articles,

IT
government reports, and annual reports.
‹‹ Requested information: Denotes data generated in response to specific requests from

S
the marketing department of an organization. This may involve information regarding
competitive strategies and market share.

R
E
6.3.3 Production

IV
The process of converting raw resources into desired goods or services is known as
production. By contributing to the generation of information on the production system’s
five primary areas—product planning, inventory management, supply chain management,

N
production process, and production cost—IT plays a significant role in the system. Using IT
technologies in the manufacturing process makes it easier to keep an eye on how goods and
U
materials are moving across the company.
Y

6.3.4 Human Resources

R

The effects of IT also extend to the field of human resources (HR). IT aids in implementing
many modifications in the HR department’s varied functions. Among these procedures are:
R

‹‹ Recruitment
E

‹‹ Selection
H

‹‹ Performance appraisal
‹‹ Compensation
IC

‹‹ Training and development

All these HR functions are linked to each other. If one function is executed properly, all the
D

others will also run smoothly. Use of IT applications in HR is used to monitor and control the
functions involved right from the joining of an employee till his/her leaving the organisation.
N

IT can help in the following HR operations:

O

‹‹ Supplying information at an optimum cost

P

‹‹ Providing information whenever required

‹‹ Updating information frequently
‹‹ Processing raw data into the desired form of information
‹‹ Securing confidential information

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Information System in Supply Chain Management

Notes Self-Assessment Questions

4. Name two business processes that can be enhanced by using IT.

5. Define financial forecasting.

6. _______ refers to market-related information that is obtained by scanning information

sources on a regular basis.

Y
IT
Activity
Use the Internet to find out the role of IT in various HR operations.

S
6.4 Management Information System

R
As the name suggests, a Management Information System (MIS) is a processor and

E
repository of management-related information. The information generated from an MIS
helps organisations access and analyse crucial information, such as business data, growth

IV
patterns, clients’ feedback, market demands and take appropriate and timely decisions. MIS is
one of the fastest growing concepts in the business environment. MIS comprises two terms
– management and information system.

N
Planning, organising, directing, and regulating resources in order to successfully accomplish
U
corporate goals is the process of management. Here are a few common definitions of MIS:

According to Schwartz, “MIS is the system of people, equipment, procedures, document and
communication that collects, validates, operates on, transforms, stores, retrieves and presents
Y

data for use in planning, budgeting, accounting, controlling and other management processes.”
R

According to Coleman and Ritley, “An MIS:

R

i. applies to all management levels

ii. is linked to an organisational subsystem

E

iii. functions to measure performance, monitor progress, evaluate alternatives or provide

H

knowledge for change or collective action

IC

iv. is flexible both internally and externally”

According to Davis and Olson, “MIS is an integrated user-machine system designed for providing
information to support operational control, management control and decision making functions in an
D

organisation. MISs make use of resources such as hardware, software, men, procedures as well as
suppliers.”
N

A collection of interconnected parts that gather, store, analyse, produce, and distribute data in
O

order to facilitate efficient corporate decision-making is referred to as an information system.

MIS gathers information from many sources, analyses it, and turns it into knowledge that is
P

insightful and practical. Figure 6.3 illustrates the structure of an MIS:

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CHAPTER 6  Information Technology and Business Processes

Notes
Management Management
Information System
(Data, Process, Information) + (Planning, Organising,
Directing, Controlling)
= Information
System

Fig. 6.3: Structure of an MIS

Y
This information is created by processing the data using technological and analytical tools
after it has been gathered from a variety of internal and external sources. Management uses

IT
this information to make decisions at different levels and increase the performance of the
organisation.

S
Functions of an MIS

R
MIS serves the information needs of managers and helps them to take various management

E
decisions. The functions of MIS are shown in Fig. 6.4:

IV
Generating
Information

N
Collection of Data Processing Dissemination
Data from of Information
various Sources
U Storage of
Storage of Data
Information
as Data
Y

Fig. 6.4: Functions of an MIS

R

The various functions of an MIS are discussed as follows:

R

‹‹ Collecting data from various sources: It entails collecting information from a range of
external and internal sources. External sources include, but are not limited to, vendors,
E

rival businesses, clients, media outlets, and newspapers. Financial reports, sales data,
and other records are examples of internal sources. Both paper and computer formats
H

are used to gather this data.

IC

‹‹ Storing data: It includes keeping all documents and retrieving them as needed.
‹‹ Processing data: It includes tasks including calculating, categorising, sorting,
analysing, comparing, and summarising the information gathered.
D

‹‹ Generating information: It entails processing the gathered data to provide meaningful

N

and practical information. This data is arranged and formatted neatly.

‹‹ Disseminating information: It involves giving users or managers access to the
O

created information to support them in carrying out their duties effectively. Take report
generating, for instance.
P

‹‹ Storing information: It involves archiving data for later use in the database. The same
data may be processed again, if necessary.

MIS helps organisations to perform complicated managerial functions with ease. In the last few
decades, it has almost become an indispensable part of any business enterprise. Organisations
are increasingly adopting MIS due to:

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Information System in Supply Chain Management

Notes ‹‹ Increased complexity of business: Refers to the level of complexity in performing

business operations. Revolutionary updates in technologies ushered in rapid changes in
the business environment. These changes increased the complexity of functions to be
performed by every department. MIS serves as a necessary tool in such complex business
environment. For instance, in today’s business environment, most organisations have
different branches at different locations worldwide. MIS helps in information sharing
from one branch to another and helps management to have control over all the functions

Y
of all branches.

IT
‹‹ Increased competition: Refers to the level of competition that has increased in the
changing business environment. MIS provides critical information to organisations,
which help them to survive in the competitive environment. Various strategic decisions

S
depend upon the information provided by MIS. For instance, in constantly changing
market conditions, MIS keeps management informed about the prevailing market

R
conditions and demand trends to help them take production-related decisions.

E
‹‹ Increased burden on management: Refers to sharing the responsibility of the
management to perform various functions efficiently. These days, decision-making

IV
functions have become more complex and need better analytical approach and expertise.
With the use of MIS, these decisions can be made more productive. MIS shares the
burden of the management by providing relevant and timely information to handle

N
strategic, tactical or operational issues.
U
Self-Assessment Questions
7. MIS stands for:
Y
a. Managerial Information System
b. Management Information System
R

c. Managerial Information Software

R

d. Management Information Software

E

8. ________of data involves functions, such as calculating, sorting, classifying,

analysing, comparing, and summarising the collected data.
H

9. MIS keeps management informed about the prevailing _______ and ________ to
help them take production-related decisions.
IC

10. MIS increases the burden of the management by providing relevant and timely
information to handle strategic, tactical or operational issues. (True/False)
D

Activity
N

With the help of the Internet, prepare a report on the role and growing popularity of
O

MIS among business organisations.

P

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CHAPTER 6  Information Technology and Business Processes

Notes
6.5 Summary
‹‹ A business process is an assortment of interlinked tasks that aims to accomplish some
organisational goal, such as delivering a service or product to a client.
‹‹ Three pillars of an organisation are people, technology, and process.
‹‹ An organisation has various types of business processes, such as Finance, Sales,

Y
Marketing or Human Resources.
‹‹ IT facilitates the financial decision-making process of an organisation.

IT
‹‹ Production is the process of transforming raw materials into desired products or
services.

S
‹‹ Management is the process of planning, organising, directing and controlling resources

R
to obtain business objectives effectively.
‹‹ An information system refers to a set of interrelated components that collect, store,

E
process, generate and disseminate information for effective business decision making.

IV
6.6 Glossary
‹‹ Financial forecasting: The planning phase in which an organisation takes decisions

N
regarding investments.
‹‹ Information system: A set of interrelated components that collect, store, process,
U
generate and disseminate information for effective business decision-making.
‹‹ MIS: A processor and repository of management-related information.
Y

‹‹ Recurrent information: The information that is generated periodically, say after every
15 days.
R

6.7 Terminal Questions

R

1. Explain the concept of business processes.

E

2. Discuss the role of IT in various business processes.

H

3. What is an MIS? Explain its various functions.

IC

6.8 Answers
Q. Self Assessment Questions
D

1. Well-defined, goal-oriented
N

2. People, technology, process

3. True
O

4. Marketing and production

P

5. Financial forecasting refers to the planning phase in which an organisation takes

decisions regarding investments.
6. Monitoring information

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Information System in Supply Chain Management

Notes 7. b. Management Information System

8. Processing
9. Market conditions and demand trends
10. False
Q. Terminal Questions

Y
1. A business process is an assortment of interlinked tasks that aims to accomplish

IT
some organisational goal, such as delivering a service or product to a client. Refer
to section 6.2 Business Processes.
2. Use of IT applications helps to enhance the working of various business processes.

S
Refer to 6.3 IT in Different Business Processes.

R
3. An MIS is a processor and repository of management-related information. Refer
to section 6.4 Management Information System.

E
IV
Case Study: Implementation of MIS at
6.9
Massachusetts General Hospital

N
As the third-oldest hospital in the United States, Massachusetts General Hospital (MGH) was
home to the doctors who first used a general anaesthesia in 1846. U.S. News & World Report
U
routinely ranks MGH in the top five hospitals in the nation. Every year, the 900-bed medical
institution records 83,000 ER visits, conducts 37,000 surgeries, and admits more than 47,000
patients. The Hospital’s five interdisciplinary care centres are well-known around the globe
Y

for their advancements in vascular medicine, transplantation, and the treatment of cancer,
digestive issues, and heart disease. Since MGH is the oldest and biggest teaching hospital
R

affiliated with Harvard Medical School, almost all of its staff doctors are faculty members.
MGH is the biggest hospital-based research programme in the US, with an annual research
R

expenditure of around $550 million.

E

Anesthesia Information Management System (AIMS) technology was already in place at

MGH. MGH needed a system that could adapt to their evolving demands in the future. The
H

hospital was looking for a system that would provide data continuity across the continuum
of care, an accurate and comprehensive anaesthetic record, and sophisticated clinical decision
IC

support. Being a significant research facility, MGH also needed a system that could facilitate
research. Furthermore, the hospital sought to optimise revenue collecting and enhance
compliance with pay-for-performance programmes via the use of technology.
D

The adaptable design of iMDsoft’s MV-OR (MetaVision Suite for OR) product is a fit to
N

the clinical documentation process to the different clinical work flows both in the Operating
Room and in non-OR locations, according to an exhaustive study of the available options
O

undertaken by MGH. The hospital selected MetaVision in large part due to the system’s
ability to adjust to the intricate operation of the facility. MGH anticipated a seamless transfer
to MetaVision with its Microsoft-based design, which was accomplished in April 2005.
P

As necessary, MV-OR offers a thorough anaesthetic record that includes precise recording
of events, prescriptions, and procedures. In order to maximise revenue collection, it makes
sure that all billable events are recorded and connects smoothly with the current hospital

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CHAPTER 6  Information Technology and Business Processes

Notes billing system. MetaVision’s Event Manager offers MGH intelligent decision assistance. The
hospital makes use of this instrument for a number of reasons, including helping to identify
substantial changes in the patient’s health early on and alerting staff to potentially dangerous
situations that may arise during surgery. Additionally, MGH has set up Event Manager to
provide warnings that encourage enhanced protocol adherence and financial savings. The
capacity of MetaVision to exchange data throughout the continuum of care has also helped
the hospital by making patient data easier to access during the whole perioperative procedure.

Y
Moreover, MetaVision helps MGH achieve its research objectives. Because of the design of
the system, analysts and physicians may instantly evaluate and analyse data from hundreds

IT
of charts. MGH’s database of over 100,000 anaesthetics contains data that may be rapidly
and readily accessed by MetaVision, such as the performance of fundamental anaesthetic

S
procedures.

When it comes to Central Venous Catheter (CVC) Insertion, Perioperative Temperature

R
Management, and Antibiotic Prophylaxis Timing, MGH may easily fulfil the PQRI metrics
pertinent to the perioperative setting by using MetaVision. This equates to an extra

E
$60,000–$70,000 in reimbursements annually. Much faster than would be anticipated for an

IV
academic institution of this size and complexity, the hospital was able to establish a reminder
to clinicians and a system for monitoring and reporting on PQRI measure 20 (Timing of
Antibiotic Prophylaxis) in only two days. To be eligible for payment, a hospital has to disclose

N
whether or not the antibiotic was given in 90–95 percent of instances. MGH currently easily
meets the criterion, reporting on this activity in 99 percent of instances.
(Source: http://www.imd-soft.com/Data/Uploads/m-CS-004-MGH-(Ver1.0)-L.pdf)
U
Discussion Questions
Y

1. What were the enhancements MGH was looking forward to in its new information
R

system vis-à-vis the present one, i.e. Anesthesia Information Management System
(AIMS)?
R

(Hint: Providing complete and accurate anesthesia records and advanced clinical
E

decision support)

2. Why did MGH decide to implement MetaVision in its system?

H

(Hint: MetaVision’s flexibility to adapt to MGH’s complex workflow)

IC

6.10 E-References and Suggested Readings

D

‹‹ Kroenke, D. (2009). MIS essentials (1st ed.). Upper Saddle River, NJ: Prentice Hall.
‹‹ Targett, D., Grimshaw, D., & Powell, P. (1999). IT in business (1st ed.). Oxford:
N

Butterworth-Heinemann.
O
P

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Notes E-references
‹‹ Team-technology.co.uk,.
(2014). The Importance Of Business Processes from http://
www.team-technology.co.uk/metarasa/management/process/the-importance-of-
business-processes/
‹‹ Webopedia.com,. (2014). What is Management Information System- MIS? Webopedia,

Y
from http://www.webopedia.com/TERM/M/MIS.html

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O
P

100 DDE, Pondicherry University, Pondicherry

chapter

7 Goals of Supply Chain

Y
Information Technology

IT
S
R
E
Structure

IV
7.1 Introduction

N
Learning Objectives U
7.2 Objectives of Supply Chain Information Technology

7.3 Standardisation of Information Technology

Y

7.4 Infrastructure of Information Technology

R

7.5 Summary

7.6 Glossary
R

7.7 Terminal Questions

E

7.8 Answers
H

7.9 Case Study: Supply Chain Infrastructure in Walmart

IC

7.10 References and Suggested Readings

D
N
O
P
Information System in Supply Chain Management

Notes Learning Objectives

After completing this chapter, you will be able to:
 discuss the objectives of IT in a supply chain
 describe the standardisation of IT
 explain the infrastructure of IT in the context of a supply chain

Y
7.1 Introduction

IT
In the previous chapter, you studied about the role played by information technology (IT)
in different business processes. Now let us move forward and discuss the objectives of

S
supply chain information technology (IT). IT applications have been vastly used in supply
chain networks to improve their efficiency. Some of the main objectives that IT fulfills in a

R
supply chain are sharing of information, controlling and managing various operations of
a supply chain, automating supply chain functions, reducing costs, reducing delivery time,

E
providing competitive advantage, and helping in the expansion of business. IT also facilitates
collecting data and creating a common platform to provide access to data, analysing data, and

IV
collaborating with supply chain partners.

In the current business scenario, supply chain operations have become global, i.e. their scope

N
now extends across various countries. Standardisation of IT has helped to maintain consistency
and smooth flow of supply chain operations in this globalised business environment. IT is
U
basically an infrastructure consisting of several elements. In a supply chain, IT primarily
helps in importing and exporting supply chain management (SCM) data.

In this chapter, you will first study the objectives of supply chain information technology.
Y

Next, you will study the standardisation of IT and its impact on SCM. Towards the end, the
chapter discusses the infrastructure of IT in the context of supply chain operations.
R

Objectives of Supply Chain Information

R

7.2
Technology
E

The smooth integration of the point of production with the point of purchase or delivery
H

is the main objective of IT in supply chain management. In other words, the objective is to
create an information trail that would follow the product trail. This enables organisations
IC

to plan, track and estimate lead time based on real data. A well-managed information trail
enables all the stakeholders involved in a supply chain to track the whereabouts or the current
state (manufactured, stored, packed, transported, or delivered) of a product. Fig. 7.1 shows
D

the product flow and information flow in a supply chain:

N

Product flow
O

Suppliers Manufactures Warehouses Retailers

P

Information flow
Intrafirm
Interfirm Interfirm

Fig. 7.1: Product and Information Flow in a Supply Chain

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CHAPTER 7  Goals of Supply Chain Information Technology

Notes As you can see, product flows from the suppliers to retailers and information flows from the
retailers to the suppliers.

Some important objectives of implementing IT in a supply chain are as follows:

‹‹ Collecting information: In a retail setting, the supplier must anticipate the incoming
orders from the manufacturer and the retailer must be aware of the status of the
provided orders. As a result, information held at different levels and locations must be

Y
accessible to all phases of a supply chain.

IT
Access to accurate, updated and timely information regarding the availability of
products and materials helps organisations to take important supply chain decisions.
Apart from tracking locations of products, organisations also need to inform people

S
involved in the various stages of the supply chain about the availability of the product.
A short delay in the delivery by the suppliers can affect the entire production schedule,

R
which may sometimes prove very expensive in terms of both money and manpower. Use
of IT facilitates the flow of relevant information across a supply chain; thus, preventing

E
the occurrence of any such unwanted situations.

IV
‹‹ Providing access to data: Organisations need to have a single point of contact for
getting access to all types of information. In other words, all the information regarding
a product or service can be accessed from a single point, regardless of the type or the

N
means through which that information is collected. For example, an organisation may
collect customers’ feedback through enquiry forms, surveys, phone calls, etc. However,
U
the concerned/authorised person should be able to access all the information from
a single point of contact. IT applications help organisations is to make all types of
information, either collected from the customers or acquired internally, accessible from
Y

one point regardless of the mode of enquiry (phone, fax, Internet, kiosk, etc.) or who is
making the enquiry. Many times the information required by the customer is available
R

at different departments in a company, and in some cases different companies. Thus it

becomes all the more important that all the parties requiring real-time data should have
R

access to all the information from one single point. Fig. 7.2 shows different information
systems in an organisation:
E
H
IC

Sales representative
Demand planner Financial
systems
Sales/ marketing
systems
Accountant
D
N
O

Service representative
Operations
Customer
Logistics/ service
P

manufacturing
systems

Fig. 7.2: Information Systems in an Organisation

DDE, Pondicherry University, Pondicherry 103

Information System in Supply Chain Management

Notes IT helps in integrating all these different information systems so that all the information
is available at a single point. Fig. 7.3 shows the integration of information from various
departments at a single point of contact:
Sales representative

Demand

Y
planner

IT
Single point
Accountant
of contact

S
Operations

R
Service representative

E
Fig. 7.3: Single Point Access to Information
‹‹ Analysing supply chain data: The entire supply chain system of an organisation

IV
produces enormous amount of data. This huge amount of raw data need to be
processed and analysed using various IT and business tools to generate meaningful
information from it. This information helps management to have better views and

N
insights regarding various business processes, which in turn enables it to take timely
and informed decisions.
U
‹‹ Collaborating with supply chain partners: One of the essential elements of the
success of a company is its ability to collaborate with its supply chain partners. A
Y

healthy and transparent alliance among different supply chain partners promotes trust
and visibility in various business processes within and across organisations. However,
R

different companies need different levels and types of collaboration. For example,
collaborative forecasting is more common in the packaged goods industry as compared
R

to hi-tech industries where supplier integration is considered more important. In the

outsourcing industry, there should be close coordination between product development
E

and logistics.
H

To encourage collaboration among manufacturers, vendors, and suppliers, new systems

like Supplier Relationship Management (SRM) and Collaborative Planning, Forecasting
IC

and Replenishment (CPFR) have been introduced and are increasingly being adopted by
organisations.
D

Self-Assessment Questions
1. A well-managed _______ enables all the stakeholders involved in a supply chain to
N

track the whereabouts or the current state of a product.

