MODULE-5

© 2007 Pearson Education 17-1

 The Role of Information Technology in the Supply
Chain
The Supply Chain IT Framework
Customer Relationship Management
Internal Supply Chain Management
Supplier Relationship Management
The Transaction Management Foundation

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 Role of Information Technology
in a Supply Chain
Information is the driver that serves as the “glue” that
allows the other supply chain drivers to work together with
the goal of creating an integrated , coordinated supply
chain
Information must have the following characteristics to be
useful:
Accurate
Accessible in a timely manner
Information must be of the right kind

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 Accurate :- without information that gives a true
picture of the state of the SC, it is very difficult to
make good decisions
Accessible in a timely manner:- need to have a up-to-
date information that is easily accessible.
Information must be of the right kind:- decision
makers need information that they can use.

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 Role of Information Technology
ina Supply Chain
Information technology (IT)
Hardware and software used throughout the supply
chain to gather and analyze information
Captures and delivers information needed to make
good decisions
Effective use of IT in the supply chain can have a
significant impact on supply chain performance

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 The Importance of Information
ina Supply Chain
Relevant information available throughout the
supply chain allows managers to make decisions
that take into account all stages of the supply
chain
Allows performance to be optimized for the entire
supply chain, not just for one stage – leads to
higher performance for each individual firm in the
supply chain
It is a key ingredient not just at each stage of the
SC, but also within each phase of the SC decision
making:- Wal-Mart
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 Information provides the basis for supply chain
management decisions
Inventory
Transportation
Facility
Sourcing
Pricing and Revenue management

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 Facility :- determining the location, capacity, and
schedules of a facility requires information on the trade-
offs among efficiency and flexibility, demand, exchange
rates, taxes and so on.
Inventory :- setting optimal inventory policies requires
information that includes demand patterns, cost of
carrying inventory, costs of stocking out, and costs of
ordering…
Transportation :- deciding on transportation networks,
routings, modes, shipments and vendors requires
information including costs, customer locations, shipment
sizes to make good decisions.

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 Sourcing :- information on product margins, prices,
quality, delivery lead times and so on.
Pricing and Revenue Management :- to set pricing
policies, one needs information on demand, both its
volume and various customer segment’s willingness to
pay, as well as many supply issues ( product margin,
lead time and availability)

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 The Supply Chain IT Framework
Use of IT in supply chain has increasingly been
enabled by Enterprise Software.
Enterprise Software collects transaction data,
analyzes these data to make decisions, and executes
on these decisions both within an enterprise and
across a supply chain.

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 The Supply Chain IT Framework
The Supply Chain Macro Processes
Customer Relationship Management (CRM)
Internal Supply Chain Management (ISCM)
Supplier Relationship Management (SRM)
Plus: Transaction Management Foundation(TMF)

© 2007 Pearson Education 17-11

 Supplier Internal Customer
Relationship Supply Relationship
Management Chain Management
(SRM) Management (CRM)
(ISCM)

Transaction Management Foundation (TFM)

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 Customer Relationship Management (CRM):-
processes that focus on downstream interactions
between the enterprise and its customers.
Internal Supply Chain Management (ISCM) :-
processes that focus on internal operations within the
enterprise.
Supplier Relationship Management (SRM):-
processes that focus on upstream interactions
between the enterprise and its suppliers.

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 Transaction Management Foundation (TMF) :-
includes basic ERP systems (& its components such as
financials & human resources), infrastructure
software, and integration software.

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 Why Focus on the Macro
Processes?
As the performance of an enterprise becomes more
closely linked to the performance of its supply chain,
it is crucial for the firms focus on these macro
processes.
Good supply chain management is not a “zero-sum
game”, but a “positive sum-game”.

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 Macro Processes Applied to the
Evaluation of Software
Failures – B2B market place and software companies
providing market place software that proliferated
during 1999 and 2000.
ERP –improving data availability and integrity within
the supply chain.

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 The software Winners in a
Macro Process
Functional performance ( ease of use)
Integration with other macro processes
Strength of the software firm’s ecosystem.

