Information Techniques in Supply Chain Management

Instructor: Dr. Dan Shunk

Ashu: Electrical EngineeringArjun: Industrial EngineeringFan Li: Industrial Engineering

Arizona State University, Tempe, AZ

Mapping supply network

Functions of logistics– Inventory – Transportation– Handling– Information communication across all the layers

Plant

Plant

Plant

supplier

supplier

PORT

PORT

Ref: http://mba.tuck.dartmouth.edu/digital/Programs/CorporateEvents/SupplyChainThoughtLeaders/session4Slides.pdf

Warehouse

Warehouse

Warehouse

Warehouse

retail

retail

retail

retail

Why to optimize a supply network

Inefficient structures and processes lead to more cost and risks and lower

performance and distribution efficiency

Optimized structures helpto proceed towards a

sustainable development

Optimized structures allow for:– Lower transport costs.

– Less stock necessary.– Shorter delivery times.– Optimized logistics facilities

for more efficient operations– Better performance for

more efficient logistics

How to optimize logistics networks?

Different levels of optimization approaches:

Technical level– Improvement of vehicle technology; use of

alternative fuelsPart1: Arjun

– Information sharingPart2: Fan Li

– Use of RFIDPart3: Ashu

Tactical level & Strategic level – Planning of efficient logistic networks.– Selection and combining of different

transport modes etc.

Alternative fuelstechnologies

Arjun

Reasons to shift to alternative fuels:

Reducing fuel consumption and emissions

Limited supply of gasoline and rapidly growing demandfor it in the emerging global market

The United States imports more than 60% of its petroleum, two-thirds of which is used to fuel vehicles in the form of gasoline and diesel

With large countries such as India and China industrialisingthe demand for petroleum based fuels will soon exceed the supply

Use of alternative fuels is critical to reducing dependence on foreignoil and improving air quality.

Global increase in greenhouse gases .

What is alternative fuel?

Alternative fuel is the choice of any fuel otherthan the traditional selections, gasoline and diesel.

Types of alternative fuels:

Biodiesel

Electricity

Ethanol

Hydrogen

Methanol

Natural gas

Propane

What is biodiesel?

Biodiesel is a renewable alternative fuel produced from a wide range of vegetable oils and animal fats

Pure biodiesel or biodiesel blended with petroleum diesel can be used to fuel diesel vehicles, providing energy security and emissions and safety benefits.

It is a cleaner replacement for petroleum based diesel fuel.

Biodiesel has physical properties similar to those of petroleum diesel

Biodiesel Production

Benefits of using Biodiesel

Biodiesel contains 3.2 times the amount of energy it takes to produce it.

Domestically produced

Clean burning

Non-toxic

Can be used as substitute forDiesel fuel in diesel trucks withminimal modifications to the engine(low cost implementation)

Natural gas:

Natural gas is a mixture of hydrocarbons, predominantly methane (CH4)

Natural gas has a high octane rating and excellent properties for spark-ignited internal combustion engines

It is non-toxic, non-corrosive, and non-carcinogenic

Only about one tenth of one percent is currently used for transportation fuel.

Ethanol

Ethanol is a renewable transportation fuel primarily made from starch crops,such as corn

It is also made from sugar beets and cane or cellulosic materials, such as fast-growing trees and grasses

Nearly one-third of U.S. gasoline contains ethanol in a low-level blend to reduce air pollution

Ethanol production:

Dry mill production process

Advantages of using Ethanol

Renewable

Domestically produced

Increasing energy security

Reducing green house gas emission

Ethanol production is a new industry that is creating jobs in rural areas where employment opportunities are strongly needed

UPS switch to alternative fuels:

UPS operates the largest private alternative fuel fleet in its industry

UPS’s long-term goal is to minimize dependence on fossil fuels by improving operational efficiencies and advancing new technologies

The company’s emissions reduction strategy includes reducing fuel consumption and deploying alternative fuel and low emissions vehicles.

Information Sharing for Supply Chain Management

Fan li

Information Sharing for Supply Chain Management (SCM)

Introduction: information technologies for SCM

– Requirement– Benefits

A Information Sharing Model: Inter-organizational Information System (IOIS)

– Definition– Benefits– Levels

Case Study: Application of IOIS

(I) Introduction

Integration of SCM with Information Technologies (IT)

– Earlier work: separated the physical processes and information flows.

– More recent research: incorporated information flows into SCM and achieved the integration (Rachna Shah, 2002).

Impact of IT on Supply Network Collaboration

– Information and information technology are important to the success of supply chain management initiative (Zafer, 2001).

– The prime benefit of applying IT to SCM is the time compression and improvement of data accuracy (since data needs only to be entered once) (Malone, 1987).

(II) Interorganizational Information System - IOIS

A key step in supply chain collaboration is to share information among supply chain partners (Zhenshen Huang, 1999).

