2012 -2013 Semester 2

ISE 246 Introduction to Logistics Engineering

Enabling Technology (Case Study)
B2B E-Business Model: E-Procurement
Lecturer: Dr. K. L. Choy
Class time: Thu 15:30 18:30
Student Name: Wong Hei Tung
Student ID: 12103077D
1. Identify the features of ERP and EDI that help Fossil Corporation
tackle the problems with explanation.
A: Background structure and flow of the Fossils E-Procurement
System
Fossil Corporation involved in every aspect of the oil
industry, form exploration and production to transportation,
refining and retail marketing, as well as chemicals
manufacturing and sales. The company implemented an eprocurement system to reduce procurement costs. Eprocurement is the B2B purchase and sale of supplies, work and
services through the Internet as well as other information and
networking systems, such as electronic data interchange and
enterprise resource planning. For example, when purchasing a
piece of equipment, the system checks the inventory to see if
the product is stored in a surplus warehouse. This helps Fossil
avoid unnecessary purchases and reduce inventory level.
Furthermore, Fossil closely examined each supplier, and
found that most of their goods purchased were only from a small
part of their suppliers. Therefore, Fossil focused on the small
part of suppliers and formed alliances with them to guarantee
low price and good quality. This reduced the cost and helped
build a close relationship between the buyer and seller.
Problems faced by the Fossil
However, there was lack of data integrity in Fossil. The
Enterprise resource planning (ERP) systems did not have a
common language. This resulted in difficulties of accessing to all
systems at once and took more time to search the items needed
from the system. Moreover, some systems were not user
friendly that it may require a longer time of purchasing. In the
case of employees need to go through six to eight screens to
make a single order, this reduce efficiency and productivity. If
there is hundreds of purchasing orders, this may create tons of
workload to employees that may be frustrating and time
consuming.
The features of ERP and EDI
ERP can be said as evolved from material requirement
planning and manufacturing resource planning. ERP systems
integrate internal management information across an entire
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organization. It helps enterprise to manage and coordinate

digital information from various internal sources such as
finance/accounting, manufacturing, sales, production, and
logistics and distribution etc. The purpose of ERP is to facilitate
the flow of information between all business functions inside the
boundaries of the organization and manage the connections to
outside stakeholders.
Electronic data interchange (EDI) is a method for
transferring data between different computer systems or
computer networks. It involves the electronic transmission of
information and documents, such as invoices or purchase
orders, between computer systems in different organizations
based on standard, structured, machine-retrievable format. It is
commonly used by big companies for e-commerce purposes,
such as sending orders to warehouses or tracking their order. By
automating the exchange of standardized documents, EDI
eliminates repetitive data entry and mistakes due to human
error.
Improvements made with the help of ERP and EDI
In order to combat with the problems mentioned above,
Fossil chose to use Ariba to integrate suppliers catalogs into
their existing ERP system in one single common format. Ariba, a
format that can interface with numbers of ERP systems, solved
the problem of lack of data integrity. This provides a common
language to allow multiple catalog formats to be accessed at
once.
In Addition, Fossil improved the performance and usability of
the system to minimize purchases made outside of the
approved and allied suppliers. Originally, the purchasing orders
were not systematically organized, repetitive orders were made.
The system software was not fully utilized. In order to encourage
their employees to use the procurement system, Fossil
cooperated with Harbingers system, the expertise in the oil and
gas industry, to set up and e-procurement architecture that
allows suppliers to submit catalogs in any format to Fossils
system and provide their procurement specialists a simplified
procurement procedure. The new system simplified buying
processes and improved communication between Fossil and
suppliers. The Harbingers system worked with the Aribas
system, which allows buyers at Fossil to make purchases form
supply catalogs while maintain all data in existing ERP systems.
The purchase is then made via EDI and sent back to the
supplier.
2. To consider the corporation or entire supply chain structure of
Fossil, briefly describe how RFID acts as an enabling technology
for enhancing the performance of Fossil Corporation with
reasons.
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A: Features of RFID acting as a enabling technology

Enabling technology is the equipment or methodology that,
alone of in combination with associated technologies, provides
the means to generate giant leaps in performance and
capabilities of the users. Information integration and total supply
chain visibility are viewed as integral parts of supply chain
excellence. In modern time, real time and accurate information
on the goods requires the integration of several evolving
technologies that enable tracking of items, cartons, trucks, and
ships.
For example, Radio Frequency Identification (RFID) is one of
the kinds of technologies using wireless devices. RFID acts as
means of storing and retrieving data through electromagnetic
transmission to an RF compatible integrated circuit. RFID tags
communicate with a reader when a tag is within range of the
reader. The reader then passes information about the object to a
host computer that processes the information and passes it over
internal networks and the internet. This allows a visible transfer
when the tagged objects are moved from place to place. The tag
contains electronically stored information which may be read
from up to several meters away which is user-friendly while
stocking in a large warehouse. Unlike a bar code, the tag does
not need to be within line of sight of the reader and may be
embedded in the object.
RFID in the supply chain of Fossil
According to Wal-Mart and the Department of Defense, RFID
is identified as a potential cost reduction technology in the
supply chain management. RFID is being used to identify
inbound and outbound product. It can be used in warehouse to
locate product. Instead of counting the goods one by one, RFID
provides a faster way for inventory. It is being used in
manufacturing and processing industries to track and locate WIP
(Work in Progress) and finished goods. It can also monitor and
track product in transit, and ensure store shelves are
replenished. RFID-enabled Asset Tracking System is developed
for physical asset tracking and machine utilization management.
It can trace and track equipment status and equipment transfer.
The system can provide transfer record tracking and utilization
analysis.
To enhance the performance of Fossil Corporation, RFIDs
software, readers, tags and printers can be used to facilitate the
tracking and movement of goods in and out of a facility and
between zones.
In the supplier and procurement phase
RFID may enhance the performance of Fossil in the supply
chain management. To start with, tags can be implemented into
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objects and supplies can help the system to check the amount
and information. Employees can read the tags and get the
information such as the prices, utilization period. This kind of
information is useful that can help Fossil to decide the time of
replenishment. Procurement can be made by checking the
supplies using RFID technologies. The working schedules and
layout can be effectively designed with the information
provided.
In the manufacturing and inventory management phase
RFID can perform in bar coding and tracing ability that helps
Fossil in managing its inventory. RFID tags are placed in the
manufacturer site, where items are tracked at every point of the
supply chain by ASN. Alerts and notifications are generated.
While thousands of inbound data are transferred to the
warehouse, employees can check the goods by detecting the
tags and matching the shippers ASN. This can ensure the item
level on the delivered goods which enhance security level. Final
verification can also be made during the outbound transfer.
In the transportation and retail phase
During the transporting and retailing process, employees
can read the data installed in the goods using RFID. Latest
delivery can be checked as well as the inventory database. The
use of RFID helps the tracking of items within the zone which
provides high accuracy. This reduces time in stock-taking and
saves man-power.
To conclude, the implementation of RFID effectively
replenishes and reduces cost of stock-taking. Fossil can get the
information of inventory effectively and easily. This reduces the
time in finding information which increases productivity.