O

2. Mention two objectives of implementing IT in a supply chain.

3. In a supply chain network, SRM stands for:

P

a. Supply Retail Management

b. Senior Relationship Manager
c. Supplier Relationship Management
d. Supplier Retailer Management

104 DDE, Pondicherry University, Pondicherry

CHAPTER 7  Goals of Supply Chain Information Technology

Notes Activity
Visit an organisation and prepare a report on the use of IT technologies in its supply chain.

7.3 Standardisation of Information Technology

Y
We are already aware of the importance of proper communication and information flow in the
success of supply chain processes. We have also discussed the role that IT plays in facilitating

IT
this communication. These days, most organisations operate on a global level, i.e. dealing
across national and international boundaries. Now every country has its own language,
currency, business policies, Internet usage policies, etc. These variations may sometimes cause

S
problems in conducting business across the borders due to lack of proper communication or
understanding on part of either one or all the parties.

R
As IT plays a major role in streamlining communication and sharing of information, setting

E
of and adhering to IT standards facilitate not only the exchange of information but also
reduce many obstacles created by various types of incompatibilities among business partners.

IV
“A document, established by consensus and approved by a recognised body that provides, for
common and repeated use, rules, guidelines or characteristics for activities or their results,
aimed at the achievement of the optimum degree of order in a given context” is what the

N
International Organization for Standardization (ISO) defines as a standard.
U
With the increasing economic and corporate globalisation, standardisation of IT has
become a very important part of technology development and the implementation process.
Standardisation of technology involves creating interchangeable and interoperable hardware
Y

and software that can be implemented in and operated by most or all of the business processes
across the globe.
R

Verman defined standardisation as “the process of formulating and applying rules for an
orderly approach to a specific activity for the benefit and with the cooperation of all concerned
R

(International Organisation for Standards (ISO), 1973. P.20).

E

Information technology standards support the development of an entirely new information

economy by fostering the expansion of electronic governance and e-commerce. According
H

to estimates, the establishment of an average IT standard would cost around $10,000,000

[Spring 95]. A’major worldwide telecommunications standard’ may need the creation of
IC

around 1,000 person-years of expertise, twenty person-years of real work, and $3 million,
according to another poll [OTA 92].
D

The following points elaborate the benefits of setting certain IT standards.

‹‹ The File Transfer Protocol (FTP) developed in the 1980s enabled large-scale data
N

transfer and manipulation of files on Transmission Control Protocol/Internet Protocol

(TCP/IP) networks.
O

‹‹ Use of hot links and compliance with Hypertext Transfer Protocol (HTTP) made file
transfer more intuitive, increasing the participation of the Internet users in file transfer.
P

DDE, Pondicherry University, Pondicherry 105

Information System in Supply Chain Management

Notes ‹‹ The development of the Hypertext Markup Language (HTML) by Tim Berners-Lee
enabled universal access to online documents through the World Wide Web (WWW)
across various computing and communication platforms.
‹‹ Development of the Extensible Markup Language (XML) permitted authors to
have flexibility of documents. It also enabled them to create unique page designs and
descriptions.

Y
‹‹ The diffusion of the Institute of Electrical and Electronics Engineers (IEEE) family
of 802.11 wireless local area communication standards has given great mobility to IT

IT
devices.

Self-Assessment Questions

S
4. Information technology standards hamper the growth of e-commerce and electronic

R
governance and help in creating a whole new information economy. (True/False)

5. Development of the ________enabled authors to create unique page designs and

E
descriptions.

IV
6. Standardisation of technology involves creating _______ and _______hardware and
software that can be implemented in and operated by most or all of the business
processes across the globe.

Activity
N
U
Use Internet to find the latest IT standards and their implementation in supply chain
management.
Y

7.4 Infrastructure of Information Technology

R
R

As we have covered thus far, supply chain management gives businesses a complete picture
of everything that occurs inside the network of suppliers and consumers, enabling them
E

to better regulate the movement of products and information (Hieber, 2002). One way to
conceptualise information technology is as an infinitely complex infrastructure. The supply
H

chain IT framework can manage the two information flows listed below:
‹‹ Import SCM data: The supplier sends the full details of SCM data (all the information
IC

related to the supply chain operations) to the manufacturer. The supplier uploads
various data such as the expected market volume of the goods on the server from where
it can be accessed by all the concerned/authorised parties. The two entities (supplier
D

and manufacturer) agree on the format of the data. The received data is then processed
N

and verified by the manufacturer.

‹‹ Export SCM data: Online or offline, the supplier examines, looks up, and changes
O

the SCM data. The provider downloads both historical and current data, including the
product’s anticipated market volume. The data in the Web-based form may be made
P

available for download by the manufacturer as documents.

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CHAPTER 7  Goals of Supply Chain Information Technology

Notes Fig. 7.4 shows a generic SCM IT infrastructure:

Medium
Enterprise SCM Data
Firewall Firewall
from Supplier
Small
Enterprise
ERP ERP EIS
Web Adapters
Client Web-Link Adapter-Link

Y
ERP

Scheduled
Current Current

IT
Replication
SCM SCM
data Data
and History

S
Fig. 7.4: Generic SCM IT Infrastructure

R
The following are the main elements of an SCM IT infrastructure:
‹‹ ERP-Web link: T: The incoming and outgoing SCM data are securely processed by

E
the ERP-Web Link. SCM data is retrieved by the ERP-Web link from a data store
containing the current and historical SCM data. Data uploaded by the suppliers are

IV
stored in an independent data store to be used by different parties. This data is validated
and examined before being processed further.

N
‹‹ ERP-Adapter link: It’s a programmable application that outputs Supply Chain
Management (SCM) data from several ERP and Executive Information Systems (EIS)
U
systems. The current SCM data is temporarily kept in a different data storage where
the data is kept. The ERP-Adapter connection aids in specifying the data that must be
exported as well as the ideal export window. An ERP-adapter connection is seen in
Y

Fig. 7.5:
Get SCM
R

Creates Metadata
Configuration ERP
Configuration
R

Data
Get SCM
Uses Data
E

Creates Export

SCM
Data Triggers
H

Scheduler
IC

Fig. 7.5: Showing ERP-Adapter Link

‹‹ Data integration: Uploaded data is never directly imported in the ERP system. The
D

data is manually verified by a human operator before being imported to the ERP system.
N

Exhibit
10 Guidelines for Supply Chain Network Infrastructure Planning
O

According to a recent analysis of supply chain operations, the network in place—rather

than the daily choices made by the supply chain team—determines up to 80% of the overall
P

expenditures associated with supply chain operations. Infrastructure has a major role in
influencing the kinds of choices and levels of flexibility accessible to supply chain decision
makers, which is the root cause. Because they lacked careful planning, many businesses
have thus physically fallen victim to hazards related to warehouses, distribution hubs, and
sources of supplies (manufacturing, supplier sites, etc.).

DDE, Pondicherry University, Pondicherry 107

Information System in Supply Chain Management

Notes Vigilant executives may get assistance in the form of ten recommendations to help them
execute the essential cost-cutting strategies. These are relevant regardless of the company’s
development plan or its struggles with underutilised assets in a difficult economic climate.
Prioritising adherence to these standards may lead to chances for mitigating margin and
bottom-line challenges.

1. Network structure, which determines 75%- 80% of total supply chain costs, offers the

Y
biggest opportunity to reduce these expenditures.

IT
This is due to the fact that efforts to enhance supply chain operations and efficiency are
constrained once manufacturing and distribution assets are established and significant
transportation contracts are signed. The best time to find chances for supply chain

S
improvement is when the infrastructure is being evaluated or reevaluated; this includes
the production capacity, procurement of raw materials, main transportation routes,

R
distribution centres, and customer delivery.

E
2. Optimise supply chain infrastructure to realise maximal cost savings.

IV
Day-to-day interruptions and temporary difficulties are mostly caused by the supply chain
infrastructure that a firm currently has in place. Businesses that regularly reassess their
infrastructure and operations tend to have the most lucrative and seamless operations.

N
Individuals that regularly reassess their processes often end up leading supply chains and
profitability. Regular assessments of infrastructure have to be regarded as essential.
U
3. Understand the changes that can be impacted.

A company’s profitability will depend on how it responds to the inevitable changes that
Y

occur. Make sure that the procedures and instruments are in place to identify the changes
that are taking place in the supply chain first. Next, decide which possible courses of
R

action to pursue, analyse them, and share the execution strategy.

R

4. Consider technological analysis to make supply chain decisions.

Spreadsheet analysis may be used to project the effects of a certain course of action and
E

assess possible changes to a company strategy or supply/demand balance. But when

H

choices have to do with thousands of clients being served by several goods manufactured
at various locations, shipping, and distribution points, businesses need advanced tools to
properly weigh all the possibilities and ensure that every supply chain infrastructure is
IC

optimised.

5. Modern infrastructure planning requires a collaborative effort.

D

Good supply chain operations happen because the people in charge of different aspects (sales,
N

manufacturing, logistics, procurement and finance) are effectively communicating by:

‹‹ Providing the critical data necessary to make the best overall decisions
O

‹‹ Understanding how each critical decision impacts them

P

‹‹ Informing each department of every decision and the steps they need to implement

6. The planning process needs to include many different scenarios to ensure a robust
solution.

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CHAPTER 7  Goals of Supply Chain Information Technology

Notes The supply chain infrastructure design process, despite the cooperation of all stakeholders,
is dependent on future projections that may turn out to be inaccurate, such as those about
customer demand, competitor activity, raw material costs, and transportation expenses.
Supply chain tools may be used by those who acknowledge the unpredictability of the
data used in their business planning to investigate many future scenarios and assess viable
courses of action. In this manner, individuals may make choices with confidence that will

Y
benefit them in a variety of potential futures and set them up for success.

7. Consider hybrid solutions to ensure low-cost, high level customer service.

IT
It is normal practise to evaluate and analyse complicated supply chain activities using
oversimplified assumptions. This might lead to managers missing out on hybrid or

S
combination possibilities. For instance, it can be possible to have optimum customer service
at lower prices by sourcing 80 percent of a raw material from a low-cost provider and 20

R
percent from a higher-cost but more dependable alternative source, as opposed to buying
all of the raw material from a low-cost nation. Another example is the change in demand

E
by day of the week, which might need varying procedures depending on the day. Hybrid
solutions are often the best balance between cost and customer service, but they may be

IV
challenging to find and assess.

8. Models and analysis mean nothing without implementation.

N
In order to determine the best course of action, a strong supply chain infrastructure
planning process starts with a thorough study and assessment of possible situations.
U
It is incomplete, however, without implementation planning, which has to deal with the
organisational and cultural problems that far too often keep businesses from realising
the anticipated improvements. Before addressing the more strategic approach, it can be
Y

important to stage the implementation in increments to acquire credibility if there is

opposition to change inside the organisation.
R

9. Optimised supply chains minimise inefficiencies.

R

Beyond only removing waste, a strong supply chain infrastructure planning process also
analyses the trade-offs and advantages of the many supply chain drivers of sustainability.
E

By definition, this implies that you are developing a more sustainable and environmentally
friendly business. Analysis of the trade-offs between profit and other sustainability
H

indicators is one such (for example CO2 emissions). Optimising decision-making to achieve
the overall goals may be achieved by using tools to analyse the overall effect of various
IC

courses of action.

10. The answer is in the data.

D

Assure the accuracy of the data, and then present it to the right people
N

Roadmap for the Future

Beyond only removing waste, a strong supply chain infrastructure planning process also
O

analyses the trade-offs and advantages of the many supply chain drivers of sustainability.
By definition, this implies that you are developing a more sustainable and environmentally
P

friendly business. Analysis of the trade-offs between profit and other sustainability
indicators is one such (for example CO2 emissions). Optimising decision-making to achieve
the overall goals may be achieved by using tools to analyse the overall effect of various
courses of action.

(Source: http://www.industryweek.com/workforce/10-guidelines-supply-chain-network-infrastructure-planning)

DDE, Pondicherry University, Pondicherry 109

Information System in Supply Chain Management

Notes Self-Assessment Questions

7. List the information flows in a supply chain network.

8. SCM data is retrieved by the _____from a data store containing the current and
historical SCM data.

9. Data integration means that the data uploaded on the server is manually verified by a

Y
human operator before being imported to the ERP system. (True/False)

IT
7.5 Summary

S
‹‹ The primary goal of IT in supply chain management is to seamlessly integrate the
point of production with the point of purchase or delivery.

R
‹‹ Access to accurate, updated and timely information regarding the availability of

E
products and materials helps organisations to take important supply chain decisions.
‹‹ One of the essential elements in the success of a company is its ability to collaborate

IV
with its supply chain partners.
‹‹ IT plays a major role in streamlining communication and sharing of information,

N
setting of and adhering to IT standards not only facilitate the exchange of information
but also reduce many obstacles created by various types of incompatibilities among
business partners.
U
‹‹ Information technology standards contribute to the growth of e-commerce and
electronic governance and help in creating a whole new information economy.
Y

‹‹ The main elements of an SCM IT infrastructure are ERP-Web link, ERP-Adapter link,
R

and data integration.

R

7.6 Glossary
E

‹‹ CPFR: A system developed to encourage collaboration among manufacturers, vendors,

and suppliers.
H

‹‹ ERP-Adapter link: A configurable application that exports SCM data from various
IC

Executive Information Systems (EIS) and ERP systems.

‹‹ HTML: A markup language that allows universal access to online documents through
the World Wide Web.
D
N

7.7 Terminal Questions

O

1. Explain the product flow and information flow in a supply chain.

2. Discuss the need and benefits of setting IT standards in the current business
P

environment.

3. With the help of a diagram, discuss the working of the main elements in an SCM IT
infrastructure.

110 DDE, Pondicherry University, Pondicherry

CHAPTER 7  Goals of Supply Chain Information Technology

Notes
7.8 Answers
Q. Self Assessment Questions

1. Information trail
2. Collecting information and providing access to data

Y
3. c. Supplier Retailer Management

IT
4. False
5. XML

S
6. Interchangeable, interoperable

R
7. Import SCM data and export SCM data
8. ERP-Web link

E
9. True

IV
Q. Terminal Questions
A well-managed information trail enables all the stakeholders involved in a supply

N
chain to track the whereabouts or the current state (manufactured, stored, packed,
1.
transported, or delivered) of a product. Refer to section 7.2 Objectives of Supply
U
Chain Information Technology.
With the increasing economic and corporate globalisation, standardisation
of IT has become a very important part of technology development and the
Y
2.
implementation process. Refer to section 7.3 Standardisation of Information
Technology.
R

Information technology can be thought of as an infrastructure with innumerable

3.
parts. Refer to section 7.4 Infrastructure of Information Technology.
R
E

Case Study: Supply Chain Infrastructure in

7.9
Walmart
H
IC

Walmart has one of the most successful logistical and operational infrastructure. According
to a recent report by Supply Chain Digest, the company sources products from more than 70
countries and operates more than 11,000 stores in more than 27 countries around the world.
D

The total amount of inventory managed by the company is worth USD 32 billion. Naturally,
given this type of an impressive number, it is imperative for the company to have an effective
N

supply chain management strategy.

Walmart has become the biggest and most influential retailer globally in the previous ten
O

years, with the greatest sales per square foot, inventory turnover, and operational profit. “I
don’t think there is a university in the world that doesn’t discuss Walmart and the supply
P

chain,” said James Crowell, the director of the Walton College of Business’ Supply Chain
Management Research Center. “They simply execute it so brilliantly that they are so much
appreciated.”

When the business first opened for business, its mission was to provide clients the products
they want, anytime and whenever they desired. In addition, the business concentrated on
creating a cost structure that would enable it to provide clients with consistently cheap pricing.

DDE, Pondicherry University, Pondicherry 111

Information System in Supply Chain Management

Notes The business then concentrated on creating a highly organised and sophisticated supply chain
management plan in order to gain a competitive edge and take the lead in the industry.

Fewer Links in The Supply Chain

Walmart’s success from the start may be traced back to its very efficient supply chain. When

Y
Sam Walton established the business in 1962, he bought goods in bulk and delivered them
straight to the retail locations. The firm started implementing supply chain innovation when

IT
it eliminated a few supply chain linkages. In an effort to control costs and optimise supply
chains, the corporation began collaborating directly with manufacturers in the 1980s. The
company’s supply chain effort, Vendor Managed Inventory (VMI), gave the producers control

S
over the merchandise that was displayed in the shops. This made it possible for the business to
complete almost all of its item orders. Walmart was selected Retailer of the Decade in 1989,

R
and its distribution expenses were estimated to be only 1.7% of its cost of sales, far lower than
those of rivals like Kmart (3.5%) and Sears (5 percent ).

E
The company’s supply chain has only become more effective since then.

IV
Strategic Vendor Partnerships

N
The organisation began strategically sourcing stuff in order to get goods at the most
U
competitive pricing. Furthermore, the business forged strategic alliances with suppliers,
promising them long-term, large-scale purchases in return for the best pricing. In order to
enhance material flow and reduce inventory, the firm additionally optimised supply chain
Y

management by building a variety of communication and connection networks with the

suppliers. Walmart’s diverse networks of international suppliers, warehouses, and retail
R

locations function almost as one cohesive entity. According to Crowell, “Walmart’s entire
business was teamwork.” “That’s a major contributing factor to their success.”
R

Cross Docking As Inventory Tactic

E
H

One of Walmart’s most crucial logistical techniques for effectively replacing inventory is
cross docking. Cross-docking is the process of unloading goods from an entering semi-trailer
IC

truck or railroad car and loading them straight onto outgoing trucks, trailers, or rail cars (and
vice versa) without the need for additional storage in between.

Products are being supplied by suppliers to Walmart’s distribution centres, where they
D

are cross-docked before being sent to Walmart retail locations. Cross docking removes
inefficiencies, cuts down on transit time, and maintains low inventory and transportation
N

costs.
O

Goods are regularly delivered by Walmart’s non-unionized truck drivers to distribution

centres, which are situated 130 miles apart on average from the store. There, they are packed,
P

stored, and dispersed without having to sit in inventory. In a day or less, goods will often move
between loading docks, and business trucks that would normally return empty would “back
carry” the unsold goods.

Products are transported from suppliers to Walmart’s warehouses via cross docking, allowing
them to be sent to stores quickly and without having to remain in inventory for extended
periods of time. Walmart’s expenditures were greatly cut by using this technique, and they
passed those savings forward to its consumers in the form of very competitive prices.

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CHAPTER 7  Goals of Supply Chain Information Technology

Notes Technology
Walmart used technology to become an innovation in the way it maintains inventory and
restocks stores as part of its unwavering quest of low customer costs.

Technology is essential to Walmart’s supply chain operations. Walmart can watch and
anticipate inventory levels, construct very efficient transportation routes, manage customer

Y
connections and service response logistics, and properly estimate demand because to its
cutting-edge technology and network architecture.