Intraorganizational vs Interorganizational– Intraorganizational: all the processes are integrated within

a business. – Interorganizational: integration is carried out over the

whole supply chain. Definition of IOIS

– The information systems that cross organizational boundaries linking one or more independent organizations (Barrett and Konsynski, 1982).

The Benefit of IOIS– To enact the SCM strategy effectively: It is suggested by

several authors, see (Johnson, 1988; Malone, 1987), that the use of IOIS can reduce the time-to-market, cost.

– To speeds the application of modern management tools and philosophies such as Just-in-time systems, concurrent engineering concepts, and various inventory replenishment schemes.

Levels of IOIS

The development of IOIS has taken place over the past 40 years and can be categorized into four phases (Shore, 2001)

– Phase one: includes paper copies of purchase orders, bills and invoices. In this phase, information technology does not contribute significantly to the information system. Still be used in some small companies.

– Phase two: the development of EDI had a dramatic effect on the automation of information flows. Issues: Expensive & Scalability;

– Phase three: This phase describes a more integrated approach. Enterprise-wide systems and databases are integrated. ERP;

– Phase four: In this phase, the supply chain is designed with extensive two-way information flows. Use of web development technologies such as XML and Java – true IOIS

(III) Case Study: Application of IOIS

usually involves implementing an information system, facilitates information sharing and coordination between internal and external partners in the chain (Elizabeth A Williamson, 2004).

provides a framework for electronic cooperation between businesses by allowing the processing, sharing and communication of information (Haiwook, 2001).

An example in a typical wholesaler – retailer arrangement. Target: reach agreement on specific inventory-level (Rasch, 1997).

(III) Case Study: Application of IOIS

A Interorganizational Information System Model - Rasch, 1997

Manufacturer Database

Retailer Database

Raw Material

Supplier

Manufacturer

Supplier (M)

Retailer (R) Customer

imq irq

,s sq p ,m mq p ,r rq p

(III) Case Study: Application of IOIS

Figure shows the essential framework of the interorganizational model. M buys raw material, produces products, and sells them to retailers. Trading partner R buys products from M and sells them to its customers.

Formally, over the interval of one time period, M buys a quantity of raw material at price from its supplier, decides on a production level and sells some quantity of this product at a wholesale price . Retailer R purchases at price and sells a retail quantity at retail price . Inventory for M is denoted as , and inventory for R is denoted as .

sq t sp t

mq t mp t mq t

mp t rq t rp t imq t

irq t

(III) Case Study: Application of IOIS

Without an IOS arrangement– internal information available to the manufacturer during time t (stored in

the manufacturer database) includes:raw material prices ps, Manufacturer inventory level information qim, the amount of product sold to retailers qm, at a price pm, and internal production levels qp, for that time period.

– Based on this information, Manufacturer estimatesraw material costs ps, internal inventory levels qim,and retailer demand qm, for the next period and makes pricing

decisions pm, and production decisions qp.

– Similarly, internal information available to the retailer during time t (stored in the retailer database) includes

the current wholesale price of Manufacturer products pm, the retailer’s current inventory level qir, the current quantity purchased from Manufacturer qm, the current cost

of goods to their customer pr, and the amount of goods sold qr. – Based on this information, the retailer estimates

future wholesale prices pm, future retail inventory levels qir, future customer sales qr, and makes purchase decisions qm, and customer pricing decisions pr .

IOIS

(III) Case Study: Application of IOIS

A Interorganizational Information System Model - Rasch, 1997

Manufacturer Database

Retailer Database

Raw Material

Supplier

Manufacturer

Supplier (M)

Retailer (R) Customer

imq irq

,s sq p ,m mq p ,r rq p

(III) Case Study: Application of IOIS

With an IOS arrangement – The interorganizational information system (IOS)

opens up the possibility of the manufacturer sharing some, or all, of its internal information with the retailer. The retailer can, similarly, share some, or all, of its internal information with the manufacturer. This arrangement is shown by the IOS interchange arrow between databases in the figure. The functions of manufacturing and retail marketing can be viewed as having a shared information system by virtue of their IOS arrangement.

– The wholesaler can improve its inventory control capability if it has information regarding the retailer’s planned activities in the future. The retailer, similarly, can benefit from knowledge of the wholesaler’s planned production by avoiding out-of-stock conditions due to lack of availability of wholesale stock.

Information Sharing for Supply Chain Management (SCM)

Shah, R., Goldstein, S. M., and Ward, P. T., 2002, "Aligning Supply Chain Management Characteristics and Interorganizational Information System Types: An Exploratory Study," IEEE Transactions on Engineering Management, 49(3) pp. 282-292.

