1. The role of Information Technologyin SCMPrepared By:Anand Jha

2. Supply Chain Management (SCM)Systems SCM is the process of effectively managing the components of an extendedvalue chain--from suppliers, through manufacturing and distribution chain, andto the consumers. SCM information systems use technology to more effectively manage supplychains 3. Value Chain Analysis 4. Benefits of Value Chain Analysis - Disintermediationto the ConsumerManufacturerManufacturerManufacturerDistributor RetailerRetailerCustomerCustomerCustomer 5. Stockless Inventory Compared to Traditional andJust-in-time Supply Methods 6. 2. Information Systemsfor SCM 7. Information Technology for Supply ChainManagement Software Systems Electronic Data Interchange (EDI) Material Requirements Planning (MRP) Manufacturing Resource Planning (MRP II) Enterprise Resource Planning (ERP) Supply Chain Management Systems (SCM) Customer Relationship Management (CRM) Internet-based Software Network Infrastructure Wide Area Network Internet (for E-commerce: B2B, B2C) 8. 3. ERP 9. Enterprise Resource Planning (ERP) Systems Enterprise resource planning (ERP) is a term used to refer to a system that linksindividual applications (for example, accounting and manufacturingapplications) into a single application that integrates the data and businessprocesses of the entire business. 10. 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 operation MRP systems software ultimately became very complex allowing for efficienciesof scale not previously possible Even more sophisticated MRP II systems began to replace MRP systems in the1980s By the early 1990s, other enterprise activities were being incorporated into ERPsystems Today, an ERP system can encompass, but is not limited to, the followingfunctions: Sales and order entry Raw materials, inventory, purchasing, production scheduling, and shipping Accounting Human resources Resource and production planning 11. Major ERP Systems SAP R/3 Oracle PeopleSoft (have been merged by Oracle) Toyota uses PeopleSoft and SAP Microsoft Dynamics (formerly Microsoft Business Solutions - GreatPlains) 12. E-Business and ERP Systems An e-business must keep track of and process a tremendous amount ofinformation Businesses realized that much of the information they needed to run an e-business stock levels at various warehouses, cost of parts, projectedshipping dates could already be found in their ERP system databases A major part of the online efforts of many e-businesses involved adding Webaccess to an existing ERP system 13. E-Business and ERP Systems Many e-businesses want the same things from their business infrastructure Thus, rather than custom build applications, many companies prefer to useprepackaged ERP system software, which is often more efficient and lessexpensive to implement. Most businesses need extensive help from consultants to configure their ERPsystem software around their existing business practices, or to suggest changesin business practices in order to better fit the ERP system requirements This process of mutual adaptation is called systems integration The consultants who supervise the integration process are often referred to assystems integrators 14. 4. Supply Chain Systems 15. Supply Chain Management (SCM) Systems A typical SCM system might address the following issues: Planning Vendor selection Manufacturing Logistics Customer relationship 16. Types of Supply Chain Management (SCM) Systems The two basic types of SCM system software are: Supply Chain Planning software (SCP): uses mathematical models topredict inventory levels based on the efficient flow of resources into thesupply chain Supply Chain Execution software (SCE): is used to automate differentsteps in the supply chain such as automatically sending purchase ordersto vendors when inventories reach specified levels 17. Major Supply Chain Planning (SCP) Players i2 Technologies i2s strength began with its powerful Advanced Planning and Scheduling(APS) Manugistics Oracle SAP Advanced Planner and Optimizer (APO) 18. Supply Network Design (SND)The Supply Chain Cockpit(SCC)Demand Planning (DP)Supply Network Planning (SND)Collaborative Planning,Forecasting, andReplenishment (CPFR)Levels of SAP APOSAP R/3 19. 5. CRM 20. Data Mining/Web Mining/Business Intelligence Data mining is the process of using mathematical techniques to look forhidden patterns in groups of data, thereby discovering previously unknownrelationships among the many pieces of information stored in a database A data warehouse is a database that contains huge amounts of data, such ascustomer and sales dataWhat does Data Mining Do?EExxpplloorreess YYoouurr DDaattaa FFiinnddss PPaatttteerrnnss PPeerrffoorrmmssPPrreeddiiccttiioonnssQuery, Reporting, Analysis Data MiningWhyHowWhat 21. Relationship among SCM, ERP, CRMSCMERPCRMBroader SCM 22. .6 SAP R/3 23. BEFORE SAP R/3 Systems didnt talk to the extent processes required, in spite of 20years of IS labor Human glue was required: to fill-in where systems dont talk to reconcile multiple views of data to arrive at an answer to monitor hold-points to ensure procedures are followed amidst thedisorganization of being part paper and part automated to bridge systems and paper processes Realized through ability to reduce the personnel requirements toperform the process Transfer into processes that were able to meet customerrequirements 24. 7. Hardware Considerations forSCM systems 25. Intranet vs. Extranet Intranet is to use Internet technology and protocol (TCP/IP) for the internalcommunications Extranet is to use Internet technology and protocol for the internal andsuppliers communications WAN Technologies Ordinary telephone line and telephone modem. Point-to-Point Leased lines (such as T1 line) Public switched data network (PSDN) Such as ATM, Frame Relay Send your data over the Internet securely, using Virtual Private Network(VPN) technologyPSDN 26. Global Considerations in Using SCM/ERP Systems Time differences Language issues Currency exchange rates Tax Different accounting systems Internet and security restrictions Culture and religion holidays 27. 