IT
For instance, Walmart introduced bar codes with the Universal Product Code, which allowed
for the instant collection and analysis of store-level data throughout the whole organisation.

S
The business then created the enormous Bentonville database, Retail Link. Retail Link is
linked to analysts who predict supplier requests using a worldwide satellite system. The

R
supplier network shows real-time sales data from cash registers and Walmart’s distribution
centres.

E
Every link in the supply chain is linked by technology, which includes a central database, store-

IV
level point-of-sale systems, and a satellite network. Manufacturers and suppliers coordinate
their demand predictions under a cooperative planning, forecasting, and replenishment
scheme.

N
Walmart’s creative approach stems from its practise of sharing all information with its
U
partners, something that many other corporations did not do in the past. In actuality, they
were paying for such information since they were employing third parties.

Walmart’s strategy calls for less centralised management and regular, unofficial collaboration
Y

between suppliers, distribution facilities, and retail locations. Additionally, rather of having
the business force products onto shelves, customers may effectively pull things to shops thanks
R

to the company’s supply chain, which tracks client purchases and demand.
R

Pallets of goods are tracked as they go through the supply chain by Walmart using radio
frequency identification tags (RFID), which employ numerical numbers that can be read at a
E

distance. Since Walmart and its suppliers must manage inventory, Walmart has pushed for the
adoption of RFID technology by its suppliers.
H

More recently, the business started using smart tags, which are scanned by a portable scanner
IC

and enable staff members to rapidly determine which products need replacement in order to
maintain regularly supplied shelves and vigilant inventory management.

Researchers at the University of Arkansas claim that since Walmart integrated RFID
D

technology into their supply chain, there has been a 16 percent decrease in out-of-stocks.
Additionally, the researchers noted that goods with electronic product codes had three times
N

faster replenishment rates than those with bar codes alone.

O

Additionally, Walmart used computers to network its suppliers. It partnered with P&G to
manage the inventory in its retail locations and developed an automatic reordering system
P

that connected all of the computers in the P&G plant via a satellite communication system.
After that, P&G either shipped the goods straight to the affected stores or to the Walmart
distribution centre.

Walmart’s supply chain management approach has given the business a number of long-term
competitive benefits, such as decreased costs associated with holding inventory, better in-store

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Information System in Supply Chain Management

Notes variety and selection, and very competitive prices for customers. This approach has aided
Walmart in establishing itself as a predominant force in a fiercely competitive global market.
Walmart is concentrating on cutting-edge procedures and frameworks to enhance its supply
chain and boost productivity as technology advances.

Businesses may get important insights into their own operations by closely examining
Walmart’s inventory and supply chain management practises.

Y
As part of the military’s Training With Industry programme, Army Col. Vernon L. Beatty,

IT
who oversaw the Defense Distribution Depot in Kuwait, worked at Wal-Mart for a full year.

In an essay detailing his experiences, Beatty defined supply chain management as “getting the
right things to the right client at the right time using the most effective way.” “Walmart is the

S
best at doing that.”

R
(Source: http://blog.tradegecko.com/incredibly-successful-supply-chain-management-walmart/)

E
Discussion Questions

IV
1. Discuss the SCM strategy that has helped Walmart to develop competitive advantage
and assume the leadership position in the market.

N
(Hint: Fewer links in the supply chain, strategic vendor partnerships)
U
2. Mention the IT applications used by Walmart to manage its supply chain network.

(Hint: Universal Product Code, Radio Frequency Identification Tags)

Y

7.10 References and Suggested Readings

R

‹‹ Simchi-Levi, D., Kaminsky, P. and Simchi-Levi, E. (2000). Designing and managing the
R

supply chain. 1st ed. Boston: Irwin/McGraw-Hill.

E

E-references
H

‹‹ http://www.indianmba.com/Faculty_Column/FC461/fc461.html
IC

‹‹ http://www.marketwatch.com/story/new-idc-marketscape-shows-that-top-supply-
chain-management-business-consulting-services-vendors-are-proficient-in-supply-
chain-outsourcing-and-consulting-services-2014-09-08?reflink=MW_news_stmp
D

‹‹ http://www.usanfranonline.com/resources/supply-chain-management/walmart-keys-
N

to-successful-supply-chain-management/
O
P

114 DDE, Pondicherry University, Pondicherry

chapter

Implementing
8 Information Technology

Y
IT
in a Supply Chain

S
R
E
Structure

IV
8.1 Introduction

N
Learning Objectives U
8.2 Integrated Supply Chain Information Technology

8.3 Warehousing Management System

Y

8.4 Summary
R

8.5 Glossary

8.6 Terminal Questions

R

8.7 Answers
E

8.8 Case Study: Supply Chain Integration

H

8.9 References and Suggested Readings

IC
D
N
O
P
Information System in Supply Chain Management

Notes Learning Objectives

After completing the chapter, you will be able to:
 describe integrated supply chain information technology
 explain inventory flow in a supply chain
 discuss information flow in a supply chain

Y
 describe Warehousing Management System

IT
8.1 Introduction

S
In the previous chapter, you studied about the objectives of supply chain information
technology. Now let us study about implementation of information technology in a supply

R
chain.

E
Information technology (IT) plays a very crucial role in providing a highly efficient supply
chain system to an organisation. Applications of IT provide a competitive edge to companies

IV
and help them get access to more customers as well as serve and retain the existing ones.
Though cutting expenses, increasing efficiency and achieving customer satisfaction are some
of the common objectives of the supply chain of all companies, there is a significant difference

N
among companies regarding their distribution models, geographical spread, customer profile,
nature of business, etc. Therefore, the process of implementation of IT in supply chain
U
operations differs in different companies.

Integrated supply chain refers to an IT-enabled supply chain system in which different
components, phases, or operations of a supply chain are connected to each other through
Y

realtime information flow. Integration of the supply chain management system is made
R

possible by implementing the right information technology system, i.e. the system in
accordance with the organisation’s specific requirements. Though the modules or components
R

of this integrated supply chain system may vary from organisation to organisation, yet this
system always facilitates information and product flow within and across organisations.
E

In this chapter, you will study about the integrated supply chain information technology. The
chapter next discusses the inventory flow and information flow in an organisation. Towards
H

the end, you will study about Warehouse Management System.

IC

8.2 Integrated Supply Chain Information Technology

D

The process of organising, coordinating, and managing the movement and storage of goods,
services, and other kinds of information from the point of origin to the point of consumption
N

with the goal of meeting consumer demands is known as the supply chain. Over time, the idea
of a supply chain has undergone significant change. Supply chain activities used to be restricted
O

to the actual physical delivery of goods and commodities. Put differently, a supply chain
encompasses tasks like packing, shipping, loading, unloading, and storage that are only carried
P

out after things have been made. However, the reach and functionality of a supply chain system
have also been significantly increased and enhanced with the development and integration of IT
applications into business operations.

The supply chain is a disjointed and uncoordinated series of activities that extend across
various organizational functions, with each individual function having its own budget, set of
priorities, and measurements. Integration of a supply chain means establishing connection

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Notes and coordination among various operations of a supply chain. In the integrated supply chain,
various functions, such as putting orders to suppliers, transporting goods to warehouses and
retail stores, storing goods and packaging, are integrated with the help of technological tools.
This helps in maintaining a centralised control over all the supply chain operations of an
enterprise. For example, Walmart uses technologies, such as Radio-Frequency Identification
(RFID) to integrate its retail stores with the distribution centers. RFID is an automated
system that checks the inventory level of various goods in the stores and puts replenishment

Y
orders to the distribution centers. This is an example of integrated logistical system.

IT
Note
The entire scope of a supply chain can be explained in terms of the 7 R’s.

S
The 7 R’s define supply chain as the accessibility of the right product, in the right quantity,

R
in the right condition, at the right place, at the right time, for the right consumer, and at
the right cost.

E
Integrated supply chain helps maintain coordination among all the logistical functions of a

IV
retail enterprise. These enterprises are under constant pressure to provide goods at low prices.
Product cost is an important aspect that causes competition among various retail players.
Integrated retailing helps in reducing the supply chain overheads of retail enterprises, which

N
in turn increases their benefits and competitiveness in the market. Businesses have found
that by combining several distribution-related tasks, overall expenses may be decreased. All
U
supply chain operations are connected by successful integrated supply chain management,
which lowers overall costs and boosts customer satisfaction. It is important to mention that
the six main cost categories of a supply chain are included in the overall cost. These are the
Y

following:
‹‹ Costs of customer service level
R

‹‹ Transportation costs
R

‹‹ Warehousing costs
E

‹‹ Inventory carrying costs

‹‹ Cost of security
H

Thxe following are some of the major benefits of an integrated supply chain management system:
IC

‹‹ High customer satisfaction. Integrated supply chain helps in providing better and
faster services to the customers.
D

‹‹ Focus on the entire supply chain channel. Integrated supply chain is a holistic
approach under which all supply chain functions are taken into consideration.
N

‹‹ Optimisation of resources. Integrated supply chain help in channelising organisational

resources to achieve organisational goals.
O

‹‹ Link the supplier to the end user. Integrated supply chain helps in increasing
P

coordination between supplier and end user.

‹‹ Quick response. It is related to the timeliness of the services that meet customer
requirements. Quick response changes the focus of supply chain operations from
forecasting and inventory to shipment and customer requirement.
‹‹ Low inventory. It reduces the burden of assets and improves the related turnover
rate. Because of smooth information sharing, manufacturers or retailers don’t have to

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Information System in Supply Chain Management

Notes maintain high inventory.

‹‹ Transport integration. Planning transport supply chain cost is important for
integrated supply chain management. In general, the transport cost per unit reduces
when the distance is long.
‹‹ Product quality: Maintenance of product quality is a very crucial requirement in a
retail environment. Integration of the supply chain helps in improving and maintaining

Y
product quality. For example, various quality management techniques, such as and Six
Sigma can be easily implemented in case information can be easily accessed and shared. .

IT
The cost incurred in such cases could be more than the original expenses. Hence, supply
chain is an important component of development and maintenance of total quality
management (TQM), and needs constant improvement.

S
Fig. 8.1 shows the integrated supply chain:

R
Inventory Flow

E
IV
Physical Manufacturing
Customer Procurement Suppliers
Distribution support

N Information Flow
U
Fig. 8.1: Integrated Supply Chain
Y

In Fig.8.1, you can see that various parties in the supply chain, such as customer and suppliers
are integrated with the help of inventory flow and information flow.
R

8.2.1 Inventory Flow

R
E

The transportation and warehousing of inventory, including raw materials, work-in-progress,

and final goods, is the responsibility of supply chain operational management. When raw
H

materials or components are first sent from the supplier, logistical activities begin. They
conclude with the final delivery of finished or processed goods to the client. From the point
IC

of purchase to the subsequent stages of the supply chain, the process of adding value to the
commodities begins. Every stage of the process adds value to the materials and components
when each one runs well. Stated differently, the value of a single component increases as it
D

is integrated into a machine. Similarly, once the equipment is delivered to the consumer, its
value increases.
N

For instance, Nokia’s supply chain in China makes sure that each product is sent by the firm
to the appropriate nation on the appropriate day and in the appropriate quantity. Production,
O

material management, storage, and transportation are all part of Nokia’s supply chain. As
of March 2013, Nokia has around 22.5% of the worldwide market share for mobile devices.
P

The largest market for Nokia is China. Nokia has two production facilities in China that
manufacture and distribute mobile phones to consumers in China and other countries. These
numbers unequivocally demonstrate that an increase in market share results in more orders
for Nokia and a heavier burden on the supply chain.

In the current market scenario, an effective inventory supply chain system is crucial for the
success of retail enterprises. Various factors such as material flow, distribution, procurement
and purchasing are required to be performed in an effective manner.

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Notes Planning for manufacturing, buying, and just-in-time inventory control/management are all
included in material flow. Optimising material flow offers a number of advantages.

The following is a list of a few of them:

‹‹ Improves product quality
‹‹ Reduces purchasing costs

Y
‹‹ Reduces freight and transportation costs

IT
‹‹ Reduces manufacturing waste
‹‹ Increases production

S
‹‹ Improves customer satisfaction
‹‹ Reduces downtime

R
‹‹ Reduces production cost

E
‹‹ Increases cash flow

IV
There are a number of retail enterprises that manufacture the merchandises to be sold in
retail stores. For these retail enterprises, inventory supply chain plays a key role. To support
manufacturing, work-in-process inventory must be moved to support the final assembly.

N
The cost of each component and its movement become a part of the value-added process.
There are retailers that do not manufacture their own products. These types of retailers
U
source products from other manufacturers. Inventory flow can be influenced by the following
personnel in your team:
Y
‹‹ Material planners
‹‹ Purchasing managers
R

‹‹ Quality assurance personnel

R

‹‹ Inventory control personnel

E

‹‹ Production engineers
‹‹ Material management professionals
H

The following are the elements of the inventory supply chain of the retailers that manufacture
IC

their own products:

‹‹ Procurement: It involves sourcing materials from the suppliers. Procurement is an
important element of inventory supply chain. In absence of an efficient procurement
D

system, an enterprise cannot achieve efficiency in manufacturing, which results in high

costs of products and low profitability. Large retailers enjoy better bargaining power
N

because of the retailer`s large order sizes. It should be noted that procurement starts with
sourcing materials from suppliers to transporting materials to the manufacturing plants.
O

‹‹ Manufacturing support: It refers to the logistical process inside a manufacturing plant.

In manufacturing support supply chain, materials are moved to different machines and
P

sections for different stages of production. For example, spare parts of automobiles are
required to be moved to different sections of the assembling unit to assemble a car. An
effective manufacturing support supply chain helps in increasing the efficiency of the
manufacturing process.
‹‹ Physical distribution: It refers to transportation of the final goods to the retail stores
or to the final customers. For example, physical distribution ensures the delivery of

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Information System in Supply Chain Management

Notes bakery products to bakery shops from the process plant. Thus, physical distribution is
the last stage of the inventory supply chain process. Customer is the final destination
of the products manufactured. Therefore, if products cannot be made available to
customers, as and when demanded, profitability of the retail enterprise would get
reduced.

Hence, there is no single element that can be used as an ideal inventory supply chain process.

Y
All the three elements should be effective and coordinate with each other. If raw materials
are not procured in a timely manner, it would hamper the smooth flow of manufacturing.

IT
Similarly, the intra-plant movement of materials should be smooth to increase manufacturing
efficiency. Lastly, the physical distribution of finished goods should be on time and regular so

S
that final products can be made available to the customers.

R
8.2.2 Information Flow

E
Information flow is an important aspect of the integrated supply chain. As we discussed earlier,

IV
the main objective of integrated supply chain is to maintain the coordination and consistency
among the various logistical functions of a retail enterprise. However, coordination among
logistical functions cannot be made possible without a proper information flow.

N
In the entire supply chain system of a retail enterprise, the requirement for the movement of
U
goods vary in terms of size, distance to be covered and availability of stocks. For example,
if supply chain managers of a retail store do not have adequate information about the
availability of stocks, they cannot put replenishment orders. At present, many large retailers
Y

use automated systems to ensure smooth information flow.

R

A logistics system’s efforts may be ineffective in the lack of reliable information. For instance,
a merchant cannot guarantee a delivery date to a consumer due to incomplete or inaccurate
R

information since the store does not have access to delivery information. Coordination flows
and operational flows are the two primary categories of flows in logistical information. The
E

primary goal is to provide a high-level summary of the information needs required to operate
an integrated supply chain system.
H

A well operated and coordinated supply chain plan involves the following:
IC

‹‹ Strategic objectives
‹‹ Capacity constraints
D

‹‹ Logistical requirements
N

‹‹ Inventory deployment
‹‹ Manufacturing requirements
O

‹‹ Procurement requirements
P

‹‹ Forecasting

It is important to emphasise that information requirements correspond accurately to the actual

work performed during customer accommodation, manufacturing support and procurement.
These areas contain the actual supply chain work and proper information flow helps to
maintain coordination between planning and controlling day-to-day operations.

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Notes Self-Assessment Questions

1. Supply chain is a fragmented and uncoordinated set of activities that spread across
various organisational functions, where every individual function has its own budget,
set of priorities and measurements. (True/ False)

2. ________ helps maintain coordination among all the logistical functions of a retail

Y
enterprise.

IT
3. List two benefits of material flow optimisation.

4. Coordination among logistical functions cannot be made possible without a proper

S
_______.

R
Activity

E
Visit an organisation and study how it manages its inventory flow and information flow

IV
both within and outside its premises. Note down the IT tools the organisation deploys to
run its supply chain operations.

8.3 Warehousing Management System

N
U
The goal of a warehousing management system (WMS) is to regulate the flow and storage of
items within a warehouse using a variety of instruments and methods. Additionally, it handles
Y
the associated transactions for material receipt, storage, put away, retrieval, and shipment.
Additionally, it uses real-time data on the state of product use to guide and improve the items
placed away.
R

WMS tracks a product’s path through the warehouse. It includes tracking systems,
R

communication between product stations, and the mapping warehouse layout. Receiving,
storing, and transporting goods—typically completed goods—to eventual customers or
E

intermediate storage facilities are all part of warehouse management.

H

Different levels of warehouses, such as a central warehouse, a regional warehouse (served by

the central warehouse), and a retail warehouse, may be included in a multi-level warehousing
IC

concept (serviced by the regional warehouses).

WMS utilises automatic identification and data capture technology to track the progress
of products. These technologies include mobile computers, bar code scanners, local area
D

networks and radio frequency identification devices (RFID). Different batches of products
are synchronised using the captured data. This database can provide useful information about
N

the status of products in the warehouse.

The objective of a WMS is to enable a better management of inventory by using computerised
O

procedures, with a target of minimising delivery time and maximising order fulfilment times.
P

Some advantages of implementing a WMS are:

‹‹ Logging client return orders and stock receipts into the warehouse facility. Reducing
the quantity of extraneous components and items stored in the store is one way that an
effective WMS assists an organisation in cutting costs. Having adequate inventory on
hand to fulfil demand also helps businesses minimise wasted revenue.
‹‹ Facilitating a flawless link
between order processing and supply chain to pick, pack and
ship products out of the warehouse.

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Information System in Supply Chain Management

Notes ‹‹ Tracking the details of products regarding where they are stocked, by which supplier
they have been supplied, and the duration they are stored for.
‹‹ Organisations can effectively control their inventory and maximise the use of
warehouse
space, using a WMS, which produces relevant reports based on the collected data.
Analysing this data helps companies control inventory levels.

One of the examples of WMS is IBM® Sterling WMS. Companies that are managing their

Y
supply chains and warehouse operations must be flexible to accommodate market changes
and disruptions. Companies are extensively investing and adopting the latest supply chain

IT
technologies for faster response time and better change management in effective inventory
management and productivity. The IBM® Sterling WMS is a prominent solution for managing
warehouse operations. By using service-oriented architecture (SOA), IBM® Sterling WMS

S
solution integrates the existing infrastructure and equipment in a warehouse. It also supports
forward technologies, such as RFID.