Kilic, Z., Basoglu, A. N., and Oner, M. A., 2002, "A simulation game to analyze impact of information technologies on supply chain management," Portland International Conference on Management of Engineering and Technology (PICMET), Anonymous Institute of Electrical and Electronics Engineers Inc, Portland, OR, United States, pp. 470.

Huang, Z., and Gangopadhyay, A., 2004, "A Simulation Study of Supply Chain Management to Measure the Impact of Information Sharing," Information Resources Management Journal, 17(3) pp. 20-31.

T.W. Malone, J. Tates, R.I. Benjamin, Electronic market and electronic hierarchies, Communications of the ACM 30 (6) (1987) 484-497.

S. Barrett and B. Konsynski, “Interorganizational information sharing systems,” MIS Quart., vol. 6, no. 1, pp. 93–105, 1982.

H.R. Johnson, M.R. Vitale, Creating competitive advantage with inter-organizational information systems, MIS Quarterly 12 (2) (1988) 153}165.

Shore, B. (2001). Information sharing in global supply chain systems. Journal of Global Information Technology Management, 4(3), 27–50.

F. J. Riggins and T. Mukhopadhyay, “Interdependent benefits from inter-organizational systems: Opportunities for business partner reengineering,” J. MIS, vol. 11, no. 2, pp. 37–57, 1994.

Williamson, E., Harrison, D. K., and Jordan, M., 2004, "Information Systems Development within Supply Chain Management," International Journal of Information Management, 24(5) pp. 375-385.

Rasch, R. H., and Hansen, J. V., 1997, "A Design Approach for Analyzing Interorganizational Information Systems," Annals of Operations Research, 71pp. 95-113.

Radio Frequency ID: A case study

Ashu

Content

Technical Aspect of RFID– RFID hardware – Operating conditions and standards– Challenges

Business aspect– RFID logistics environment– How and where – Summary

What constitutes and RFID system ?

Radio Frequency ID is a wide term referred to a system formed by amalgamation of multiple technologies which can catch the data automatically . – TAGS

Attached to the product, vehicle, parts or containers

– Reader Which communicates with the tag on

a wireless frequency

RFID Tag Transponder

Read Only (Factory Programmed) WORM - Write Once, Read Many times Reprogrammable (Field Programmable)

Micro-chip, contains Unique ID Code (UID), memory

Antenna, copper or aluminum, wound or etched

Antenna or reader

Are All Tags The Same?

Basic Types:Active Tag transmits radio signal

– Internally powered memory, radio & circuitry

– High Read Range (300 to 1500 feet) PassiveTag reflects radio signal from reader– Reader powered– Read Range (4 inches – 150 feet)

How does it works

Control Module

Broadcast Interface

Reader

Data

Received

Host Computer

Command to retrieve data

Data sent

to Host

TAGTransponder

Request

TransmittedData

RequestedData

Transmitted

Reader Antenna

Reader broadcasts signal through antenna

Transponder

Transponder receives signal

Transponder is charged with enough energy to send back an identifying response

RFID Operating Frequencies

– Low Frequency (125 – 134 kHz) Used in Access control, livestock, race timing, pallet tracking, automotive

immobilizers, wireless commerce

– High Frequency (13.56 mHz) – Smart Labels Used in supply chain, wireless commerce, ticketing, product authentication

– Ultra-High Frequency – UHF (900+ mHz) Emerging technology, applications still in development

– Microwave (2.45 gHz) Not widely deployed, chipless technology

Differences LF, UHF

UHF FIELD .LF FIELD

Ref to : Craig K. Harmon, President & CEO, Q.E.D. Systems with update by Greg Stewart, President, Allaura, Inc. Courtesy: Josef Preishuber-Pfluegl, CISC AT

UHF has near field reflection issue (holes in the read zone) plus a medium sized back lobe unless engineered.

Read Distance is ½ the antenna length. These are 125 kHz and 13.56 mHz RFID.

Note: New infrared (IRid) passive tags with read / write ,and 6 ft. range now compete with RFID .

Affiliations

The Auto ID Lab at MIT was formed in the 1990’s*

Control of the Supply Chain initiative was transferred to EPC Global in the early 2000’s*

– EPC Global is part of GS1 which is the governing body that gives us the UPC’s we use to identify product today

– Focus was on developing standards and methodologies to be used by the industry

– Electronic Product Code (EPC) was introduced to the industry

*Rfidjounrnal,epcglobus

Failures

Human/environmental failures– Caused by electrostatic discharge (25 kV) in handling– Caused by “slap and ship” operations that may detach the antenna

from the chip– Caused by poor manufacturing techniques– Cold Climate issues of Tyson foods*

– AdhesivesAdherence to product at low temperature during

application and during the life of the caseRelease from liner in cold temperature

Technical failures– Reflection / refraction– Absorption (loss)– Dielectric effects (detuning)– Complex propagation effects