8. Role of IT in Wal-MartsSCM systemA Case Study 28. Walmart Walmart, an American multinational retail corporation that runs chains oflarge department and warehouse stores Established 1962, Arkansan-USA Sam Walton- Founder & Mike duke- current CEO Successful due to its IT usage in SCMIntroduction t case 1990 Superseded K-Mart rival retail chain as one of the largest retailingchain in US 1991- Superseded Sears Roebuck & Company and became the largestretailing chain in US In November 2003, Wal-Mart, worlds largest retailer, planned to replace barcode technology with RFID. Objective: To enhance supply chain efficiency Expected they could save $8.35 million per year primarily in labor costs 29. Background Note Wal-Mart known for innovative business practices One of the first retailing companies to centralize distribution system. Always among the front runners in employing IT to manage its supplychain processes. 30. Using IT in supply chain management Using EDI for procurement EDI saved time and made procurement efficient (EDI=Electronic DataInterchange) Using the bar code scanners, an analysis of daily, weekly, monthly salesdata helped the store manager determine what products were selling andat what quantity. Accordingly, the store manager would place orders in the manufacturingdivision. In 1977, Wal-Mart set up a computer terminal network (CTN) toestablish a communication link between its stores and the companyheadquarters Real time business operations In 1978, Wal-Mart set up its first fully automated distribution center 31. Using EDI for procurement Wal-Mart placed orders for huge quantities of goods with its suppliers Cost of sales worked out to be 2-3 %(very low from industry average) Information of product, manufacturer, price was recorded oncomputer system That information was passed to centralized data warehouse. Analysis of daily, weekly, monthly sales data helped store manager todetermine which products were sold in which quantities So that they can place purchase order Edi also helped suppliers Right merchandize at the right time, and have it at right place at rightprice 32. Using IT in supply chain managementUsing voice based technologies: Enhancing warehouse and logisticsmanagement Wal-Mart could replenish stock at any of its 1525 stores in US within24 hours Cross-docking It enabled the company to receive goods and dispatch them to stores inlees than a day How it works at distribution centers? It installed voice based order filling(VOF) system in all distributioncenters Is consisted portable Voice Recognition Talkman Terminals(VRTT)and radio module on companys wireless LAN It eliminated mis-picks and product labeling costs since VOF didntrequire paper lists labor 33. How to quickly locate & replenish goods? Store ready displays called PDQ(pretty darn quick) displays Time saved per employees were not much but aggregate time savedwas quite goodGPS GPS system in communication in trucks Any truck can be located Drivers could activate system by voice and interact with staff 34. Using IT in supply chain managementThe Retail Link system- Supporting Inventory ManagementRetail link connected EDI network to extranet ,accessible to allsuppliersProvided suppliers historical sales data of 24 months, allowed them totrack invoice, can make demand forecastSuppliers could also study competitors products demand 35. Using the Internet in Supply chain Management CPFR (Collaborative Planning ForecastingReplenishment) Real time bases to determine product wise demand forecast Wal-Mart shared past data, customer data, demographic data, stockpositions Both forecasted demand individually and then co-operated Reduced inventory cost Product availability across supply chain As a result lead time was cut to 11 days from 21 days On-hand inventory was reduced by two weeks Sales grew by $8.5 millions in six months Later on it was implemented to other stores By 1990s, about 90% of suppliers were doing business through RetailLink 36. Barriers to CPFR Lack of discipline to execute primary phases Promotions and new items events are not jointly planned Ineffective replenishment in response to demand fluctuations Trading partners focus on traditional supply chain steps Scalability and critical mass 37. Recent Supply Chain Initiatives 2001- Global Procurement Division[Shenzhen, China Exchange of sales and inventory data Best deal procurement from any part of world Strategy Employed Identify generic products Enhance product quality reduce cost by collaborating 2001- copy paper increased sales[ 46% in UK, 94% in Federal Republic of Germany, 38% inCanada, 25% in US] 38. Recent Supply Chain Initiatives October 2002- Asked suppliers to replace VAN-EDI to Web based EDI Direct online communication between trading partners No transaction costs Highly secured Saved millions[ VAN-EDI cost $200 Billion] No licensing fees July 2003 Asked suppliers to place RFID tags on goods, packed in palletsand cratesVAN-EDI = Value Added Network-EDIRFID = Radio Frequency Identification 39. Benefits from RFID Drastic decrease in Stock out situations From $400 million to $1.2 billion for P&G Lesser labor requirements Almost $6.34 billion yearly Decrease in merchandise thefts Almost $2 billion Real time tracking of consumption patterns Would help enhance JIT Inventory management system Decrease in stock levels by around 25%[IBM] Total savings expected to be 8.34 billion per year 40. Problems An estimated cost of $20 million to suppliers 50% of this is integration of system with software and modificationin soft wares Not a proven technology Not compatible with liquids and metal packaging