R
An organisation must achieve at least six distinct operational goals in the design and

E
management of logistical systems: quick response, minimal variation, minimal inventory,
movement consolidation, quality, and life-cycle support. Operational objectives state that

IV
operational actions are required to accomplish the aims. The integrated supply chain aims to
accomplish certain objectives that assist a retail business in increasing efficiency and cutting
expenses. The following is an explanation of these goals:

N
‹‹ Rapid response: It is focused on an organisation’s capacity to promptly meet customer
service standards. The ability to delay logistical activities until the last feasible hour
U
and then quickly provide the necessary supplies has increased thanks to information
technology. As a consequence, surplus inventory that was stockpiled in advance of
consumer demands is eliminated. Keeping a large amount of inventory on hand
Y

consumes funds that might be used for other company ventures. Consequently, a large
inventory level raises operating expenses.
R

Rapid response shifts operational focus of a retail enterprise towards meeting customer
R

expectations. It helps in fulfilling customer requirements on the basis of consignment.

It reduces operational deficiencies, as inventory is moved lot-wise in a time-bound
E

manner to fulfil customer requirements.

‹‹ Minimum variance: This is a reference to an unforeseen incident that impairs system
H

functionality. Variance may arise from any facet of the logistical process. Operations
experience time distractions that need to be fixed, such as delays in the anticipated time
IC

of receiving client orders, unanticipated production disruptions, broken items arriving

at the customer’s location, or deliveries to the wrong place. There is a chance to reduce
variation in both internal and external operations. A logistics system’s operating zones
D

concentrate on possible variation. Traditionally, safety stock was established or luxury

transportation was used to account for volatility. Safety stock is the excess inventory
N

that merchants keep on hand in case of supply disruptions or unexpected spikes in

O

demand. To reduce risks in the event of a delayed supply in the next month or greater
demand in the present month, a store may, for instance, maintain stock of 5,500 units
P

(10 percent extra) of a product if the typical monthly demand for it is 5000 units.
Information technology has taken the place of conventional methods, which came with
risk and cost, in order to accomplish positive supply chain management. Economic
operations lead to an increase in logistical efficiency if variations are minimised.
Therefore, minimising variation is the primary goal of logistical performance.

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Notes  Minimum inventory: It refers to the minimum amount of stock to be maintained

by a retail enterprise. Minimum level of inventory is maintained to minimise the
commitment of assets in high inventory. The objective of minimum inventory is
to reduce and manage inventory to the lowest level while simultaneously achieving
customer service goals, such as attaining the lowest overall supply chain cost.
Concept, such as zero inventory, has become increasingly acceptable as managers

Y
seek to reduce inventory deployment. To achieve minimum inventory, the logistical
system design must control inventory and turn the logistical velocity for the entire

IT
enterprise. Note that velocity refers to the rate of inventory usage over time.
 Movement consolidation: Costs associated with logistics are mostly related
to transportation. Cost of transportation is directly impacted by product type,

S
consignment size, and distance. A number of premium service-oriented logistics

R
systems rely on small-consignment, high-speed transportation. Premium
transportation is often more expensive. Movement consolidation must be

E
accomplished in order to save transportation costs. Generally speaking, the cost of
transportation per unit decreases with consignment size and distance travelled. To

IV
achieve this, creative programmes for consolidating small consignments are needed
for consolidated transit.

N
‹‹ Quality improvement: Seeking constant quality improvement is an integrated supply
chain’s sixth operational goal. TQM has grown to be a significant commitment across
U
the board for industry. One of the main reasons for the logistical comeback is the
general dedication to TQM. In cases when a product is harmed or promises are broken,
the supply chain adds very little value. Once incurred, logistical expenses cannot be
Y

recovered. Reversing and repeating the logistical performance is necessary when quality
fails. The performance of the supply chain should meet strict quality requirements.
R

Because logistical activities must always be carried out across a large geographic region,
achieving zero-defect logistical performance is very difficult. Since most supply chain
R

procedures are carried out without the presence of a supervisor, the problem of quality
is exacerbated. It is more expensive to redo a customer’s purchase after an inaccurate
E

shipment or damage sustained in route. The supply chain is essential to the creation
H

and upkeep of continual TQM development. Toyota is a prime illustration of how

TQM deployment may successfully improve quality. In order to guarantee high-quality
IC

goods, it merged several organisational areas, as well as personnel and procedures.

‹‹ Life-cycle support: Life-cycle support is the ultimate operational goal of an integrated
supply chain. Seldom are products supplied without an assurance that they will function
D

as promised for a certain amount of time. The typical value-added inventory movement
N

towards the consumer must sometimes be reversed. Product recall is a critical skill
brought about by tightening quality requirements, expiry dates, and accountability for
O

negative outcomes. Requirements for return supply chains are also the result of more
and more legislation that encourage recycling of packaging materials and containers
P

and prohibit their disposal. The need for utmost control in the event of possible health
liability is a crucial component of reverse logistical operations. For this reason, it is
necessary to implement, at all costs, a recall programme akin to a maximum customer
service approach. Johnson & Johnson’s traditional approach to the Tylenol problem
is a suitable illustration of how to convert hardship into opportunity. Organisation to
organisation differs in its reverse supply chain operating requirements.

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Information System in Supply Chain Management

Notes Exhibit
Keys to a Smoother, Happier Warehouse Management System Implementation

Editor of SCDigest Dan Gilmore and President of GetUsROI Mark Fralick

From the August 25, 2014,

Y
On-Target E-Magazine of SCDigest

IT
Despite this fact, there are a number of actions businesses can take to increase the
likelihood of a reasonably easy (although there will always be some pain!) deployment
that will save costs, lessen stress, and win over top management (or at least happier).

S
Although there are many more ideas we might have thought of, and we yet could someday,

R
we have narrowed down the top 10 critical actions businesses using WMS can do to
increase their chances of success.

E
We recognised the first five of them last week, and they were:

IV
1. Broadly train employees about what a WMS is and does prior to the project
kickoff: In the future, it will save time and result in wiser choices as the project

N
develops.

2. Interview/approve the vendor’s project manager: Until you have a designated

U
PM whose résumé you have reviewed and interviewed, do not sign a contract.

3. Recognize lost time is lost time - it really can’t be made back up: Businesses
Y

who are attempting to recoup time often take short cuts in testing, training, etc.,
which will cost them in the long run.
R

4. Focus on validation preparation and execution: What constitutes a system that

R

is prepared for launch? Both the effort and the testing to check whether the system
satisfies validation requirements are often short cut.
E

5. Implement the “best methods” part of labor management: Implementing labour

H

regulations with a new WMS is often not a smart idea, but teaching employees how
to do each activity correctly? By doing this, activities will become more precise
IC

and organised, which will aid in the deployment of WMS overall. To refresh your
memory, the following five unusual factors are crucial for seamless and successful
WMS deployments:
D

6. Make repetition the focus of user training: We may refer to a large number
N

of the WMS suppliers’ training courses as “one and done” courses. Employees
walk through every screen that is pertinent, but how much of it can they really
O

remember?

The secret to a successful WMS training programme is repetition—not only of
P

the fundamental procedures but also of the very important exceptions (location
overrides, etc.). You will know you have truly well-trained someone when you can
get them tired of the training. Repetition is key.

7. Do the IT plumbing early: While blocking and tackling may appear

easy, there’s a lot of work involved with system-to-system interactions,

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CHAPTER 8  Implementing Information Technology in a Supply Chain

Notes
internal websites, proxies to external servers, and other related tasks. Without this
task, the system often cannot operate at all.

However, for some reason, this kind of work is virtually never done until practically
the very end of the project, meaning that the WMS and the integrations have to
work together miraculously just before go-live.

Y

IT should begin working on this project far in advance of the functional portion of
the WMS deployment to ensure a seamless implementation. Naturally, part of the

IT
validation strategy must also include testing to ensure that everything functions
reliably. It often happens that integrations seem to function OK on a basic data set,

S
but when actual operations are applied, they malfunction, severely harming the go-
live.

R
Don’t let this happen by getting started on the plumbing work right away.

E
8. Plan for extensive performance scenarios/testing: Mark created a set of

IV
components that enable a client of his business, which processes around 50,000
order lines per pick wave, to operate at 75, 100, 150, and 200 percent of typical
volume in order to verify performance and scalability. Nothing is more detrimental

N
than having a reliable system that struggles to function at huge volumes.
U

If they have the time, the vendor can often take care of these scalability problems
prior to go-live. When users and management lose trust in the system, attempting
to resolve scalability concerns while the system is actually executing the DC may
Y

lead to serious complications.

R

9. Over-involve operations in decision making: Despite their hectic schedules,

operational managers must find the time to participate in system setup decision-
R

making. This must begin at the outset of the validation preparation process and
continue through setup and final validation. Rather of being “given over” a system
E

by IT, they need to have a major role in the system’s development.

H

Although it may seem apparent, our extensive experience indicates that this isn’t
always the case.
IC

Execute as much end-to-end testing as you can.

10. Do as must end-to-end testing as possible: WMS testing is much too often
D

conducted on what is referred to be an incomplete basis. By that, we mean that just

a portion of the whole process is tested, not the final product. It is not necessary to
N

verify and confirm the function’s apparent functionality; rather, the whole “round
trip” of the function or transaction must be verified.
O

Orders may be received and picked, but are shipping confirmations really being sent

P

out and handled appropriately in the inventory and order management systems?
Almost all testing scenarios have to be characterised as examining the whole
process; yet, they are often divided into distinct test scripts nowadays, which may
conceal problems.
(Source: http://www.scdigest.com/ONTARGET/14-08-25-1.PHP?cid=8422&ctype=content)

DDE, Pondicherry University, Pondicherry 125

Information System in Supply Chain Management

Notes Self-Assessment Questions

5. Define WMS.
6. WMS facilitates a flawless link between order processing and supply chain to ____,
____, and ____ products out of the warehouse.
7. _______ is directly related to the type of product, size of consignment and distance.

Y
8. _______shifts operational focus of a retail enterprise towards meeting customer

IT
expectations.

a. Rapid response

S

b. Minimum variance

R

c. Minimum inventory

d. Movement consolidation

E
IV
8.4 Summary
‹‹ The process of organising, carrying out, and managing the movement and storage of

N
goods, services, and other kinds of information from the point of origin to the point
of consumption with the goal of meeting client demands is known as the supply chain.
U
‹‹ Integrated supply chain helps maintain coordination among all the logistical functions
of a retail enterprise. These enterprises are under constant pressure to provide goods
Y
at low prices.
‹‹ Work-in-process, completed goods, and materials inventories are moved and stored as
R

part of the supply chain’s operational management.

R

‹‹ Receiving, storing, and transporting goods—typically completed goods—to intermediate

storage facilities or the ultimate consumer comprise warehouse management.
E

‹‹ An organisation must achieve at least six separate operational goals in the design
and management of logistical systems: quick response, minimal variation, minimum
H

inventory, movement consolidation, quality, and life-cycle support.

IC

8.5 Glossary
‹‹ Procurement: Involves sourcing materials from the suppliers.
D

‹‹ Physical distribution: A process to transport final goods to retail stores or to final

N

customers.
‹‹ WMS: A combination of tools and techniques that aim to control the movement and
O

storage of materials within a warehouse.

P

‹‹ Minimum variance: An unexpected event that disrupts system performance.

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Notes
8.6 Terminal Questions
1. Discuss the major benefits of an integrated supply chain management system.

2. Explain the need and benefits of implementing a WMS in an organisation.

8.7 Answers

Y
Q. Self Assessment Questions

IT
1. True
2. Integrated supply chain

S
3. Improves product quality and reduces purchasing costs

R
4. Information flow.
5. WMS is a combination of tools and techniques that aim to control the movement

E
and storage of materials within a warehouse.

IV
6. Pick, pack, ship
7. Transportation cost

N
8. a. Rapid response
Q. Terminal Questions
U
1. Integrated supply chain helps maintain coordination among all the logistical
functions of a retail enterprise. Refer to section 8.2 Integrated Supply Chain
Y
Information Technology.
2. WMS is a combination of tools and techniques that aim to control the movement
R

and storage of materials within a warehouse. Refer to section 8.3 Warehousing

Management System (WMS)
R
E

8.8 Case Study: Supply Chain Integration

H
IC

Supplier
D

Raw Materials
Manufacturing
N
O

Distribution
P

Consumer
Customer

The biggest food marketing and distribution corporation in North America, as well as a Fortune
100 company, are the subjects of this lawsuit. The firm supplies over 420,000 restaurants,
hotels, schools, healthcare facilities, and other food service clients with an assortment of over
275,000 goods from more than 160 sites in the US and Canada.

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Information System in Supply Chain Management

Notes Business Need

The firm made the brave decision to redesign its supply chain by establishing local distribution
centres in order to optimise its supply chain, which was essential to its success and continuous
expansion. The goal of this initiative was to re-distribute items from supplier source to main
distribution point more efficiently.
The business operated a number of operational units, which served as its regional distribution

Y
subsidiaries. These were all operating on various platforms, including IBM AIX and AS400.
These places’ information systems were developed using a variety of in-house software. The

IT
customer has also bought other small businesses over the years, each with its own unique IT
setup. They lacked complete integration and were just point-to-point interoperable.

S
Solution

R
For the customer to increase enterprise-wide operating efficiency, a smooth, integrated
system was required. In order to sustain its extraordinary expansion, it chose to follow the

E
Enterprise Application Integration (EAI) approach, which allowed it to keep using existing
databases and older applications while integrating new technology.

IV
From a technological standpoint, the EAI project included the smooth integration of eight
applications, including packaged, custom-built, and legacy systems, to create a whole new
layer of supply chain systems.

N
Through this endeavour, the client hoped to support its future enterprise demands and
U
strategic goals by laying the groundwork for EAI Infrastructure, in addition to meeting its
immediate business needs.
(Source: http://www.infosys.com/industries/retail/case-studies/Pages/supply-chain-revamp.aspx)
Y

Discussion Question
R

1. Why did the company in the case study require supply chain integration?
R

(Hint: Different IT systems in the company were inter-operable on a point-to-point
basis and lacked total integration.)
E
H

8.9 References and Suggested Readings

‹‹ Simchi-Levi, D., Kaminsky, P. and Simchi-Levi, E. (2000). Designing and managing the
IC

supply chain. 1st ed. Boston: Irwin/McGraw-Hill.

D

E-references
N

‹‹ Eresourceerp.com,(2014). Supply Chain Integration | Integration of Supply Chain

Management Explain by Eresource. [online] Available at: http://www.eresourceerp.
O

com/What-does-supply-chain-integration-mean.htm
‹‹ Logichemus.wbresearch.com, (2014). Supply Chain Integration. [online] Available at:
P

http://logichemus.wbresearch.com/supply-chain-integration-ml [Accessed 16 Sep. 2014].

‹‹ Missourienterprise.org, (2014). Supply Chain Management and Integration.
[online] Available at: http://www.missourienterprise.org/ManufacturingServices/
SupplierDevelopment/SupplyChainManagementandIntegration/tabid/526/Default.
aspx [Accessed 16 Sep. 2014].

128 DDE, Pondicherry University, Pondicherry

chapter

9 ERP and DSS in

Y
Supply Chain

IT
S
R
E
Structure

IV
9.1 Introduction

N
Learning Objectives U
9.2 Role of ERP in a Supply Chain

9.3 Role of DSS in a Supply Chain

Y

9.4 Supply Chain Master Planning

R

9.5 Summary

9.6 Glossary
R

9.7 Terminal Questions

E

9.8 Answers
H

9.9 Case Study: ERP Implementation in Newman Technology

IC

9.10 References and Suggested Readings

D
N
O
P
Information System in Supply Chain Management

Notes Learning Objectives

After completing the chapter, you will be able to:
 describe the role of ERP in a supply chain
 explain the role of DSS in a supply chain
 discuss supply chain master planning

Y
9.1 Introduction

IT
In the current business environment, organisations face competition from their contemporaries

S
at every step. In order to survive and have a competitive edge over the rest, an organisation
needs to grow and change with time. As we have seen in previous chapters, IT plays a very

R
important role in almost every aspect of a business enterprise. Since high investment is
involved in the implementation of advanced IT technologies, organisations must have proper

E
mechanisms to ensure their most optimum usage and maintenance. We have already learned
about information systems and how they help organisations to generate useful information

IV
from the data collected from various sources.

In this chapter, we will learn about two information systems, namely Enterprise Resource

N
Planning (ERP) and Decision Support System (DSS). As is evident from its name, an ERP
helps an organisation to manage its resources and plan their utilisation in the most effective
U
manner. It is a set of business tools designed to record, store and integrate data from various
departments of an organisation, and process the collected data to derive useful information.
DSS supports the organisational decision-making process by providing useful information.
Y

It integrates data from different sources within the organisation and supply analytical
information required to make important business decisions. It is especially useful for mid and
R

higher management in operations and planning stages.

In this chapter, you will first study about ERP, its framework and its role in the efficient
R

management of a supply chain. Next, the chapter explains the role of DSS in supply chain.
The chapter also discusses the implementation of artificial intelligent (AI) techniques in DSS.
E

Towards the end, the chapter discusses the concept of supply chain master planning.
H

9.2 Role of ERP in a Supply Chain

IC

Enterprise Resource Planning (ERP) is defined as a business solution that empowers people
to be more productive and respond to the ever-changing world of business. It is a suite of
D

integrated business applications that an organisation can use to collect, store, manage and
interpret information from many business activities. ERP enables organisations to adapt to
N

the changing scenario as well as provide insights needed for information processing.
O

As we have seen in earlier chapters, a supply chain binds together all the entities of a
business, as if in a chain, and provides a compact perspective of the entire business. Effective
management of a supply chain helps an organisation to reduce inventory, lead times as well as
P

costs involved in its various business processes.

Akkermans et al., in 2003, published a research based on 23 separate business enterprises

about the consequences and future expectations of implementation of ERP in supply chain
management (SCM). The result inferred by the study showed that many business enterprises
that deployed ERP considered extending the scope of their existing system to integrate

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CHAPTER 9  ERP and DSS in Supply Chain

Notes their suppliers, customers or both in the system. This extension in the existing system was
proposed to increase supply chain functionalities and in turn enhance additional e-commerce
or e-business operations.

In the contemporary business world, organisations face the challenge of understanding the
factors that play a critical role in utilising ERP systems and the implications that these could
have on a supply chain.

Y
The results of various studies show that ERP systems have a positive impact on both internal

IT
as well as external supply chains.

9.2.1 ERP Framework

S
ERP is a term that, from the point of view of an organisation, encompasses the set of activities

R
that help in managing the important parts of its business. ERP facilitates the smooth flow of

E
information between different stages of business so as to ensure that business decisions are
data-driven and up-to-date. To enable this smooth flow of information, ERP software suites

IV
are designed to collect and organise data that is generated at various levels of an organisation.
This data is then summarised and provided to the management in real time with insight into
key performance indicators (KPIs) for decision making and implementation.

N
When an ERP software deployment is easily connected with other software systems that the
company utilises, it becomes beneficial. In light of this, implementing an internal ERP system
U
might result in significant business process reengineering, personnel retraining, and back-end
IT support for data analytics, database integration, and ad hoc reporting.
Y

Distributors, manufacturers, and service providers may all benefit from the complete enterprise-
wide solution provided by the integrated suite of modules that make up the ERP framework.
R

By implementing improved customer service, increasing productivity, and improving overall

performance, organisations may gain a competitive edge via the use of the ERP framework.
R

A typical ERP framework can be classified into various modules, as shown in Fig. 9.1:
E

Manufacturing
H
IC

Distribution and transportation

Modules in ERP Framework
D

Finance
N

Service
O
P

Project

Process

Fig. 9.1: Modules of an ERP Framework

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Information System in Supply Chain Management

Notes Let us take a closer look at each of these modules:

‹‹ Manufacturing: Project control, product configuration, multisite material requirement
planning (MRP), and critical path activity analysis are all included in this module. It
also oversees supply chain management for multisite manufacturing, as well as job shop
and repetitive production management.
‹‹ Distribution and transportation: With order processing, margin tracking, and contract

Y
administration features, this module oversees sales and buying. Furthermore, this
module provides extensive functions for external logistics and transportation, including

IT
public storage and packaging, route optimisation, transport order administration, and
transport maintenance. Rapid contact with customers and subcontractors is made
possible by this module’s strong integration with electronic data exchange (EDI).

