ROLE OF Information TECHNOLOGY IN SUPPLY CHAIN MANAGEMENT

Presented By :

Kirti Mishra

Naveen Tyagi

Introduction

Information is crucial to the performance of supply chain because it provides the basis on which supply chain managers make decisions.

Information Technology consists of the tools used to gain awareness of information, analyze the information and execute on it to increase the performance of the supply chain.

Role of IT in a Supply Chain

Information is a key supply chain driver because it serves as the glue that allows other drivers to work together with the goal of creating an integrated, coordinated supply chain.

Information makes the supply chain visible to a manager. With the visibility, a manager can make decisions to improve the supply chains performance.

….Contd

Managers must understand how information is gathered and analyzed. This is where IT comes into play as IT consists of the hardware, software and people throughout a SC that gather, analyze and execute upon information.

Thus, the organization needs to be connected and become able to share information in real time and instantaneously. This is not achievable without IT and the tools it offers for organization wide collaboration.

Functional Roles of IT in SCM

Functional Roles Of IT

TransactionExecution

Collaboration & Coordination

Decision Support

….ContdThe most typical role of IT in SCM is

reducing the function in transactions between supply chain partners through cost-effective information flow.

IT is viewed to have a role in supporting the collaboration & coordination of supply chains through information sharing.

It can be used for Decision Support. In this instance the analytical power of computers is used to provide assistance to managerial decisions.

Objectives of IT in SCM

1) Providing information, Availability & Visibility.

2) Enabling single point of contact of data.

3) Allowing decisions based on total supply chain information.

4) Enabling collaboration with supply chain partners.

Information Technology for Supply Chain Management

• Software Systems

• Enterprise Resource Planning (ERP)• Electronic Data Interchange ( EDI )• Supply Chain Management Systems (SCM)• Customer Relationship Management (CRM)

• Network Infrastructure

• Internet

Origins of ERP Systems

ERP systems grew out of a function called materials requirements planning (MRP) which was used to allocate resources for a manufacturing operationMRP systems software ultimately became very complex allowing for efficiencies of scale not previously possibleEven more sophisticated MRP II systems began to replace MRP systems in the 1980sBy the early 1990s, other enterprise activities were being incorporated into ERP systems

Enterprise Resource Planning Systems

Enterprise resource planning (ERP) is a term used to refer to a system that links individual applications (for example, accounting and manufacturing applications) into a single application that integrates the data and business processes of the entire business.

Contd…...

ERP is a s/w that aims to serve as a backbone for the whole business.

It integrates key business & management processes to provide an integrated view of the entire organization & the activities that take place within it.

ERP systems have emerged to automate business functions and offer an integrated data solution across an org’s infrastructure.

….contd

It provides the capability to manage & integrate the information & services of departments throughout an entire enterprise.

This allows org’s to better manage all their resources, thus achieving cost reduction and efficiency through the integration of all information among various business processes.

By combining all the operations within the firm, ERP allows co’s to view the information, cash and material flow.

Major ERP Systems

• SAP R/3• Oracle• PeopleSoft (have been merged by Oracle)• Toyota uses PeopleSoft and SAP• Microsoft Dynamics (formerly Microsoft

Business Solutions )

Electronic Data Interchange (EDI)

EDI is the computer-to-computer exchange of business data in standard formats.

In EDI, information is organized according to a specified format set by both parties, allowing a “hands-off” computer transaction that requires no human intervention at either end.

EDI standards are developed & managed by the Accredited Standards Committee (ASC) X12. The standards are designed to work across industry & co. boundaries.

Contd …..

It permits hundreds of unrelated co’s to communicate & process business transactions electronically.

EDI works because it relies on a standard system that everyone can use, developed under the guidelines of the American National Standard Institute (ANSI), USA.

The ANSI committee ensures that everyone using a process such as EDI follow the same rule & methods, making the Programme Universally accessible.

