Role of Information in Supply

Chain
Course Instructor : Syed Ubaid Ahmed
Introduction
• Information is crucial to the performance of a supply chain because it
provides the basis on which supply chain managers make decisions.
We have already seen this in earlier chapter about Bullwhip Effect.
• Information technology consists of the tools used to gain awareness
of information, analyze this information, and execute on it to improve
the performance of the supply chain.
• In this chapter, we explore the importance of information, its uses,
and the technologies that enable supply chain managers to use
information to make better decisions.
Role of Information
• Information is a key supply chain driver because it serves as the glue that
allows the other supply chain drivers to work together with the goal of
creating an integrated, coordinated supply chain.
• Information is crucial to supply chain performance because it provides the
foundation on which supply chain processes execute transactions and
managers make decisions.
• Without information, a manager cannot know what customers want, how
much inventory is in stock, and when more product should be produced or
shipped.
• In short, information provides supply chain visibility, allowing managers to
make decisions to improve the supply chain’s performance.
Role of Information
• Availability and analysis of information to drive decision making is a
key to the success of a supply chain.
• Companies that have built their success on the availability and
analysis of information include Seven-Eleven Japan, Walmart,
Amazon, UPS, and Netflix.
• To support effective supply chain decisions, information must have
some characteristics
Characteristics of information
1.Information must be accurate. Without information that gives a true picture of the state
of the supply chain, it is difficult to make good decisions. That is not to say that all
information must be 100 percent correct, but rather that the data available paint a picture
that is at least directionally correct.
2.Information must be accessible in a timely manner. Accurate information often exists,
but by the time it is available, it is either out of date or it is not in an accessible form. To
make good decisions, a manager needs to have up-to-date information that is easily
accessible.
3. Information must be of the right kind. Decision makers need information that they can
use. Often companies have large amounts of data that are not helpful in making a decision.
Companies must think about what information should be recorded so that valuable
resources are not wasted collecting meaningless data while important data go unrecorded.
4. Information must be shared. A supply chain can be effective only if all its stakeholders
share a common view of the information that they use to make business decisions.
Different information with different stakeholders results in misaligned action plans that
hurt supply chain performance.
Uses of Information
1. Facility. Determining the location, capacity, and schedules of a facility requires information on the trade-offs among
efficiency and flexibility, demand, exchange rates, taxes, and so on (see Chapters 4, 5, and 6). Walmart’s suppliers use the
demand information from Walmart’s stores to set their production schedules. Walmart uses demand information to
determine where to place its new stores and cross-docking facilities.
2. Inventory. Setting optimal inventory policies requires information that includes demand patterns, cost of carrying
inventory, costs of stocking out, and costs of ordering. For example, Walmart collects detailed demand, cost, margin, and
supplier information to make these inventory policy decisions.
3. Transportation. Deciding on transportation networks, routings, modes, shipments, and vendors requires information
about costs, customer locations, and shipment sizes to make good decisions (see Chapter 14). Walmart uses information to
tightly integrate its operations with those of its suppliers. This integration allows Walmart to implement cross-docking in its
transportation network, saving on both inventory and transportation costs.
4. Sourcing. Information on product margins, prices, quality, delivery lead times, and so on, are all important in making
sourcing decisions. Given sourcing deals with inter-enterprise transactions, a wide range of transactional information must be
recorded in order to execute operations, even once sourcing decisions have been made.
5. Pricing and revenue management. To set pricing policies, one needs information on demand, both its volume and various
customer segments’ willingness to pay, and on many supply issues, such as the product margin, lead time, and availability.
Using this information, firms can make intelligent pricing decisions to improve their supply chain profitability.
Role of Information
• Information leads to more effective forecasts. The more factors tha
predictions of future demand can take into account, the more
accurate these predictions can be
• In summary, information is crucial to making good supply chain
decisions at all three levels of decision making (strategy, planning, and
operations) and in each of the other supply chain drivers (facilities,
inventory, transportation, sourcing, and pricing).
• IT enables not only the gathering of these data to create supply chain
visibility, but also the analysis of these data so that the supply chain
decisions made will maximize profitability.
Technology in action
• Enterprise Resource Planning (ERP)
• Procurement Systems
• Advanced Planning and Scheduling
• Transportation Planning Systems
• Demand Planning
• Customer Relation Management (CRM) and Sales Force Automation (SFA)
• Supply Chain Management (SCM)
• Inventory Management Systems
• Manufacturing Execution Systems (MES)
• Transportation Scheduling Systems
• Warehouse Management Systems (WMS)
Enterprise Resource Planning
• Enterprise Resource Planning (ERP) systems gather data from across
multiple functions in a company. ERP systems monitor orders, production