S
‹‹ Finance: This module offers general ledger, fixed asset, accounts payable, and accounts

R
receivable functions as part of an integrated financial system. It may also be used
by businesses that need financial management skills as a stand-alone solution or as a

E
comprehensive one.

IV
‹‹ Service: Control over installations, contracts, service orders, and billing are provided
by this module.
‹‹ Project: This module facilitates the administration of major projects through all

N
phases, from estimating bids to delivery and then through the guarantee period, and is
specifically developed for the manufacturing and construction sectors.
U
‹‹ Process: Key manufacturing process functions, including as formulation and co-
product/by-product management, are provided by this module.
Y

Exhibit
R

ERP Implementation at Old Mill Kettle Corn

R

A significant distribution offer was made to Old Mill Kettle Corn, a firm that produces
corn-based snacks, by McKee Foods Corporation, a major national snack food maker. The
E

management of Old Mill Kettle Corn realised that using paper spreadsheets and manual
processes to manage product quality, inventory, supply chain communications, and other
H

processing operations was no longer practical due to the company’s impending expansion
and new market opportunities. Previously, the company had never used an ERP platform
IC

or a formal food safety management system.

They used to depend on estimates, but after receiving this large order from McKee Foods
Corporation, it became essential to determine the precise amount produced each day and
D

the amount still required to be produced.

N

Old Mill Kettle Corn Vice President of Operations Greg Smith realised that the estimate
is no longer valid. They enlisted the aid of Plex Manufacturing Cloud, an all-inclusive
O

manufacturing enterprise resource planning (ERP) programme that addresses every

aspect of the manufacturing business. Following a three-month deployment phase, Plex
P

was being used by Old Mill Kettle Corn in every department of its processing business,
and inventory was now being monitored with almost perfect precision. The management
now has total insight into all plant data and processing activities. Old Mill Kettle Corn
was able to adapt to the changing demands of its company because to Plex’s cloud-first
architecture.
(Source: http://www.plex.com/knowledge-center/featured-articles/case-studies/kettle-corn-manufacturer-sees-sweet-growth-
cloud/)

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Notes 9.2.2 Integration of ERP in a Supply Chain

Integration of ERP in a supply chain of an organisation is a complex process, which requires
comprehensive preparatory work. All the organisational structures of a business enterprise
must be defined clearly in terms of concepts supported by the ERP system. Although ERP is
standard software, it does not signify that it can be implemented in an organisation as it is. An

Y
ERP system needs to be customised according to the defined requirements of an individual
enterprise.

IT
The following points must be taken into consideration while integrating ERP with a supply
chain:

S
‹‹ Since every part of the business enterprise is affected by the integration, all the
employees especially in planning, procurement and information technology must be

R
brought on board.
‹‹ It is vital to examine the existing system and identify the goals in terms of business

E
requirements for a successful and efficient integration.

IV
‹‹ All the gaps related to time, data and collaboration within the various operations must
be checked.
‹‹ The existing and the prospective systems need to be reviewed to find out the areas

N
in which the present system is falling short and also to anticipate what the potential
solution shall bring to the table. Some existing systems may adapt well to the new
U
technology, while others may not. Thus selecting the solution that suits best for your
organisation is of crucial importance.
Y

‹‹ The integration must proceed in a sequential manner, evaluating its progress at every
step. This ensures that the right system is being implemented for your organisation.
R

‹‹ Make sure that the system as well as employees adapt seamlessly to the new system.
R

‹‹ The cost implications of the integration in the long run must also be considered.

Integrating ERP with a supply chain has many positive effects on the growth and functioning
E

of an organisation. Some of the main benefits are:

H

‹‹ Enterprise-wide visibility: ERP software enables all the employees to have permission-
based access to the centralised data. This allows end-users to analyse and provide their
IC

inputs in the optimisation of inventory levels, purchasing and production activities for
enhanced performance.
‹‹ Automated purchasing: ERP systems from suppliers such as SAP, Oracle, and
D

Microsoft Dynamics may be configured to automatically place orders with suppliers

when inventory falls below a certain threshold. By having this capability, the likelihood
N

of running out of material at crucial points in the manufacturing schedule is reduced.

O

‹‹ Vendor performance: ERP systems provide the end user the ability to monitor vendor
performance via the use of metrics like cycle time, cost, mistake rates, etc. Vendor
P

negotiations may be improved by using this information.

‹‹ Exposure of fraud and malpractices: ERP solutions discourage supply chain
corruption because they provide visibility across an organisation.
‹‹ Economies of scale: ERP systems help the management to keep track of every
financial transaction made across the organisation. Accurate and updated financial
information helps organisations to take informed decisions.

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Information System in Supply Chain Management

Notes Self-Assessment Questions

1. ________are designed to collect and organise data that is generated at various levels
of an organisation.
2. Name two modules of an ERP framework.
3. Since ERP systems offer visibility across an organisation, they deter ______ in the

Y
supply chain.

a. growth

IT

b. corruption

c. information sharing

S

d. transparency

R
Activity

E
Collect information about various types of ERP systems installed in different types of
organisations.

IV
9.3 Role of DSS in a Supply Chain

N
A computer-based information system (CBIS) that is interactive, adaptable, and flexible that
U
was specifically designed to assist in solving an unstructured management challenge in order
to enhance decision-making. It makes use of data, offers a simple user interface, and enables
the decision maker to add their own insights. (Turban, 1998)
Y

From the perspective of a business enterprise, the act of decision making is considered one
of the most significant. A single correct decision has the potential to put the organisation on
R

the track of success; whereas, an incorrect decision can have serious implications on its overall
growth.
R

Any enterprise’s decision-making process includes gathering data, analysing and interpreting
E

it, and then producing reports to help choose the best course of action for solving the given
business challenge. You are already familiar with Management Information System (MIS),
H

which helps organisations do management tasks more efficiently by providing precise,

pertinent, and up-to-date information. The purpose of the Decision Support System (DSS),
IC

a component of a MIS, is to assist management in making decisions. A DSS is an interactive

computer-based information system that provides the analytical data needed to make business
choices by integrating data from many sources within the company.
D

According to Hicks, “DSS is an integrated set of computer tools that allow a decision-maker to
interact directly with computers to create information useful in making decisions.”
N

According to Keen and Scott-Morton (1978), “A DSS couples the intellectual resources of
O

individuals with the capabilities of the computer to improve the quality of decisions. It is a computerbased
support system for management decision makers who deal with semi-structured problems.”
P

The following are the main functions of a DSS:

1. To amass data from the routine transactions of an organisation
2. To employ advanced statistical techniques to analyse data and extract meaningful
information from it

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CHAPTER 9  ERP and DSS in Supply Chain

Notes 3. To taper down the range of choices by applying rules based on the decision theory

Exhibit
Decision-Making Process

Making decisions is a process that aims at finding the best solution to a problem from
many alternatives. This process involves the following steps:

Y
1. Identifying the problem: Refers to the step in which the actual problem of the

IT
organisation is identified. A researcher can analyse the problem properly, only if
he/she identifies it.

S
2. Identifying the decision criteria: Refers to the step in which the researcher
identifies the various factors that affect a decision. These factors are costs, risks,

R
and outcomes. Cost refers to the money spent in conducting research work and
implementing a solution. Risk refers to the likelihood of taking a wrong decision.

E
Outcome is the impact of the decision on the growth of an organisation after
implementing the solution.

IV
3. Allocating weightage to the criteria: Refers to the step in which weightage is
allocated to factors affecting decisions. Weightage is assigned according to the

N
importance of the factors in the present scenario.

4. Developing alternatives: Refers to the step in which the alternative solutions are
U
generated for solving a problem. In this step, the researcher precisely identifies
multiple solutions to solve a problem.
Y

5. Analysing alternatives: Refers to the step in which all the alternatives are analysed
on the basis of their advantages and disadvantages.
R

6. Selecting the alternative: Refers to the step in which the researcher selects the
R

best alternative to address the problem out of all the options available.

7. Implementing the Alternative: Refers to the step in which the researcher puts into
E

practice the selected solution. In this step, the researcher receives feedback from the
people who would implement the decision.
H

8. Evaluating the Decision’s effectiveness: Refers to the step in which the researcher
IC

finds out the effectiveness of the solution to solve the problem.

D

9.3.1 Structure of a DSS

N

As we discussed, DSS plays a dominant role in the decision-making process of an organisation.

The structure of a DSS consists of various components that play a crucial role in reaching a
O

collective decision. Figure-9.2 shows the components of a DSS:

P

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Information System in Supply Chain Management

Notes DSS Components

Database Management Knowledgebase User Interface Model Management

System Management System Management System System

Y
Fig. 9.2: Components of a DSS

IT
Let us discuss these components of DSS briefly:
‹‹ Database Management System (DBMS): It aids in cutting expenses, eliminating

S
redundant data, managing data flow, and boosting data exchange. The DSS database
component has five distinct data models. These models include the relational,

R
hierarchical, network, record, and rule models.

E
‹‹ Knowledgebase Management System: It provides information and assistance for
gathering pertinent data and using the learned facts to tackle challenging issues.

IV
‹‹ Model Management System: It offers a range of methods and abilities to provide
accurate, perceptive, and practical outcomes. An abstract depiction of an item or topic is

N
called a model. Decision-makers are able to analyse the provided situation from several
angles thanks to the modelling component.
U
‹‹ User Interface Management System: It refers to a framework that allows graphical
interaction between human beings and information systems. Some examples of such
systems are computers, smart phones, Automated Teller machines (ATMs).
Y
R

9.3.2 Intelligent DSS for Supply Chain Management

R

An intelligent decision support system (IDSS) is a specialised area of DSS that integrates the
techniques if AI with the decision-making process. Intelligence, in general, is defined as the
E

ability to think and understand all the pros and cons of a given condition and then take the
H

required action. Thus the basic idea behind developing AI techniques is to study the thought
processes of humans, and then represent and duplicate those processes via machines, such as
IC

computer and robots. Therefore, Artificial Intelligence (AI) is defined as the study of how to
use computers to do things which are usually done by humans.

An IDSS has been designed to act like a human consultant. It is supposed to support decision
D

makers by accumulating and analysing data, identifying problems, proposing possible courses
of action and evaluating the proposed actions. AI techniques embedded in an IDSS help it
N

to emulate human actions, behavior, and thinking patterns as closely as possible. Similar to
humans, intelligent behavior in an IDSS can be defined as its ability to:
O

‹‹ Learn and understand from experience

P

‹‹ Find solutions in situations where there is fuzziness and uncertainty

‹‹ Use knowledge and experience to perceive a scenario and manipulate accordingly
‹‹ Think and apply reasoning in difficult situations
‹‹ Understand and infer in rational ways
‹‹ Respond aptly to a changing situation

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CHAPTER 9  ERP and DSS in Supply Chain

Notes ‹‹ Recognise the relation between different elements in a situation

‹‹ Understand ambiguous or contradictory messages

Nowadays, IDSS applications are being implemented in various areas of supply chain
management such as product development, planning, inventory control, packaging,
transportation, delivery, etc. Implementation of IDSS in various business processes automates
their functioning, making them far more accurate and efficient.

Y
Self-Assessment Questions

IT
4. CBIS stands for:

a. Computer-based Inventory System

S

b. Computer Basics Information System

R
c. Computer-based Information System

E

d. Computer Basics Inventory System
5. ATM is an example of a _________ management system.

IV
6. AI techniques embedded in an IDSS help it to emulate human actions, behavior, and
thinking patterns as closely as possible. (True/False)

Activity
N
U
Use Internet to find new innovations and applications in the field of IDSS.
Y

9.4 Supply Chain Master Planning

R

The collection of all planning procedures aimed at creating a practical plan that optimally
R

balances supply and demand is known as supply chain master planning. Managing the
material and capacity limits is a significant obstacle to the completion of this master plan.
E

Many modern supply chain apps provide a special chance to develop a workable and readily
analysed strategy to reach different degrees of optimisation. Various restrictions may apply
H

to planning, including:
‹‹ Supplier capacity (material)
IC

‹‹ Production storage area

‹‹ Loading and/or unloading capacity
D

‹‹ Transport capacity
N

‹‹ Personnel and staffing

O

‹‹ Tool availability
‹‹ Sequencing requirements
P

In general, master planning looks for the most economical means of completing client orders
and/or demand estimates during a mid-term planning period, which often spans an entire
seasonal cycle. The goal of master planning is to reconcile projected demand with existing
capacity. Because it requires inputs from every link in the supply chain to be successful and
because its outcomes have a significant influence on the supply chain, master planning is a
crucial decision level in the supply chain (Chopra and Meindl, 2004).

DDE, Pondicherry University, Pondicherry 137

Information System in Supply Chain Management

Notes The mid-term planning takes into consideration estimated quantities of the supplied material,
requirement of workforce, production quantities, seasonal stock and the distribution channels
being used. Master planning was carried out using conventional techniques, that is, by doing
straightforward spreadsheet calculations without taking capacity constraints into account,
until Operation Research (OR) technologies like optimization and simulation were introduced
into the business planning field. The recently released software connected to ORs uses linear

Y
programming to attempt to satisfy demand while maximising profit or minimising expense.
Furthermore, it attempts to include the consideration of limits, such as capacity, into the

IT
planning process. An organisation’s management may create a unified plan for production,
distribution, inventory, procurement, and material needs with the use of master planning.

S
When it comes to DSS for production and distribution planning, advanced planning systems
(APS) are still a mostly untapped technique. However, it may be utilised to successfully fulfil

R
the constantly rising demands that place further strain on quick and effective supply chain
planning and management. Companies that provide ERP systems have been creating and

E
deploying APS modules for the last several years. These modules aid organisations in the
planning of intricate systems like supply chains by using optimisation functionality and

IV
advanced mathematical techniques.

An effective master plan:

N
‹‹ Leads to higher turnover at a lower investment cost
U
‹‹ Helps maintain lower inventory level with a higher service level throughout the supply
chain
‹‹ Increases supply chain visibility and coordination.
Y

‹‹ Is more proactive as it opens the possibilities of presenting a number of scenarios at

R

very short computing times

‹‹ Leads to effective and smooth communication between various departments of the
R

organisation
E

‹‹ Leads to smooth integration of production and distribution planning, which helps in

the efficient use of scarce resources
H

Thus, we can conclude that APS together with a centralised master planning function can
contribute to the restructuring of the supply chain; thereby, resulting in more efficient
IC

operations.

Self-Assessment Questions
D

7. Master planning tries to strike a balance between _________ and available capacities.
N

8. List two limitations in creating a supply chain master plan.

O

9. An effective master plan helps maintain higher inventory level with a lower service
level throughout the supply chain. (True/False)
P

9.5 Summary
‹‹ ERP is defined as a business solution that empowers people to be more productive and
respond to the ever-changing world of business.

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CHAPTER 9  ERP and DSS in Supply Chain

Notes ‹‹ An ERP software deployment proves to be useful when it is integrated seamlessly with
other software systems that the organisation uses.
‹‹ The decision-making process of any enterprise involves data collection, analysis and
interpretation of collected data, and finally generating reports to facilitate the selection
of optimal solution to the business problem.
‹‹ The four main components of a DSS are database management system, knowledgebase

Y
management system, user interface management system and model management
system

IT
‹‹ An intelligent decision support system (IDSS) is a specialised area of DSS that
integrates the techniques if AI with the decision-making process.

S
‹‹ Supply chain master planning can be defined as the collection of all planning processes
targeted at designing a realistic plan that matches supply and demand, in the most

R
efficient manner possible.

E
9.6 Glossary

IV
‹‹ Artificial Intelligence: The exploration of employing computers to perform tasks
typically carried out by humans.

N
‹‹ Decision Support System: A computer-based information system that engages users
interactively, amalgamating data from various sources within the organisation and
U
providing analytical information essential for making business decisions.
‹‹ ERP framework: A cohesive set of modules created to provide a thorough, organization-
Y

wide solution for distributors, manufacturers, and service providers.

‹‹ User Interface Management System: A framework facilitating graphical interaction
R

between individuals and information systems.

R

9.7 Terminal Questions

E

1. Discuss ERP framework and its modules in detail.

H

2. Write a note of IDSS and its role on supply chain management

3. What is supply chain master planning? List the benefits of formulating an effective
IC

master plan.

9.8 Answers
D

Q. Self Assessment Questions

N

1. ERP software suites

O

2. Manufacturing and Finance

P

3. b. corruption

4. c. Computer-based Information System

5. user interface

DDE, Pondicherry University, Pondicherry 139

Information System in Supply Chain Management

Notes 6. True

7. Demand forecasts

8. Production storage area and Transport capacity

9. False

Y
Q. Terminal Questions
1. The ERP framework is an integrated suite of modules that are designed to offer

IT
a comprehensive, enterprise-wide solution for distributors, manufacturers, and
service providers alike. Refer to section 9.2 Role of ERP in a Supply Chain.

S
2. An intelligent decision support system (IDSS) is a specialised area of DSS that
integrates the techniques if AI with the decision-making process. Refer to section

R
9.3 Role of DSS in a Supply Chain.

E
3. Supply chain master planning can be defined as the collection of all planning
processes targeted at designing a realistic plan that matches supply and demand,

IV
in the most efficient manner possible. Refer to section 9.4 Supply Chain Master
Planning.

9.9 N
Case Study: ERP Implementation in Newman
U
Technology
Mansfield, Ohio-based Newman Technology, Inc. produces car, motorcycle, and all-terrain
Y

vehicle components (ATVs). Door moulding, door sash components, and exhaust parts are
the company’s main offerings. In four sites, the company’s 700+ workers construct and
R

oversee hundreds of thousands of components every day. 1,500 containers of components

are delivered daily to the firm by several vendors. Following manufacturing and assembly,
R

Newman Technology distributes 5,000 containers of parts to 15 client sites worldwide.

E

The paper trail method is still in use at Newman Technology for handling accounts and
transactions. To transfer supplies through the business, staff members had been using paper
H

purchase orders and spreadsheets for years, which was laborious and time-consuming. Worse,
every department’s handbook had to be updated whenever a process was changed, which
IC

required creating and physically updating forms for up to 25 binders dispersed throughout
the four buildings. Additionally, managing operations from buyer to buyer became more
challenging due to varying container label forms and quality.
D

Thus, maintaining inventories, purchase orders, and accounts receivable needed a reliable
instrument and strict procedures. In order to enhance accuracy and accountability across the
N

supply chain, the organisation also needed to communicate with suppliers more often. Newman
Technology realised that it required a contemporary solution to ensure accountability and
O

precision in manufacturing.
P

In order to overcome these obstacles, Newman contacted Columbus, Ohio-based manufacturing

consultant Revolution Group. It was suggested by Revolution Group that Newman install an
ERP system from Plex Manufacturing Cloud. Plex Cloud ERP is a completely integrated
ERP system that links and controls the whole production process, from the procurement of
raw materials to the delivery of the finished product. Over the course of eighteen months,
Newman Technology deployed Plex Cloud ERP in a progressive manner with the assistance

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CHAPTER 9  ERP and DSS in Supply Chain

Notes of Revolution Group. Plex reduced the amount of paper used in Newman Technology’s
operations and facilitated interactions between the company and its suppliers. Plex allowed for
cross-functional alignment with suppliers and customers beyond the company’s boundaries as
well as streamlined and expedited Newman Technology’s procedures. In a rapidly evolving
and dynamic manufacturing setting with over 700 employees, four facilities, 220 work centres,
330,000 components received daily, and 100,000 parts dispatched daily to 15 customer
locations, that holds considerable significance.

Y
Plex enabled Newman Technology to expedite client order processing and free up its buyers to

IT
concentrate on supplier relationships. The organisation can now give precise inventory counts
in real-time and avoid accounting waste because of improved accuracy and accountability.
Additionally, the whole supply chain can respond to shifts in consumer expectations with

S
greater agility and speed.

R
With Plex, suppliers may now operate with much more insight into the activities of Newman
Technology’s supplier management team. Additionally, suppliers can use a supplier portal

E
to get the necessary Newman data to generate labels that are directly linked to inventories
inside the system. Product demand may be shared by supply chain managers, who can also

IV
use receipt history to confirm supplier shipments, payments, and information. Suppliers can
respond to firm and anticipated demand, as well as generate correct labels and serial numbers.
The company’s inventory management and supply chain systems are significantly more

N
accurate because to this accessibility and regulated labelling.
Employees at Newman have also improved the process of accurately recording component
U
numbers and quantities on labels, which results in a far better inventory system. A pay-on-
reception system, in which goods and quantities are validated upon receipt and set off an
Y
automated payment and email remittance advise to the supplier, is made possible by this
degree of precision, control, and detail.
R

Newman Technology enhanced and expedited domestic inventory management, increasing

from 12 to 20 rotations per month for items used every day; it also cut labour in the operations
R

and raised supplier responsibility and financial statement correctness by fifty percent.
E

The outcome is a cost-saving paperless method (and trees). It has aided Newman Technology
in fully adhering to ISO, which is essential in the modern production environment.
H

(Source: http://www.plex.com/knowledge-center/featured-articles/case-studies/newman-
technology-cuts-inventory-costs-25-percent-achieves-98-percent-inventory-accuracy/)
IC

Discussion Questions
D

1. What were the problems faced by Newman Technology prior to the implementation of
N

an ERP system in their organisation?

O

(Hint: Producing and replacing all the forms manually in case of any updates)

2. “Installing Plex has helped Newman Technology to meet the challenges of an

P

expanding business and growing demands.” Justify this statement.

(Hint: Reduced purchase order time by 50 percent, provided better accuracy and
accountability)

DDE, Pondicherry University, Pondicherry 141

Information System in Supply Chain Management

Notes
9.10 References and Suggested Readings
‹‹ Olson, D. (2012). Supply chain information technology (1st ed.). [New York, N.Y.] (222
East 46th Street, New York, NY 10017): Business Expert Press.
‹‹ Hernández, J. (2012). Decision support systems-- Collaborative models and approaches
in real environments (1st ed.). Berlin: Springer.

Y
E-references

IT
‹‹ Searchsap.techtarget.com,. (2014). What is ERP (enterprise resource planning)? -

S
Definition from WhatIs.com. , from http://searchsap.techtarget.com/definition/ERP
‹‹ http://paper.ijcsns.org/07_book/201005/20100539.pdf

R
E
IV
N
U
Y
R
R
E
H
IC
D
N
O
P

142 DDE, Pondicherry University, Pondicherry

chapter

10 Supply Chain

Y
Information System

IT
S
R
E
Structure

IV
10.1 Introduction

N
Learning Objectives U
10.2 Supply Chain Information System

10.3 Modules in a Supply Chain Information System

Y

10.4 Summary
R

10.5 Glossary

10.6 Terminal Questions

R

10.7 Answers
E

10.8 Case Study: Supply chain integration with existing system in

H

SABMilller

10.9 References and Suggested Readings

IC
D
N
O
P
Information System in Supply Chain Management

Notes Learning Objectives

After completing the chapter, you will be able to:
 explain supply chain information system
 discuss the role of various modules of a supply chain information system

Y
10.1 Introduction

IT
In today’s competitive business environment, it is imperative for business enterprises to be
in line with the latest technologies and take advantage of the benefits they have to offer.
Business enterprises must keep themselves updated in terms of customers’ requirements,

S
market trends, inventory level, transportation status, retailer-supplier relationship, etc. An

R
effective information system designed exclusively for managing supply chain operations can
offer these benefits and more.

E
In the previous unit, you have learned that an information system enables manufacturers
to have a competitive edge in the prevailing market atmosphere. The information system

IV
comprises various modules in compliance with each of the supply chain stages. Organisations
with an effective supply chain information system can satisfy customer needs for flexibility,

N
competitive price, quicker response time and shorter lead times, all of which help in providing
overall cost benefit to the customer, which eventually returns to the organisations in terms of
larger customer base.
U
In this chapter, you will first study about the supply chain information system. The chapter
next explains various modules of the supply chain information system in detail.
Y

10.2 Supply Chain Information System

R
R

The information system for supply chain is designed to support the management and
movement of raw materials, work-in-process inventory, as well as finished goods from their
E

point of origin to the point of consumption. These supply chain tasks form the backbone of
the organisation’s cost structure, which eventually affects the profit-loss margin of the entire
H

business. Having an effective supply chain information system software is vital for the success
of a business enterprise in many ways. Therefore, management should consider all the pros and
IC

cons while selecting the Enterprise Resource Planning (ERP) software for the organisation.
Moreover, the information system once installed should be amenable to modifications with
the changing business scenario and requirements of the organisation. For example, a lot of
D

USbased business enterprises have recently taken to importing of goods. This has made them
more dependent on overseas suppliers. The change in the approach of these organisations has
N

placed greater significance on long-term planning as well as procurement of raw materials

and distributed goods. To ensure smooth flow of operations in the changed scenario, these
O

organisations needed to redesign their existing supply chain information systems.

As discussed in the previous chapters, information systems are computers or servers that
P

collect, organise and process data to generate useful information. The following are some
major information systems used in supply chain management (SCM):
‹‹ Executive Support System (ESS): It is implemented at the strategic level of an
organisation. An ESS provides reports in the form of graphics and charts and help in
decision making.

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CHAPTER 10  Supply Chain Information System

Notes ‹‹ Management Information System (MIS): It helps in planning, controlling, and

decision making by providing routine summary and exception reports.
‹‹ Decision support system (DSS): It is applied at the management level of an
organisation; management information system (MIS): It assists in planning, controlling,
and decision making by generating regular summary and exception reports. A DSS
facilitates both semi-structured and unstructured decision making by combining data

Y
and advanced analytical algorithms.
‹‹ Knowledge Work Station (KWS) : The purpose of a KWS is to assist information

IT
workers in generating and incorporating new knowledge inside the company.
‹‹ Office Automation System (OAS): It is crafted to enhance the efficiency of data

S
workers in the office. Computer systems, including word processing, electronic mail
systems, and scheduling systems, fall within the OAS category.

R
‹‹ Transaction Processing System: It is implemented at the operational level of an

E
organisation. TPS maintains a record of all the business transactions on a daily basis.

IV
Self-Assessment Questions
1. Name two information systems used in supply chain management.

N
2. A supply chain network forms the backbone of the organisation’s cost structure,
which eventually affects the profit-loss margin of the entire business. (True/False)
U
3. ________ maintains a record of all the business transactions on a daily basis.
Y

Activity
Visit at least three business enterprises and study their supply chain information systems.
R

Discuss and compare your findings with those of your friends.

R

10.3 Modules in a Supply Chain Information System

E

A supply chain information system comprises many modules that work independently as well
H

as in conjunction with other modules of the SCM network. For example, the manufacturing/
production module would need to consult the information generated by the inventory
IC

management module to decide the amount of goods that should be produced in a particular
batch. The number and types of modules in a supply chain information system may vary with
the requirements of an organisation. Fig. 10.1 shows some common modules of a supply
D

chain information system:

N

Supply Chain Information System

O
P

Quality Inventory
Planning Capacity Manufacturing Operations Transportation
Management Management

Fig. 10.1: Modules of a Supply Chain Information System

DDE, Pondicherry University, Pondicherry 145

Information System in Supply Chain Management

Notes Now, let us discuss each of these modules in detail.

10.3.1 Planning
Planning is the first and the most vital phase in supply chain management. An organisation needs
to plan about various things, such as finances, material procurement, warehousing, packaging,

Y
etc. In addition, every department in the organisation has its individual strategies to attain
pre-determined targets. For example, the marketing department wants to ensure that there is

IT
enough inventory to fulfill all the current customer requests; whereas, the main objective of the
accounting department is to keep costs down by maintaining low inventory level. In between
these two departments, there is inventory control department that has to find the right balance

S
of inventory and costs with effective planning.

R
A manufacturing organisation develops products for which it needs raw materials. Therefore, it
is imperative for any organisation to have a reliable and user-friendly information system with a

E
genuine Material Requirement Planning (MRP) module. An effective MRP helps organisations
gain insight into the current as well as projected inventory investment levels. This information

IV
enables organisations to organise, schedule and reschedule materials for their current as well as
future requirements. The main objective of the MRP module is to generate information that
will enable the organisation to manage its inventory in an effective manner. MRP must provide

N
timely pointers to maintain enough inventory to fulfill demand at the lowest possible cost to the
organisation. An efficient MRP module helps managers to decide:
U
‹‹ when to place an order
‹‹ how much quantity to be ordered
Y

‹‹ who should be the supplier

‹‹ when the items are to be delivered
R

10.3.2 Capacity
R
E

Meeting company objectives in the customer-focused business climate of today requires both
a thorough production planning and a successful execution strategy. An additional factor
H

to be considered before turning the planned order into production is whether or not there
is sufficient capacity to generate the necessary order. In this context, “capacity” refers to an
IC

organization’s manpower, equipment, material, and financial resources.

The supply chain information system is designed such that it checks and validates every order
D

on the basis of the available capacity. The information system assesses the capacity and helps
the scheduling department to allocate the required resources. The scheduling department in
N

turn takes into account various factors such as delivery dates, production rates and equipment
needed to complete a particular project.
O

Another area of capacity planning in the supply chain information system that requires
attention is warehouse management. By maximising the use of available space, minimising
P

trip times, and making recommendations for improved space use, an efficient warehouse
management system contributes to higher warehouse productivity.

10.3.3 Quality Management

While keeping all other aspects of business in sight, an organisation must also keep a strict
tab on the quality of the product that is being produced. The quality management module

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CHAPTER 10  Supply Chain Information System

Notes of the supply chain information system helps in maintaining quality standards defined by the
customer as well as the parameters defined by the organisation itself.

The quality management module gives individual departments the ability to design their own
quality tests at various points in the manufacturing process, from checking the final product’s
quality to doing a quality check on raw materials at the time of purchase. These quality
checks assist in identifying persistent issues and enhancing the calibre of the output. To make

Y
sure that the proper quality control procedures are followed, different subsystems for process
monitoring and control at different levels may be completely linked with other modules, such

IT
as buying, inventory management, shop floor control function, etc.

10.3.4 Manufacturing

S
R
All of the features needed to oversee and manage the production floor are included in the
information system that was created to govern manufacturing-related operations. These

E
include labour reporting, scheduling, and online route maintenance. The production module
balances and assesses the plant’s workload while simultaneously maintaining track of the

IV
data needed for timely order completions. Additionally, it maintains track of the capacity
(resources) needed now and in the future. To guarantee a smooth flow of business processes,
this module connects with other modules in the information system.

N
The manufacturing module has to be updated in real time because the management needs
accurate and timely shop floor data. Additionally, this module has shop order maintenance
U
capabilities, which enables users to assess and modify an operation’s phases and constituent
parts. This facilitates moving orders forward or backward. Additionally, this module preserves
production data at a single shop floor and, if numerous locations exist within the organisation,
Y

at various locations while monitoring the production process. The finance department also
uses this precise manufacturing data to determine product costs.
R

Exhibit
R

Providing Vital Equipment and Logistics Support for

E

Tokyo Electron America

H

Tokyo Electron Limited (TEL) is a worldwide manufacturer, distributor, and service

provider of semiconductor manufacturing equipment. It began as an equipment importer
IC

and has expanded to have more than 80 locations globally. TEL is acknowledged as a
pioneer in the business for its technical advancements.

TEL combines an uncommon dedication to deliver great customer service and support
D

with its heritage of product quality and innovation, given the mission-critical nature of
both the industry it services and the goods it makes. Tokyo Electron America, Inc. (TEA),
N

its US affiliate, is no different.

O

TEA provides round-the-clock support to semiconductor production locations in the US

that need quick service parts. The tremendous expense of client downtime, when a 24-hour
P

delay may result in millions of dollars in lost productivity, is the primary driver of this
urgency. Because time loss is so important, TEA’s clients need service level agreements
(SLAs) that guarantee delivery within specified timeframes. Any deviation from these
important delivery dates might have a negative effect on both TEA’s high standards for
customer care and customer productivity.

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Information System in Supply Chain Management

Notes Additionally, specialised components storage with advanced security measures is necessary
for semiconductor capital equipment due to its very expensive and sensitive nature. Prior
to outsourcing its logistics operation for servicing parts, TEA managed its inventory,
which consisted of over 50,000 components, domestically.

Parts were selected, packaged, and sent nationwide by the corporation using its own

Y
distribution facility located in Austin, Texas. However, TEA realised that it needed
to outsource its service parts logistics to a full-service provider in order to grow its

IT
market share in the US and stay competitive with other organisations who were already
outsourcing this kind of work.

S
UPS Supply Chain Solutions was chosen by TEA to be its logistics supplier. Important
elements mentioned by TEA were the company’s expertise, track record, and well-

R
established service parts logistics network.

To fulfil TEA’s unique requirements, UPS Supply Chain Solutions created a divisional

E
distribution centre. Under the constant supervision of a committed team, the inventory

IV
is stored in climate-controlled sections of the facility, which is reinforced by an advanced
security system.

The system makes use of the extensive national network of field stocking facilities

N
maintained by UPS Supply Chain Solutions (FSLs). Thanks to UPS Supply Chain
Solutions, TEA is able to satisfy its contractual time limitations and stock key spare parts
U
since FSLs are situated within an hour’s drive of certain fabrication plants.

An EDI system and web-based interfaces are used to provide distribution tracking and
Y

inventory visibility. Approved TEA personnel have simple access to a specialised website
where they can track the progress of parts and service orders in real time, around-the-
R

clock. To provide an audit trail for the component throughout the inventory management
process, each part is tagged with a unique identification number when it is put into the
R

UPS Supply Chain Solutions system. Accurate and smooth distribution management and
inventory control are the final results.
E

Since the start of the programme, both TEA’s clientele and the quantity of FSLs
H

employed to service them have grown. Even as the program’s scope grows, UPS Supply
Chain Solutions is still able to provide network scalability and service levels of more than
IC

99 percent for TEA.

After partnering with UPS Supply Chain Solutions for only six months, TEA decided to
D

fully outsource all of its US distribution requirements to them due to the favourable and
significant outcomes.
N

(Source: https://www.ups-scs.com/solutions/case_studies/cs_tokyo_electron.pdf)
O

10.3.5 Operations
P

An organisation makes various supply chain operational decisions almost every day. These
decisions are related to day-to day business activities and affect the way products are developed,
marketed, transported and manufactured. An information system designed to manage supply
chain operations provides relevant and updated data that helps management in taking various
operational decisions. The importance of having the right information to make decisions can
be judged by the fact that sometimes even a single decision based on accurate information and

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CHAPTER 10  Supply Chain Information System

Notes taken on time averts some major disaster or provides a competitive edge to the organisation.

The information system designed for business operations controls various processes such
as scheduling, delivery, inventory, manufacturing, invoicing. It also allows the operations
manager to keep track of various stages of manufacturing by recording the cycle-time, which
is the total time set to produce an order.

Operations managers benefit from increased visibility and control, shorter lead times, lower

Y
manufacturing costs, higher production, less work-in-process and inventory, better product

IT
quality, fewer defects and scrap, shorter cycle times, improved traceability, and less paperwork,
data entry, and labour when supply chain information systems are implemented successfully.

S
10.3.6 Transportation

R
The transfer of goods from one place to another is referred to as transportation. It is also

E
referred to as the supply chain’s lifeblood since it is always in operation. Stated differently, a
supply chain starts with the shipment of raw materials and concludes with the delivery of the

IV
final product to the customer. Selecting the best form of transportation for a global supply
chain may have a significant impact on a number of factors, including cost savings and the
safe delivery of goods.

N
Information system can help enhance the functioning of the transportation process. IT
application software can be used to determine transportation routes, making it easier for the
U
supplier as well as the receiver to keep a track on the whereabouts of any shipment. The details
about the location of customers, shipment size, desired delivery times, distance between points
of dispatch and delivery, and vehicle capacity are fed as inputs in the application software. The
Y

software then uses these inputs to formulate an optimised solution and lays out a set of routings
and packing options for each vehicle so as to minimise costs while meeting delivery constraints.
R

The fleet utilisation is further enhanced by the transportation information system, which
R

considers the size of the container as well as the size and order of each delivery. It also
helps in creating a strategy for effectively packing the car while taking into account how
E

simple it will be to load and/or unload along the way. Electronic notification devices and
Global Positioning Systems (GPS) are also part of modern information systems. GPS aids in
H

tracking and monitoring the trucks transporting the product in real time.
IC

10.3.7 Inventory Management

D

An effective inventory management system should allow managers to react quickly to client
requests while also being adaptable enough to include any necessary adjustments. The supply
N

chain information system’s inventory management module has useful features that reduce
warehousing expenses and optimise storage requirements in accordance with the situation
O

at hand. Many complex warehousing capabilities that enable operation modification, balance,
transfer, and reversal are included in this module. It may also be used to manage different
P

storage facilities and locations, monitor material batches, record inventories, identify specific
serial numbers, and do other operations. Additionally, this module gives managers a great
deal of flexibility so they may manage complicated storage requirements and regularly
update warehouse status using various auditing techniques and inventory procedures. All
input/output transactions may be automatically automated by integrating the inventory
management module with other system modules.

DDE, Pondicherry University, Pondicherry 149

Information System in Supply Chain Management

Notes The integration of the various modules of a supply chain information system enables end-
users to have a transparent view and the highest level of visibility into materials transactions
and other business processes.

Self-Assessment Questions
4. An efficient ______ must provide timely pointers to maintain enough inventory level

Y
to fulfill demand at the lowest possible cost to the organisation.

5. The inventory management module enables various departments to define their own

IT
quality tests at different stages of production. (True/False)
6. ________ is also called the lifeline of the supply chain that remains operational from

S
the beginning till the end.

a. Planning

R

b. Transportation

E

c. Delivery services

d. Quality management

IV
10.4 Summary
‹‹ The

N
information system for supply chain is designed to support the management and
U
movement of raw materials, work-in-process inventory, as well as finished goods from
their point of origin to the point of consumption.
‹‹ An effective warehouse management system helps increase the productivity of the
Y

warehouse by reducing traveling time, maximising the use of available space, and
suggesting moves for better space utilisation.
R

‹‹ The quality management module enables various departments to define their own
R

quality tests at different stages of production, starting with quality check for raw
materials at the time of procurement to testing the quality of the finished product.
E

‹‹ In a global supply chain, choosing the correct mode of transportation can prove to be
H

a major factor in determining many parameters, such as cost reduction, safe delivery
of products, etc.
IC

‹‹ The inventory management module of the supply chain information system incorporates
effective features to minimise warehousing costs and optimise storage needs in line with
the requirements at hand.
D

10.5 Glossary
N

‹‹ Capacity: A term that encompasses all the available resources of an organisation in

O

terms of man, machine, material and money

P

‹‹ Information systems: Computers or servers that collect, organise and process data to
generate useful information
‹‹ Knowledge Work Station: A system designed to help knowledge workers in the
creation and integration of new knowledge in the organisation
‹‹ Management Information System: A system that helps in planning, controlling, and
decision making by providing routine summary and exception reports

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CHAPTER 10  Supply Chain Information System

Notes
10.6 Terminal Questions
1. What is a supply chain information system? Discuss its types.

2. List various modules of a supply chain information system. Discuss each of these
modules in brief.

Y
10.7 Answers

IT
Q. Self Assessment Questions
1. Executive Support System and Management Information System

S
2. True
3. Transaction Processing System

R
4. MRP module

E
5. False

IV
6. b. Transportation
Q. Terminal Questions

N
1. The information system for supply chain is designed to support the management
and movement of raw materials, work-in-process inventory, as well as finished
U
goods from their point of origin to the point of consumption. Refer to section
10.2 Supply Chain Information System.
2. A supply chain information system comprises many modules that work
Y

independently as well as in conjunction with other modules of the SCM network.

R

Refer to section 10.3 Modules in a Supply Chain Information System.

R

Case Study: Supply Chain Integration with Existing

10.8
E

System in SABMilller
H

Over 200 brands across six continents are owned by $24 billion global brewing behemoth
SABMilller, which also includes top worldwide brands Grolsch, Miller Genuine Draft, Peroni
IC

Nastro Azzurro, and Pilsner Urquell. It is the owner of well-known regional brands as
Tyskie, Miller Lite (USA), Aguila (Colombia), Castle (Africa), and Snow (China) (Poland).
It is also among the biggest Coca-Cola product bottlers globally. It employs around 60,000
D

people and has 139 breweries and 35 bottling operations, producing 230 million hector litres
of beer annually. It is now valued at around £17.2 billion on the London and Johannesburg
N

stock markets, where it is listed.

O

Redesigning the supply chain management system is necessary for SABMilller to minimise
stock-outs brought on by a more unpredictable and complicated market. According to
P

SABMiller programme manager Rudi van Schoor, the company is creating and testing the
new system in South Africa with the intention of implementing it throughout the group’s
enterprises globally. The company’s consumers running out of popular SABMiller products at
peak seasons in two consecutive years, 2007 and 2008, served as the impetus for the overhaul.
For other brands, there was a 22 percent shortage. The bottom line was directly impacted by
it.

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Information System in Supply Chain Management

Notes Consequently, SABMilller hired McKinsey, a management consulting firm, to examine the
supply chain system as a whole in order to identify areas for improvement and prevent stock-
outs in the future. The research showed a complicated scenario. The market in South Africa,
with its diversified population and ethnic makeup, is one of the most intricate and dynamic in
the world. The SABMiller programme manager, Rudi van Schoor, lists a number of elements
that affect the demand for SABMiller’s goods, including economic growth, more disposable
money in the hands of new people, evolving and upgrading consumer preferences, new

Y
product development, and new distribution channels. The image becomes more complicated
when major events like the British Lions trip and the 2010 World Cup are included.

IT
According to Van Schoor, the company aims for 98 percent average stock availability.
“However, 100% is the goal for certain luxury products,” he adds. This implies that it will

S
maintain extra inventory of certain items in order to guarantee that a client who is thirsty
may always acquire their preferred drink.

R
However, SABMiller also wants to increase its earnings. It has to combine data from many

E
sources in order to do all of this. These include, among other things, cost and production
data, sales projections for around 2,600 stock-keeping unit locations or depots for the brewing

IV
division and 3,100 for the soft drink division, as well as planned promotional data from the
marketing and promotions division.

N
Then, using these data, twelve factories (seven breweries and five soft drink plants) and three
tiers of distributors must have their raw material purchases, manufacturing scheduling,
U
distribution, and stockholding plans created. The brewing division’s stock-keeping units will
be divided into between seventy and eighty, while the soft drink division’s will be around 270.

However, SABMillers’ demand prediction and supply system was too complicated to integrate
Y

and increase the accuracy of demand forecasts and schedules to increase profitability.
According to Van Schoor, the internal system was created over many years and had many of
R

the typical issues of legacy systems, including being rigid, complicated, difficult to interact
with, and difficult to interface with newer systems.
R

SABMiller chose Infor’s cutting-edge supply chain management solution after a worldwide
E

search. In order to generate production schedules, orders for raw materials, volume and
financial forecasts, and production schedules, it takes data from modules of SABMiller’s SAP
H

enterprise resource management system, integrates it with field sales forecasts, and feeds
back to the manufacturing resource planning system and financial systems. The ability to
IC

produce any of its goods in the most economical place will be made possible by this, taking
into account local demand, production, transportation, and inventory expenses.
D

Additionally, it will make it more adaptable to shifts in demand. Products will now be
manufactured at factories that maximise total profitability rather than just one facility to
N

maximise production runs, depending on more comprehensive data. Additionally, this

flexibility provides the business with more buffer against unexpected changes in demand and
O

production outages.

However, certain components of the outdated system will endure. Van Schoor said, “We are
P

maintaining it to handle empty bottle returns and reuse.” However, even that information will
be included into the Infor system to enable the creation of production schedules with minute,
line, and tank precision.
(Source: http://www.computerweekly.com/feature/Case-study-SABMiller-revamps-supply-chain-management)

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Notes Discussion Questions

1. What were the challenges faced by the management consultancy McKinsey in
revamping the existing supply chain management in SABMilller?

(Hint: Dealing with the ethnically and demographically diverse South African markets).

Y
2. Describe how the new supply chain management system was applied in SABMilller and
the overall impact of its implementation on the existing system.

IT

(Hint: Taking information from modules of SABMiller's SAP enterprise resource
management system, integrating the information with sales forecasts)

S
10.9 References and Suggested Readings

R
‹‹ Olson, D. (2012). Supply chain information technology (1st ed.). [New York, N.Y.] (222

E
East 46th Street, New York, NY 10017): Business Expert Press.

IV
‹‹ Boyer, K., Frohlich, M., & Hult, G. (2004). Extending the supply chain (1st ed.). New
York: American Management Association.

N
E-references U
‹‹ Igi-global.com,. (2014). International Journal of Information Systems and Supply
Chain Management (IJISSCM): 1935-5726, 1935-5734: Business and Management
Journals | IGI Global from http://www.igi-global.com/journal/international-journal-
Y

information-systems-supply/1097
R

‹‹ Researchgate.net,.
(2014). What role does IT play in supply chain management? from
http://www.researchgate.net/post/What_role_does_IT_play_in_supply_chain_
R

management
E
H
IC
D
N
O
P

DDE, Pondicherry University, Pondicherry 153

P
O
N
D
IC
H
E
R
R
Y
U
N
IV
E
R
S
IT
Y
chapter

11 E-Business and

Y
Supply Chain

IT
S
R
E
Structure

IV
11.1 Introduction

N
Learning Objectives U
11.2 Electronic Business

11.3 Electronic Supply Chain

Y

11.4 Electronic Procurement

R

11.5 Electronic Auctions

11.6 Summary
R

11.7 Glossary
E

11.8 Terminal Questions

H

11.9 Answers
IC

11.10 Case Study: Dell.com's Managing the Electronic Supply Chain

Effectively
D

11.11 E-References and Suggested Readings

N
O
P
Information System in Supply Chain Management

Notes Learning Objectives

After completing the chapter, you will be able to:
 explain e-business
 explain e-supply chain
 explain e-procurement

Y
 discuss e-auctions

IT
11.1 Introduction

S
The emergence of electronic business (e-business) has redefined almost all the rules and
models of the business world, revolutionising the concept of traditional business altogether.

R
The digital technology is also transforming the role of supply chain management (SCM) in
the whole business scenario. The ability and inclination of an organisation to embrace this new

E
technology play a key role in increasing its productivity in the ever changing technological era.

IV
The arena of e-business and supply chain has been merged, creating a network of immense
opportunities. Supply chain structures are also evolving and their evolution is dependent to a
large extent on the use of e-business technology and innovation. Electronic supply chain leads

N
to cost reduction, increased capital investments, easy communication, reduced lead time, etc.

Along with e-supply chains, other online technologies like e-procurement and e-auctions are
U
propelling the 21st century organisations into the exciting digital world, characterised by
a market in which both buyers and sellers play equivalent roles. Business enterprises that
capitalise on the advantages offered by the digital world have a dynamic, sophisticated supply
Y

chain aligned with their e-business strategies.

R

In this chapter, you will first study the concept of e-business. Next, you learn about the
e-supply chain and its relation with traditional supply chain. The chapter further explains
R

e-procurement and its various types. Towards the end, the chapter explains the concept of
e-auctions in detail.
E
H

11.2 Electronic Business

IC

E-business refers to the business that uses the services of the Internet to conduct its
various operations. E-business is one of the fastest growing sectors and presents upcoming
entrepreneurs an excellent opportunity to enter a well-established business market.
D

Nowadays, almost all major business enterprises have entered the arena of e-business due
to the various advantages it offers, especially in terms of its availability, wide reach and
N

everexpanding capabilities. E-business tools refer to gadgets or technologies used to conduct

online business. Mobile phones, PDAs, electronic data exchange, video conferencing, the
O

Internet, intranets, and extranets are a few of the most widely utilised e-business technologies.
P

All internal and external business operations, including purchasing and selling goods and
services, handling payments, overseeing production control and customer relations, working
with partners on joint ventures, exchanging data, managing automated staff services, hiring,
giving and receiving feedback, and so on, are carried out online in e-business. A few e-business
procedures are shown in Fig. 11.1:

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Notes
Customer
Management

Invoicing and
Shipping
Packaging

Y
IT
E-business
Online store
Marketing
set up

S
R
Human
Global

E
resource
Trading
services

IV
Fig. 11.1: E-business Processes

N
Exhibit U
Different Types of E-commerce
Some of the major types of e-commerce are:
‹‹ Business-to-Business (B2B)
Y

‹‹ Business-to-Consumer (B2C)
‹‹ Business-to-Government (B2G)
R

‹‹ Consumer-to-Consumer (C2C)
R

‹‹ Mobile commerce (m-commerce)

Business-to-Business (B2B) Commerce

E

Business-to-business (B2B) e-commerce is defined as following. It addresses the

interactions between and among enterprises. This sort of e-commerce makes up around
H

80% of all e-commerce, and most experts believe that B2B e-commerce will continue to
develop at a higher rate than the B2C category. E-markets and e-frastructure are the two
IC

main parts of the B2B market.

The majority of business-to-business (B2B) applications are found in the following
D

domains: distribution management (particularly in the transfer of shipping documents),

channel management (i.e., sharing information on modifications to operational conditions),
N

inventory management (i.e., controlling order-ship-bill cycles), and payment management

(e.g., electronic payment systems).
O

Business-to-Consumer (B2C) Commerce

B2C is the term used to describe business-to-consumer (B2C) transactions. It is the

P

original and second-largest kind of online shopping. Customers are involved in collecting
information, buying information goods or tangibles like books or consumer items, or both
(goods of electronic material or digitised content, such as software or e-books).

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Notes The two most popular uses of this kind of e-commerce are information and product
purchases, as well as personal financial management, which is the use of online banking
facilities to manage one’s own assets and money.

Business-to-Government (B2G) Commerce

B2G is the term used to describe business-to-government (B2G) transactions. It alludes to

Y
the usage of the Internet for government-related tasks including licence applications and
public procurement. Two characteristics distinguish this kind of e-commerce: first, the

IT
public sector takes the lead in developing e-commerce, and second, it is presumed that the
public sector has the greatest need to improve the efficiency of its procurement system.

S
Web-based buying procedures lower the possibility of errors and improve the openness of

R
the procurement process. However, since government e-procurement systems are still in
the early stages of development, the size of the B2G e-commerce sector relative to overall

E
e-commerce is still negligible.

IV
Consumer-to-Consumer (C2C) Commerce

C2C is the commerce among private individuals or consumers. This type of e-commerce
is characterised by the growth of electronic marketplaces and online auctions, particularly

N
in vertical industries where firms/businesses can bid for what they want from among
multiple suppliers. This type of e-commerce comes in at least three forms:
U
‹‹ Auctions facilitated at a portal, such as eBay, which allows online real-time bidding
on items being sold on the Web
Y

‹‹ Peer-to-peer systems, such as the Napster model (a protocol for sharing files between
R

users used by chat forums) and other file exchange and money exchange models
‹‹ Classified ads at portal sites such as Excite Classifieds and eWanted,
R

Mobile commerce (m-commerce)

E

The purchasing and selling of products and services using wireless technology, or portable
H

gadgets like mobile phones and PDAs, is known as m-commerce (PDAs).

According to some, m-commerce will become the preferred means of conducting digital
IC

commerce transactions over landline e-commerce as content distribution via cellular

devices becomes more rapid, safe, and scalable. In the Asia-Pacific region, where mobile
D

phone users outnumber Internet users, this may very well be the case.

Industries affected by m-commerce include:

N

‹‹ Financial services: brokerage services (where clients can view stock quotes and
O

trade using the same handheld device), mobile banking (where users access their
accounts and pay their bills), and telecommunications (where users can make service
P

changes, pay bills, and review accounts all from the same handheld device).
‹‹ Service and retail, as customers may make and pay for orders instantly
‹‹ Information services include the provision of entertainment, sports figures, financial
news, and traffic updates to a solitary mobile device.
(Source: http://booktype-demo.sourcefabric.org/e-commerce-and-e-business/different-types-of-e-commerce/)

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Notes 11.2.1 Role of E-Business in Supply Chain

A collection of electronic technologies and commercial procedures that provide exceptional
customer service, lower prices, accelerate lead times, and enhance information availability are
together referred to as e-business, or e-commerce. You may eventually anticipate more sales
and profitability in the company by using e-business.

Y
E-business plays a substantial role in supply chain management (SCM). Fig.11.2 lists the
major benefits of conducting e-business on supply chain operations:

IT
Impoved Customer Service

S
R
Reduced Costs

E
IV
Shortened Lead Time

N
Improved Communication and Availability
of Information
U
Fig. 11.2: Benefits of E-Business in Supply Chain
Y

Let us now discuss each of these benefits in detail.

R

‹‹ Remarkable Customer Service: Deployment of e-business tools and processes helps

business enterprises to improve the quality of customer services. This can be done by
R

providing an interactive website to be used by customers to shop, order and keep a track
of their purchases online. Earlier, consumers used to shop by browsing through the
E

catalog for selecting the product, then placing their order over the phone to a customer
service representative. The payment for the product would be done when the order
H

arrived. Now, using e-business tools customers can shop at any time, from anywhere,
for anything by accessing the World Wide Web. All the details related to a product
IC

are offered online along with user reviews that help consumers in making educated
purchasing decisions. It also provides the option of making payments online at the
time of placing the order. In addition, there are lots of customers friendly provisions,
D

such as providing the order confirmation, payment-related information, an estimated

delivery date, etc.
N

‹‹ Reduction in Costs: A comparison between the supply chain flow of 1970s and today
clearly shows how costs can be reduced by automating the processes of supply chain.
O

By making the whole process online, a portion of the customer service staff has been
replaced. Providing automated order confirmation and tracking information online
P

have reduced the customer phone calls inquiring about the order status and the number
of staff attending those calls. In addition, the process of collecting cash on payment
has been replaced by processing payments online thereby reducing this overhead.
‹‹ Shortened Lead Time: Earlier, the time taken by the entire supply chain process,
from the time of ordering a product to receiving it at the doorstep, would often take

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Notes as long as 10 to 12 weeks. Furthermore, the time it takes a customer to request and
get a catalogue, decide what to buy, and then place an order might reach six weeks.
The whole supply chain became very sluggish and unresponsive as a result of all this
time, as well as the lengthy lead periods required by manufacturers and distributors to
process orders, package, ship, and deliver.

Application of e-business tools and processes has drastically reduced this lead time.

Y
Now consumers are presented with a lot of choices online and can choose and make
multiple purchases in minutes instead of weeks. In e-business, the order receipt is

IT
generated instantaneously, the availability of the product and exact shipping date and
time can be known, payments can be made instantaneously at the time of purchase or
receipt of products, All these factors help in reducing the lead time from 12 weeks to

S
less than two weeks in most cases.

R
‹‹ Improved Communication and Availability of Information: The tremendous
advancements in online communication and information availability are other features

E
of e-business. Online, a variety of automated technologies are used to proactively
respond to any questions a client could have. Customers may easily evaluate product

IV
choices and prices from many producers thanks to e-business. This improves the
pre-purchase decision-making process, which reduces the number of returns from
customers. Customers are able to schedule other aspects of their lives in accordance

N
with the ability to monitor their orders and know when they are expected to arrive.
Additionally helpful to customers are multilingual websites, which allow them to search
U
items and make purchases without encountering any language obstacles.

11.2.2 E-Business Framework

Y
R

E-business framework refers to the plan or model according to which organisations conduct
e-business. In other words, it defines how e-commerce is implemented and online trading
R

activities are carried out. Fig. 11.3 shows the major components of an e-business framework:
E

Network infrastructure
H

Multimedia contents and network publishing

IC

Messaging and information distribution infrastructure

D

Common business services infrastructure

N

Public policy and technical standards

O

Fig. 11.3: Components of e-business framework

P

Let us now discuss each of these components in detail:

‹‹ Network infrastructure: It refers to the communication path on the Internet through
which actual information flows between sender and receiver. It is also called as
“Information Superhighway”. This highway consists of telephone lines provided by
telecommunication companies, coaxial cables and direct broadcast satellite networks

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CHAPTER 11  E-Business and Supply Chain

Notes provided by cable TV systems, mobile radio and satellite networks provided by wireless
companies and private computer networks and public data networks like the Internet.

All these communication modes are interconnected using networking hardware

devices like routers, switches, bridges, gateways, etc. These devices help in
connecting similar as well as different networks. The information flow online
takes place using these lines and through these devices to reach the desired

Y
destinations.
‹‹ Multimedia contents and network publishing: The World Wide Web is the

IT
architecture that enables networking publication, much as the information superhighway
is the transportation basis of the e-business framework that permits a simple transfer of

S
material. It enables companies and people to create material relating to their enterprises
using Hypertext Markup Language (HTML) and post it online. Consequently, the

R
World Wide Web offers a way to generate product content and post it in a distribution
hub (network server).