Tyson's Assembly line*

*Tyson foods,herbert Markwardt

Technology has improved– From read-only to read-write– From no memory to 2k, 8k,16k bits– Anti-collision for multiple tags read in the field

Ability to communicate with several transponders simultaneously

– Better authentication between tag and reader– Unique ID 91bit e.g . GTIN *

Header : Company : Object Class : Serial Number

– More sophisticated security algorithms

RFID Is Maturing

Epcglobus,tyson foods Herbert Markwardt

Business aspects of RFID

RFID-based Logistics Environment

Application

Information Services

Retail Distribution

Center

Shipment

RFID Tag

ProductSpecification

Manufacture

Product

Physical FlowInformation

Reader

Retail Store

DaeWon Park and HyukChul Kwon

RFID-based Logistics Environment

Bill Allen Texas instruments

Management Logistics– Managing physical flow

– Warehouse management solution– Vehicle identification– Manufacturing– Parcel logistics– Retail supply chain overall management (end to end

information )

Warehouse Management Solutions

Uniquely Identify, Collect, Sort and Track more efficiently Hard data on pallets, containers, fork lift trucks, equipment & man-hours Data collection in rugged environments where barcodes can’t

Google images

Vehicle identification and tracking

Google images

Parcel sorting

Google images

How is it done ?

Tyson foods case– Could not afford to not tag at the time of shipment

(too ideal for practical purposes).– It is tag at the time of production– Solutions needed to be able to move from tagging at

shipment to tagging at production with minimal modification

Tag Applicator writes EPC information to tag and applies

Printer/Applicator writes label and overlays RFID Tag with label

RFID Tag is read and validated; and, if valid, the information is added to the database Additional

Thompson Research Results

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Track Product

Movement

Inventory Control Theft Reduction

Reduction in Product

Counterfeiting

Point of Sale

Productivity

Rela

tive I

mp

ort

an

ce

Scale (1-5 ) 5 is very important *Thompson Research

How they compare to 2D barcodes

RFID Label 2D Barcode

Line of sight Not required Required

Capacity Low to high Low to medium

Security High Low to Medium

Change Information? Yes – Read/Write NO – new label

Cost (today) $0.10 - $0.250 (in millions)

$0.05 or less

Summary what did we achieve ?

Improved Efficiency – Scan-free reduces labor costs and improves throughput

Increased Accuracy – Product tracking not dependent on human initiation

Reduced Inventory – Increased accuracy and information timeliness supports leaner operations

Improved Visibility – Ability to track and report serialized entity movement throughout Supply Chain

Enhanced Security – Improved theft control and product authentication

Special case Tyson foods– Food traceability, monitoring product life cycle, data for promotions,

pallet management etc….

References and Acknowledgement

Special thanks to Mr. Herbert Markwardt from Tyson foods for providing me the material.

Presentations of RFID referenced – DaeWon Park and HyukChul Kwon Pusan National University. – Bill Allen Texas instruments– R.Kimball DOD– John DiPalo -Vice President, Solutions Engineering– Craig K. Harmon, President & CEO, Q.E.D. Systems– Thompson research

Materials referenced from websites like – www.rfidjournal.com www.epcglobus.com www.wikipedia.com

www.research.thompsonib.com

Questions ?

•Buying and installing readers (about $1,000 each today)

•Buying tags to track products (0.01 cents to $250 today)

•Integrating RFID data with existing back-office systems

•Upgrading network infrastructure to handle RFID data

•Upgrading software applications to handle RFID data

•Ongoing maintenance costs

The cost of deploying an RFID system

The key costs involved are:

12

•60% to 93% in labor costs associated with receiving and checking goods into a distribution center

•90% in labor costs associated with verifying an order’s accuracy before shipping to a retailer

•Up to 36% in the cost of labor in selecting cases for shipping

•Out of stock situations, increasing sales up to 1 percent

•5% to 30% in inventory

•Stocks of un saleable and obsolete goods and chargebacks

Benefits for manufacturers include reductions of:

Source: Accenture, IBM Business Consulting

11

0 1 2 3 4 5 6 7 8

Point of sale, POS (retail only)

Store inventory counts (retail only)

Store receipt (by store personnel, retail only)

Customer or store delivery (carrier)

Pool distribution departure

Pool distribution arrival

Distribution center picking or shipment

Distribution center inventory counts

Inbound distribution center receipts

Manufacturing plant outbound shipments

Manufacturing plant issues or consumption

Inbound manufacturing plant receipts

Inbound consolidation center departures

Inbound consolidation center arrivals

Number of Responses

Current

Next 2 Years

3 to 5 Years

•$5.3 million to install RFID readers in three modern manufacturing facilities and 10 distribution facilities,including $4.25 million for system integration

•$1 million per year in recurring costs, such as buyingtags and maintaining the system

Hard dollar figures

Deployment costs vary widely depending on your operations, but Accenture estimates it will cost: