Innovative Practices of Information Systems and Its Impact over Supply Chain Management


By

Dr. V.T.R. Vijayakumar
PhD
Professor & Head
Department Of Management Studies
St. Xaviers Catholic College of Engineering
Tamil Nadu

Ms. S. Angel Raphella
(Phd)
Asst. Professor & Head
Department Of Management Studies
Scad College of Engineering & Technology
Tamil Nadu
 


ABSTRACT

Business professionals rely on many types of information systems that use a variety of information technologies. For example, some information systems use simple manual (paper and pencil) hardware devices and informal (word of mouth) communications channels. A large firm that produces many complex Products and Services has hundreds of Suppliers. Thus the company will need to coordinate the activities of many Supplier Firms in order to produce their Products and Services.

Supply Chain Management Systems, is an answer to these problems of Supply Chain complexity and scale. A firm's Supply Chain is network of Organizations and Business Processes for procuring raw materials, transforming these materials into intermediate and finished products, and distributing the finished products to customers.

KEY WORDS

 Integration, Logistics, Radio frequency identification, Relationships, Supply Chain, retailing, information technologies, quick response, Vendor, enterprise resource planning

INTRODUCTION

Supply Chain Management (SCM) is all about "Providing the right product, at the right place and right time, of appropriate quality at the lowest cost". It includes planning and managing supply and demand, acquiring materials, producing and scheduling the product or service, warehousing, inventory control, distribution, and delivery and customer service.

The retailing industry in India examines the growing awareness and brand consciousness among people across different socio-economic classes in India and how the urban and semi-urban retail markets are witnessing significant growth. Retailer Vendor collaboration in supply chain management grew out of activities undertaken by retailers, called quick response (QR) and consumer package goods (CPG). QR was modeled after just in time (JIT). Radio frequency identification (RFID) is a technology that allows an object or a person to be identified at a distance using radio waves. RFID is a dream to every supply chain manager because it enables the accurate, real-time tracking of every single product, from manufacturers to checkout in stores.

 Purchasing power of Indian urban consumer is growing and branded merchandise in categories like Apparels, Cosmetics, Shoes, Watches, Beverages, Food and even Jewellery, are slowly becoming lifestyle products that are widely accepted by the urban Indian consumer. Indian retailers need to advantage of this growth and aiming to grow, diversify and introduce new formats have to pay more attention to the brand building process.

In simplest form, the supply chain is a "process umbrella" under which products are created and delivered to customers. From structural view, a supply chain refers to the complex network of relationships that organizations maintain with trading partners to source, manufacture and deliver products. Traditionally, marketing, distribution, planning, manufacturing, and the purchasing organizations along the supply chain operated independently.

 The retail industry is another sector for advancements in SCM. Whether for a single shop or a national chain, that's a daunting challenge with the sometimes thousands of stocking units delivered to multiple warehouses from hundreds of manufacturers with better visibility across the entire supply chain, buyers can make more informed decisions about every aspect of their operations, from how to optimally allocate inventories among different stores and warehouses, what goods to order and reorder, and how to price and stock them on the sales floor.

COLLABORATION BETWEEN RETAILERS AND VENDORS IN SUPPLY CHAIN MANAGEMENT

 New forms of retailing appear as price cutting, low cost, and narrow profit margin operations, Eventually the retailer trades up by improving displays and location, providing credit, deliver and by raising advertising expenditure. Thus retailers mature as high cost, high price, conservative operators, marketing themselves vulnerable to new, lower priced entrants (Brown, 1990). By collaborating, vendors can plan their purchases of raw materials and production process to match the retailer's merchandise needs. Thus vendors can make sure that the merchandise is available "just in tine", when the retailer needs it, without having stock excessive in the vendor's warehouse or the retailer's distribution centers or stores. When retailers and vendors do not coordinate their supply chain management activities, excess inventory builds up in the system even if the retail sales for the merchandise are relatively constant. This buildup of inventory in an uncoordinated channel is called the "bullwhip effect".

KEY SCM CONCEPTS

Each interface in the supply chain represents movement of goods, information flow, purchase and sales.


SUPPLY CHAIN DECISIONS

We classify the decisions for supply chain management into two broad categories -- strategic and operational. As the term implies, strategic decisions are made typically over a longer time horizon. These are closely linked to the corporate strategy, and guide supply chain policies from a design perspective. On the other hand, operational decisions are short term, and focus on activities over a day-to-day basis. The effort in these types of decisions is to effectively and efficiently manage the product flow in the "strategically" planned supply chain.

There are four major decision areas in supply chain management: 1) location, 2) production, 3) inventory, and 4) transportation (distribution), and there are both strategic and operational elements in each of these decision areas.

Location Decisions

The geographic placement of production facilities, stocking points, and sourcing points is the natural first step in creating a supply chain. These decisions are of great significance to a firm since they represent the basic strategy for accessing customer markets.

Production Decisions

The strategic decisions include what products to produce, and which plants to produce them in, allocation of suppliers to plants, plants to DC's, and DC's to customer markets. These decisions include the construction of the master production schedules, scheduling production on machines, and equipment maintenance.

Inventory Decisions

These refer to means by which inventories are managed. Inventories exist at every stage of the supply chain as either raw material, semi-finished or finished goods. Since holding of inventories can cost anywhere between 20 to 40 percent of their value, their efficient management is critical in supply chain operations.

Transportation Decisions

Air shipments may be fast, reliable, and warrant lesser safety stocks, they are expensive. Meanwhile shipping by sea or rail may be much cheaper. Since transportation is more than 30 percent of the logistics costs, operating efficiently makes good economic sense. Shipment sizes, routing and scheduling of equipment are key in effective management of the firm's transport strategy.

DEMAND DRIVEN SUPPLY CHAINS:

Supply Chain Management Systems facilitate efficient Customer response, enabling the Workings of Business to be driven more by Customer Demand as well as reducing costs.

I) PUSH-BASED SUPPLIER CHAIN MANAGEMENT MODEL

Earlier, a Push-based model also known as Build-to-Stock drove SCM Systems. In a Push-based model, production master schedules are based on forecasts or best
 guesses of demand for products, and products are "pushed" to Customers.

II) PULL-BASED SUPPLY CHAIN MANAGEMENT MODEL

With new flow of information made possible by Web-based tools, SCM more easily follows a Pull-based Model also known as Build-to-Order model, or "Demand-driven model"

In the Pull-based model actual customer orders or purchases trigger events in the Supply Chain.

Manufacturers use only actual Order demand information to drive their production schedules and the procurement of components or raw materials.

The difference between Push-based Models and the Pull-based Models is summarized by the slogan "Make what we sell, not sell what we make"


SCM FRAMEWORK PYRAMID

A SCM framework pyramid is to understand the various issues involved in the supply chain management. It is important that the decisions made within the SCM strategy pyramid are interdependent. The pyramid is analyzed in four levels, such as:


Strategic: On the strategic level it is important to find out the value SCM is providing to its customers to meet their needs.

Structural: Next level is to choose the right distribution channel to market the products. So that it reaches their customers promptly. The SCM network includes manufacturing locations, warehouses and so on.

Functional: This is the level where the operational details are decided. Functional excellence such as transportation management, warehouse operations, and materials management, which includes forecasting, inventory management, production scheduling and purchasing are designed.

Implementation: The development of SCM is meaningless without its implementation. Supply chain managers should consider their information needs relative to decision support tools, application software, data capture, and the system's overall structure.

STAGES OF SUPPLY CHAIN INTEGRATION:

There are four major stages in Supply Chain Integration. They are as follows,

Stage 1: Complete functional independence


At this stage all the functions of the supply chain are independent and there is no dependence between the functions.

Stage 2: Limited integration between inter-related functions


In this stage there is limited integration between the inter-related functions, whereas in first stage there is total independence.

Stage 3: Internal integration


This stage aims to achieve excellence in functional integration within the four walls of the enterprise spanning all the stakeholders of the supply chain (internal to the organization)

Stage 4: External integration


At this stage all the suppliers, transporters, third party service providers, distributors / dealers, warehouses and financial institutions like banks are integrated.

OBJECTIVES OF SCM Systems

The main objectives of SCM are:

1. To maximize the overall value generated
2. To fulfill the demand at the right product, at the right place and right time, of appropriate quality at the lowest cost.
3. To minimize uncertainty
4. To reduce lead times
5. To minimize the number of stages of goods and services flow
6. To improve flexibility of manufacturing and assembling techniques
7.  To improve process quality
8. To modify performance measures
 

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Source: E-mail March 31, 2011

          

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