E
‹‹ Messaging and information distribution infrastructure: Data may be sent via a
network in a variety of different forms, including text, numbers, images, audio, and

IV
video. The network does not distinguish between various types of material since
everything is sent in digital format, which consists of combinations of zeros and ones.
After the material is produced and saved on a server, the messaging and information

N
dissemination infrastructure starts to work. The infrastructure aids in the network’s
content delivery. Another name for the message vehicle is middleware software.
U
Translators are part of the message and information delivery infrastructure; they
interpret and convert any kind of data into a digital format.
Y

‹‹ Common business services infrastructure: It comprises methods that facilitate the

process of online buying and selling and render the financial transactions error free.
R

While carrying out e-business, buyers send an electronic payment and remittance
information to the seller. The seller validates the payment after authenticating the
R

payment and remittance information. Online commerce entails transference of a lot

of financial data and confidential information. To guarantee the security of material
E

moving on the network, payment services infrastructure has to provide authentication

(confirming that customers are real) and encryption (making data unintelligible except
H

for the intended receiver) techniques.

IC

‹‹ Public policy and technical standards: Technical standards and public policy are
regarded as the two foundations of support for any e-commerce infrastructure and
applications. E-commerce-related public policy specifies topics such information
D

price, privacy, and universal access. The details of information publishing tools, user
interfaces, and transit are defined by technical standards. Standards must be established
N

in order to guarantee interoperability across the World Wide Web, which is made up
of several tiny networks with disparate protocols.
O

11.2.3 Impact of E-Business on Cost

P

A conventional firm incurs different expenses than those associated with establishing an
e-enterprise. Even before you make your first sale, there are a few fixed expenses associated
with launching an internet store to offer goods or services. The internet shop serves as a
sales representative for your company and projects your brand to the outside world. As online
businesses require fewer human resources and infrastructure, they can be considerably more

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Notes cost-effective than traditional “bricks and mortar” businesses. Certain expenses, on the other
hand, are set, and include company taxes, accounting fees, logistics, conventional marketing,
warehouse charges, and product procurement prices. Even if you sell online, all of these
conventional company expenses still apply to internet businesses and don’t just disappear.

Moreover, the cost of developing a website and maintaining it can be high. This cost can
be curbed to some extent by employing an in-house technical personnel who can handle the

Y
regular maintenance of the website. To run a successful business online requires as much
business acumen and planning as any other traditional business. Updating the software

IT
technology for better interactivity and speed would need investment of funds at regular
intervals.

S
Self-Assessment Questions

R
1. Name two commonly used tools for conducting e-business.

E
2. In an e-business, all the business processes are conducted on the _______.

IV
3. List two benefits of conducting e-business on supply chain operations.
4. __________ refers to the plan or model according to which organisations conduct
e-business.

N
5. ______ and _______ are considered as two support pillars for all e-commerce
U
applications and infrastructure.
6. The online business store is a projection of the business to the outer world and acts
like a sales person for your business. (True/False)
Y
R

Activity
R

Visit a manufacturing organisation and study the role of e-business on its:

E

a. Supply chain operations

H

b. Overall costs
IC

11.3 Electronic Supply Chain

D

Supply chain management and e-business are combined to create the electronic supply chain,
or e-supply chain (SCM). It illustrates how trade partners collaborate to maximise possibilities
N

and resources.
O

As we all know by now, supply chain management (SCM) is a software-driven business

process that connects all of a company’s entities and provides a condensed view of the
P

whole enterprise. From the supplier’s supplier to the customer’s customer, every aspect
of the extended enterprise’s business activities are optimised via electronic supply chain
management, or e-SCM.

E-supply chains use Web technology and e-business ideas to manage flow both within and
outside of the firm, upstream and downstream. It encompasses every phase of a standard
business cycle, which comprises initial product design, acquisition of raw materials,

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Notes transportation, distribution, and storage all the way up to the point of client delivery of
the completed product. Better control over investments and budgets as well as improved
relationships with all partners result from this. Large, diverse company organisations with
intricate supply chain networks, firms with extensive distribution networks, and businesses
that rely heavily on items that are outsourced all utilise e-SCM.

An efficient e-SCM can lead to a drastic reduction in costs and integrate the operations of an

Y
enterprise with those of its partners. An effectively implemented e-SCM can prove beneficial
for a business in the following ways:

IT
‹‹ Binds together all the business relations in the extended enterprise, from that of raw
materials to the final point of distribution

S
‹‹ Enables all the business relations to have real-time market information, so that they

R
can anticipate and adjust their operations with respect to changing market conditions
‹‹ Helps in optimising inventory levels and eliminating costly stockpiling against demand

E
spikes, freeing up resources and reducing costs

IV
‹‹ Lowers costs, improves speed of delivery and increases the accuracy of data shared
within the extended enterprise

N
‹‹ Creates value-for the enterprise by integrating its operations with those of its supply
chain partners and shareholders.
U
Self-Assessment Questions
Y

7. ________ is the combination of the concepts of e-business and supply chain

management:
R

a. E-procurement
R

b. E-bay
E

c. E-supply chain
H

d. E-auction

8. An efficient ____ can lead to a drastic reduction in costs and integrate the operations
IC

of an enterprise with those of its partners.

9. An effectively implemented e-SCM _____, ______ and _______within the extended

D

enterprise.
N

11.4 Electronic Procurement

O

The use of the Internet for the acquisition and selling of goods and services by businesses
P

to businesses, consumers, or the government is known as electronic procurement, or

e-procurement. In addition, it encompasses other networking and information technologies
including enterprise resource planning and electronic data exchange. Supplier exchange is
another name for e-procurement.

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Notes The elements included in e-procurement value chain are shown in Fig. 11.4:

Indent management

e-tendering

Y
e-auctioning

Elements of e-procurement value chain

IT
Vendor management

S
Catalogue management

R
Purchase order integration

E
Order status

IV
Ship notice

N
U e-invoicing

e-payment
Y

Contract management
R

Fig. 11.4: Elements of e-procurement value chain

R

Tender preparation is the procedure known as indemnity management. Depending on the

specific procurement department and how they choose to design their indenting process,
E

this portion of the value chain is optional. For instance, in the purchase of labour, technical
sanction and administrative permission are gained electronically, while in the procurement of
H

products, the indent creation process is completed online.

IC

Registered users may also locate customers or vendors for their products and services by using
e-procurement websites. Buyers or sellers may respond by stating their pricing or inviting
bids for their goods and services, depending on the strategy. As a result, transactions may be
D

started and finished online. Customers may qualify for special deals or volume reductions if
they make frequent purchases.
N

A certain amount of the purchasing and selling process is automated using e-procurement
software. Businesses that adopt and use this technology may improve production cycles, save
O

buying expenses, and better manage their stocks. It is simple to connect computerised supply
chain management with e-procurement.
P

The majority of businesses operate in many supply chains, providing a variety of goods and
services, sourcing resources from several vendors, and marketing to numerous customers.
Therefore, to be successful and efficient, a company has to concentrate its efforts on the clients
and supply chains that have the most potential and provide it the most competitive advantage.
Three primary categories of benefits are cost, performance, and timeliness.

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CHAPTER 11  E-Business and Supply Chain

Notes Exhibit
FedEx - The E-procurement Journey

Founded in 1971 by Frederick W. Smith (Smith), Federal Express is a significant provider

of transportation, logistics, and supply chain management services. Smith saw the need
for an airfreight system to expedite the delivery of papers. Federal Express was the name

Y
of the corporation when it was formed in Memphis in June 1971, and it began operations
in 1973. Federal Express became a trailblazer in the express delivery sector shortly after

IT
declaring its first earnings in July 1975.

Federal Express was a well-established business by the early 1980s, and it was growing at
a compound annual rate of around 40%. In 1983, the company’s sales surpassed $1 billion.

S
FedEx started offering services to Europe and Asia in the following year. As part of a

R
corporate branding update, the corporation chose FedEx as its main brand name in 1994.

FedEx’s IT activities began in the late 1970s when Smith realised that, in order to support

E
its increasingly intricate and extensive air and car networks, the company needed a
network of information systems, a sophisticated mix of bar codes, software, and laser

IV
scanners. FedEx was leading the industry in information technology use by the late 1970s.
FedEx has always made transportation simpler and more efficient by using cutting-edge

N
technological technology. An automated shipping system handled more than 65 percent
of the overall volume. U
Companies may gain control over suppliers by consolidating purchases using e-procurement
platforms. E-procurement platforms enable businesses monitor expenditure trends
and increase internal efficiency by lowering administrative expenses and unauthorised
Y

spending.
R

FedEx started a trial run of the Ariba e-procurement system for “personal computers”
in June 1999. The Ariba Network platform, the Ariba Operating Resource Management
R

System (ORMS) application, the Ariba ORMX application, and Ariba’s integrated Net
market deployment solution, which consists of the Ariba Internet Business Exchange,
E

Ariba Commerce Center, and Ariba Market Suite, comprised Ariba’s e-Commerce solution.
Industry analysts predict that by 2003, expenditure facilitated by worldwide e-procurement
H

systems would increase by around 445 percent, public Internet market exchange spending
by approximately 116 percent, and Internet-based business-to-business auction spending
IC

by approximately 370 percent.

(Source: http://www.icmrindia.org/casestudies/catalogue/IT%20and%20Systems/ITSY016.htm)
D

E-procurement is mainly of the following six types:

‹‹ Web-based ERP (Electronic Resource Planning): Refers to the process of creating
N

and approving purchase orders, putting in buy requisitions, and receiving products and
services via the use of an Internet-based software system.
O

‹‹ e-MRO (Maintenance, Repair and Operating): This is comparable to web-based

P

ERP, except it only applies to non-product related items and services. Another name for
this is indirect procurement.
‹‹ e-sourcing: Refers to utilising the Internet technology for identifying new suppliers
for a different category of purchasing requirements.
‹‹ e-tendering: Refers to utilising the Internet technology for sending requests for
information and updated price list to suppliers and receiving the responses of suppliers.

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Notes ‹‹ e-reverse auctioning: Refers to using the Internet technology for buying goods and
services through online auction from a number of known or unknown suppliers.
‹‹ e-informing: Refers to using the Internet technology for collecting and distributing
purchasing information both from and to internal and external parties.

Self-Assessment Questions

Y
10. E-procurement is sometimes also known as _______.

IT
11. List two elements of an e-procurement value chain.

12. What does MRO stand for in e-MRO?

S
R
11.5 Electronic Auctions

E
An e-business partnership between auctioneers and bidders that occurs in an electronic

IV
marketplace is known as an e-auction, or electronic auction. This particular kind of electronic
commerce occurs in the context of business-to-business (B2B), business-to-consumer (B2C),
or consumer-to-consumer (C2C) transactions. E-bay, which employs each of these three forms

N
of trade, is the greatest illustration of an e-auction website.
U
The auctioneer provides products, commodities, or services on an online auction platform
during an electronic auction. Within a certain time frame, interested parties may make their
bids for the specific product they need. These items, commodities, or services are up for grabs.
Y

There are primarily two kinds of online auctions:

‹‹ Forward auction: Several bidders compete for the items of a single seller in this kind of
R

online auction. It suggests that an object is offered for sale by a single vendor, and that
consumers bid more and higher to get the item. Because they are more common among
R

consumers than reverse auctions, this kind of auction is more readily understood by the
general public. Forward auction is also used by eBay and other online auction platforms
E

that sell wines, artwork, and other valuables. The ultimate objective of this kind of
H

auction is for the seller to get the highest bid amount for the provided commodity. It is
also often used to auction off items such as equipment, vehicles, and real estate. For this
IC

reason, a forward auction may be used for any kind of online, offline, or hybrid sales of
products and services.
‹‹ Reverse auction: Several vendors compete for a single buyer’s order in this kind of
D

online auction. Another popular kind of auction is the reverse auction. A lone bidder
declares his desire to purchase a certain item or service from possible sellers in a reverse
N

auction. Prices are pushed down when prospective vendors compete with one another
for the buyer’s proposed business. The seller who makes the lowest price offer in this
O

instance is the bidder. Reverse auctions are often used by non-profit organisations, public
sector organisations, and commercial corporations to acquire products and services.
P

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CHAPTER 11  E-Business and Supply Chain

Notes E-auction offers various benefits to both sellers and buyers.

Benefits of e-auctions to sellers:

‹‹ Increase in revenues
‹‹ Optimal price setting
‹‹ Removal of expensive intermediaries

Y
‹‹ Better customer relationships

IT
‹‹ Easy liquidation
‹‹ Lower transaction costs

S
‹‹ Lower administrative costs

R
Benefits of e-auctions to buyers:
‹‹ Opportunities to find unique items and collectibles

E
‹‹ Lower prices

IV
‹‹ Anonymity of purchase
‹‹ Convenience of buying

N
Even as there are benefits of e-auctions, it has various limitations as well. Limitations of
U
e-auctions:
‹‹ Possibility of fraud
Y
‹‹ Limited participation
‹‹ Security constraints
R

‹‹ Need for auction software

R

‹‹ Long cycle time

‹‹ High order fulfillment costs
E
H

Self-Assessment Questions

13. ______ is defined as an e-business collaboration between auctioneers and bidders that
IC

takes place in an electronic marketplace.

14. In the forward auction, several sellers bid for one buyer’s order. (True/ False)
D

15. List two limitations of holding e-auctions.

N

Activity
O

Use Internet to find more information on the types of e-auctions and the ways they are
P

conducted.

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Notes
11.6 Summary
‹‹ E-business or e-commerce, as it is sometimes called, encapsulates a set of electronic
tools and business processes that provide remarkable customer service, reduce costs,
shorten lead times and improve the availability of information.
‹‹ Deployment of e-business tools and processes helps business enterprises to improve

Y
the quality of customer services.
‹‹ E-business framework refers to the plan or model according to which organisations

IT
conduct e-business.
‹‹ Electronic supply chain, or e-supply chain, is the combination of the concepts of

S
electronic business (e-business) and supply chain management (SCM).

R
‹‹ E-auction, or electronic auction, is defined as an e-business collaboration between
auctioneers and bidders that takes place in an electronic marketplace.

E
11.7 Glossary

IV
‹‹ E-business tools: Gadgets or technologies used to conduct online business

N
‹‹ E-sourcing: A method of utilising the Internet technology to identify new suppliers
for a different category of purchasing requirements.
U
‹‹ Forward auction: An e-auction in which several buyers bid for one seller's goods
‹‹ Network infrastructure: The communication path on the Internet through which
Y
actual information flows between the sender and receiver
‹‹ Reverse auction: An e-auction in which several sellers bid for one buyer's order
R

11.8 Terminal Questions

R
E

1. Discuss the applications of e-business in various business processes.

2. What is an e-supply chain? List the benefits of an effectively implemented e-supply

H

chain.
IC

3. What is e-procurement? Explain its various types.

4. Write a note on e-auctions, explaining its types, benefits, and limitations.

D

11.9 Answers
N

Q. Self Assessment Questions

O

1. Mobile phones, personal digital assistants (PDAs)

P

2. Internet

3. Improved cutomer service, reduced costs

4. E-business framework

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CHAPTER 11  E-Business and Supply Chain

Notes 5. Public policy, technical standards

6. True

7. c. E-supply chain

8. e-SCM

Y
9. Lowers costs, improves speed of delivery, increases the accuracy of data shared

IT
10. Supplier exchange

11. E-tendering and e-auctioning

S
12. Maintenance, Repair and Operating

R
13. E-auction

E
14. False

IV
15. Possibility of fraud and limited participation

Q. Terminal Questions

1.
N
Electronic business refers to the business that uses the services of the Internet to
U
conduct its various operations. Refer to section 11.2 Electronic Business.

2. Electronic supply chain, or e-supply chain, is the combination of the concepts of

Y

e-business and supply chain management (SCM). Refer to section 11.3 Electronic
Supply Chain.
R

3. The use of the Internet for the acquisition and selling of goods and services by
R

businesses to businesses, consumers, or the government is known as electronic

procurement, or e-procurement. Refer to section 11.4 Electronic Procurement.
E

4. An e-business partnership between auctioneers and bidders that occurs in an

electronic marketplace is known as an e-auction, or electronic auction. Refer to
H

section 11.5 Electronic Auctions.

IC

Case Study: Dell.com's Managing the Electronic

11.10
D

Supply Chain Effectively

N

Michael Dell, the founder of DELL Computer Corporation, is often acknowledged for having
revolutionised the personal computer business. Dell established a new business model in
O

1984, after its belated debut into the PC industry. There were neither resellers nor retailers
in DELL’s direct business strategy. Through the elimination of middlemen and effective
P

inventory and distribution management, DELL was able to provide its clients with more
powerful and customised computers at a far lower cost than its rivals.

Due to its shorter inventory turnover than most of its competitors—most of whom kept
inventory maintained for about 40 days—the firm was able to integrate cutting-edge
technology into its product lines far ahead of their rivals.

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Information System in Supply Chain Management

Notes In order to provide customer assistance, DELL launched its Internet project in the late 1980s.
When consumers called DELL for assistance, customer service representatives suggested that
they get a new disc driver or another DELL software update.

The consumer may download the programme instead of getting it on a diskette, which came
with a hefty price tag. These software downloads were first made accessible via a CompuServe1
DELL Bulletin Board site. The hardware backbone of Dell.com was made up of PowerEdge

Y
servers and PowerVault storage units.

IT
To improve consumer convenience, DELL has added a number of value-added services to Dell.
com throughout the years. Clients may use the DELL Order Maintenance System to place an
order and monitor its progress by logging onto the website.

S
Order Watch is available to customers who prefer not to check the progress regularly. Once the
machine had been dispatched, the customer could input their email address and order number,

R
and the system would immediately notify them by email.

E
Midway through 1998, DELL introduced Valuechain.dell.com, a website that provided suppliers
with the same services that Premier Pages provided for consumers. DELL started working to

IV
connect [email protected] with Premier Pages in late 2000. In comparison to the previous
procedure, this allowed DELL’s suppliers to examine an order as soon as it was placed and
dispatch the merchandise even faster.

N
Analysts claim that a major factor in DELL’s Internet efforts’ success was that the firm saw
U
them as a natural extension of its direct business model rather than as a shift from a brick and
mortar to a virtual enterprise.
(Source: http://www.icmrindia.org/casestudies/catalogue/IT%20and%20Systems/ITSY012.htm)
Y

Discussion Questions
R

1. Describe the innovative measures taken by DELL to manage its electronic supply chain
R

effectively.
E

(Hint: By eliminating intermediaries and managing its inventory and distribution

process efficiently online)
H

2. Write a note on the online customer support provided by DELL.

IC

(Hint: DELL bulletin board, Poweredge server, PowerVault Storage systems)

D
N
O
P

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CHAPTER 11  E-Business and Supply Chain

Notes
11.11 References and Suggested Readings
‹‹ Geunes, J. (2005). Applications of supply chain management and e-commerce research
(1st ed.). New York: Springer.
‹‹ Reason, M., & Evans, E. (2000). Implementing e-procurement (1st ed.). London:
Thorogood.

Y
E-references

IT
‹‹ Searchcio.techtarget.com,. (2014). What is e-business (electronic business)? - Definition

S
from WhatIs.com, from http://searchcio.techtarget.com/definition/e-business
‹‹ Supplychainquarterly.com,.
(2014). The economic impact of e-commerce – CSCMP's

R
Supply Chain Quarterly, from http://www.supplychainquarterly.com/columns/
scq201102monetarymatters/

E
IV
N
U
Y
R
R
E
H
IC
D
N
O
P

DDE, Pondicherry University, Pondicherry 171

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