Benefits of EDI

Following are the benefits of using EDI:-

• Better inventory management.• Increased productivity.• Reduced costs.• Improved business relationships.• Improved accuracy.• Enhanced customer service.• Increased sales.

Supply Chain Management Systems

• SCM is the process of effectively managing the components of an extended value chain—from suppliers, through manufacturing and distribution chain, and to the consumers.

• SCM information systems use technology to more effectively manage supply chains

Continued….

• A typical SCM system might address the following issues:

• Planning• Vendor selection• Manufacturing• Logistics• Customer relationship

Continued…..

• The two basic types of SCM system software are:• Supply Chain Planning software (SCP): Uses

mathematical models to predict inventory levels based on the efficient flow of resources into the supply chain

• Supply Chain Execution software (SCE): is used to automate different steps in the supply chain such as automatically sending purchase orders to vendors when inventories reach specified levels

Major Supply Chain Planning Players

i2 Technologies i2’s strength began with its powerful

Advanced Planning and Scheduling (APS)

Manugistics Oracle SAP

Advanced Planner and Optimizer (APO)

SAP ( System, Applications and Products in Data Processing )

PARTIAL SAP CLIENT LIST

Spacenet

THE KEY ENABLER: ONE SYSTEM

SAP R/3Single Central

Database

FinancialAccounting

Controlling

FixedAssetsMgt.

Workflow

Exec.Information& Report

Writer

MaterialsMgt.

Sales &Distribution

ProductionPlanning

QualityMgt.

ProjectSystem

PlantMaintenance

HumanResources

FI

CO

AM

PS

MM

PM

HR

WF

PP

SD

QM

SAP R/3 Omni-functional Fully integrated Process-oriented

1

Customer Relationship Management Systems

Customer relationship management (CRM) systems, sometimes called e-CRM systems, use technology to help an e-business manage its customer base .CRM allows an e-business to match customer needs with product plans and offerings, remind customers of service requirements, and determine what products a customer has purchased .

Relationship among SCM, ERP, CRM

SCM ERP CRM

Broader SCM

INTERNET

Internet has a profound impact on SCM. The backbone of SCM is communication & real-time information exchange between various parties involved in the production & distribution of materials.

Following are the various SCM activities that have created new Internet opportunities:-

• Online Vendor Catalogue (without human contact).• The ability to schedule outbound logistics.

Contd ….

• Provide world wide customer service (24X7).• Receive orders from all over the world all the time.• Place bids on projects.• Pay invoices electronically.• The ability to directly communicate.• The ability to be more responsive to customer service

problems.• To reduce service costs & response time.

SCM Software's

The SCM data in a SC resides in several different basic systems, so it is essential to carefully examine the ability of a software package to be integrated with existing systems.

The greatest advantage of SCM software is to be able to execute & evaluate decisions real time.

It is especially important that users can perform ‘what-if’ scenarios & evaluate the effects of changes. This requires planning & control of SC’s. SCM s/w provides these features.

Examples …..

o CISCO reported savings of $500m by restructuring its internal operations & integrating processes with suppliers & customers with the help of web-based tools. Currently 90% of CISCO’s sales are facilitated online.

o Intel replaced hundreds of order clerks by an automated on-line ordering application.

o Godrej & Boyce’s 28 locations view their account status and sales order delivery status online by enabling stockists to directly access information from the Baan system.

The Use & Benefits of IT

1) Successful companies have developed focused E-business solutions for improving customer service elements that are most important in their business.

2) Improved efficiency allows company personnel's to focus more on the critical business activities.

3) E-business solutions support planning collaboration & improved agility of the supply network.

Contd …..

4) The use of E-business solutions improve the information quality.

5) To gain strategic benefits, the use of IT has to be coupled with process re-design.

Conclusion….

SCM & IT are inseparable & incomplete without one another. IT, Internet & it’s tools have enabled supply chain to prosper & become an aid to the SCM manager. The IT tools combined with each other provide an ability to the supply chain manager to take informed decisions in real time.