schedules, raw material purchases, and finished goods inventory.
• They support a process-oriented view of business that cuts across different
functional departments. For instance, an ERP system can view the entire
order fulfillment process and track an order from the procurement of
material to fill the order to delivery of the finished product to the
customer.
• ERP systems come in modules that can be installed on their own or in
combination with other modules. There are usually modules for finance,
procurement, manufacturing, order fulfillment, human resources, and
logistics. The focus of these modules is primarily on carrying out and
monitoring daily transactions. ERP systems often lack the analytical
capabilities needed to optimize the efficiency of these transactions.
Procurement Systems
• Procurement systems focus on the procurement activities that take place
between a company and its suppliers. The purpose of these systems is to
streamline the procurement process and make it more efficient.
• Such systems typically replace supplier catalogs with a product database
that contains all the needed information about products the company
buys. They also keep track of part numbers, prices, purchasing histories,
and supplier performance.
• Procurement systems allow people to compare the price and performance
capabilities of different suppliers. This way the best suppliers are identified
so that relationships can be established with these suppliers and prices
negotiated. The routine transactions that occur in the purchasing process
can then be largely automated.
Advanced Planning and Scheduling
• Advanced Planning and Scheduling, also known as APS systems, are
highly analytical applications whose purpose is to assess plant
capacity, material availability, and customer demand. These systems
then produce schedules for what to make in which plant and at what
time. APS systems base their calculations on the input of transaction
level data that is extracted from ERP or legacy transaction processing
systems. They then use linear programming techniques and other
sophisticated algorithms to create their recommended schedules.
Transportation Planning Systems
• Transportation Planning Systems are systems that calculate what
quantity of materials should be brought to what locations at what
times. The systems enable people to compare different modes of
transportation, different routes, and different carriers. Transportation
plans are then created using these systems. The software for these
systems is sold by system vendors. Other providers known as content
vendors provide the data that is needed by these systems, such as
mileage, fuel costs, and shipping tariffs.
Demand Planning
• These systems use special techniques and algorithms to help a company
forecast their demand. These systems take historical sales data and
information about planned promotions and other events that can affect
customer demand, such as seasonality and market trends.They use this
data to create models that help predict future sales.
• Another feature that is often associated with demand planning systems is
revenue management. This feature lets a company experiment with
different price mixes for its different products in light of the predicted
demand. The idea is to find a mix of products and prices that maximizes
total revenue to the company. Companies in the travel industry such as
airlines, rental car agencies, and hotels are already using revenue
management techniques. These techniques will spread to other industries.
Customer Relation Management
• Customer Relation Management and Sales Force Automation
• Systems of this type automate many of the tasks related to servicing
existing customers and finding new customers. Customer Relation
• Management (CRM) systems track buying patterns and histories of
customers. They consolidate a company’s customer-related data in a place
where it is quickly accessible to customer service and sales people who use
the data to better respond to customer requests.
• Sales Force Automation (SFA) systems allow a company to better
coordinate and monitor the activities of its sales force. These systems
automate many of the tasks related to scheduling sales calls and follow-up
visits and preparing quotes and proposals for customers and prospects.
Supply Chain Management (SCM) systems
• Supply Chain Management (SCM) systems are suites of different
supply chain applications, such as those described here that are
tightly integrated with each other. An SCM system could be an
integrated suite that contains advanced planning and scheduling,
transportation planning, demand planning, and inventory planning
applications. SCM systems rely on ERP or relevant legacy systems to
provide them with the data to support the analysis and planning that
they do. These systems have the analytical capabilities to support
strategic level decision making.
Inventory Management Systems
• These systems support the activities described in Chapter 2 that are
part of inventory management such as tracking historical demand
patterns for products, monitoring inventory levels for different
products, and calculating economic order quantities and the levels of
safety inventory that should be held for each product. These systems
are used to find the right balance for a company between the cost of
carrying inventory and the cost of running out of inventory and losing
sales revenue because of that.
Manufacturing Execution Systems
• The focus is on carrying out the production activities in a factory. This
kind of system is less analytical than an APS. It produces short-term
production schedules and allocates raw materials and production
resources within a single manufacturing plant.A Manufacturing
Execution System (MES) is similar in its operational focus to an ERP
system and frequently MES software is produced by ERP software
vendors.
Transportation Scheduling Systems

• Systems in this category are similar to ERP and MES applications in

• These systems support daily warehouse operations. They provide