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 Customer Relationship
Management
The processes that take place between an enterprise
and its customers downstream in the supply chain
Key processes:
Marketing
Selling
Order management
Call/Service center

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 Marketing :- decisions regarding which customers to
target, how to target customers, what products to
offer, how to price products, & how to manage the
actual campaigns targeting customers.
Selling :- providing the sales force the information it
needs to make a sale and then execute the actual sales.
Order Management :- managing customers orders,
plan & execute order fulfillment.
Call/service center:- primary point of contact between
a company and its customers. Customer place orders,
suggest products, solves problems, provides
information on order status.

© 2007 Pearson Education 17-19

 Internal Supply Chain Management
Includes all processes involved in planning for and
fulfilling a customer order
ISCM processes:
Strategic Planning
Demand Planning
Supply Planning
Fulfillment
Field Service
There must be strong integration between the ISCM
and CRM macro processes

© 2007 Pearson Education 17-20

 Strategic Planning :- focuses on the network design
of the SC.
Demand Planning :- consists of forecasting demand
and analyzing the impact on demand management
tools such as pricing and promotions.
Supply Planning :- process takes as an input the
demand forecasts produced by demand planning and
the resource made available by strategic planning, &
then produces an optimal plan to meet demand.
Fulfillment :- links each order to a specific supply
source and means of transportation.
Field service :- after the product has been delivered
to the customer, it eventually must be serviced.
© 2007 Pearson Education 17-21
 Supplier Relationship Management
Those processes focused on the interaction between
the enterprise and suppliers that are upstream in the
supply chain
Key processes:
Design Collaboration
Source
Negotiate
Buy
Supply Collaboration
There is a natural fit between ISCM and SRM processes

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 The Macro Processes and Their
Processes

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© 2007 Pearson Education
 TRANSACTION MANAGEMENT
FOUNDATION { TMF }
Transaction Management Foundation (TMF) :- includes basic
ERP systems (components such as financials & human resources),
infrastructure software, and integration software.
The TMF is the historical home of the largest enterprise software
players.
In the early 1990s, when much of the thinking in supply chain
management was just getting off the ground and ERP systems
were rapidly gaining popularity there was little focus on the three
macro processes.
SRM, ISCM & CRM

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 Cont…
In fact, there was little emphasis on software applications
focused on improving decisions. Instead, the focus at that
time was on building transaction management and process
automation systems that proved to be the foundation for
future decision support applications.
The huge demand for these systems during the 1990’s
drove the ERP players to become the largest enterprise
software companies.
SAP continued as the market leader, but other powerful
ERP players included Oracles, PeopleSoft, JD Edwards
and Baan.
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 Cont…
The real value of the transactions management
foundation can only be extracted if decision making
within the supply chain is improved.
Most recent growth in enterprise software has come
from companies focused on improving decision
making in the three macro processes.
ERP players that focus on the integrating across the
macros processes along with developing good
functionality in one or more macro processes will
continue to occupy a position of strength.

© 2007 Pearson Education

 THE FUTURE OF IT IN THE SUPPLY
CHAIN
At the highest level, it is believed that the three SCM
macro processes will continue to drive the evolution of
enterprise software.
Firms targeting a macro process, the ability to integrate
across macro processes, and the strength of their eco
systems has the keys to success.
User of supply chain software should first identify areas
within the three macro processes where improvement will
provide the maximum leverage. Software and IT decision
should then support the goal of improving performance
along these processes.
© 2007 Pearson Education
 Potential paths for a company to
enter the market
The first is through superior functionality, whether it be
specific functionality needed by a particular industry or
an application with vastly improved ease of use.
The other path consists of providing an integrated
product that increases the linkages between the macro
processes.
It will be difficult for start-up to garner the resources to
build an integrated a product across CRM, ISCM and
SRM.
E.g.: Microsoft
© 2007 Pearson Education
© 2007 Pearson Education
 Risk management in IT
INTRODUCTION:
Risk associated with the use of IT in supply chain is
very high.
Process of adding new supply chain capabilities with
IT can be filled with danger.
Larger the change in IT system, greater the risk of a
negative impact on operation.
If IT suffers a major failure , the firm will not able to
function properly.

© 2007 Pearson Education

 The major areas of risk in IT can be
divided into two categories
1)Risk involved with installing new IT system.
2)A firm still faces risks ones its IT systems are
operating.

© 2007 Pearson Education

 1)Risk involved with installing new
IT system
During the process of getting new IT system running the
firm is forced to change from old process to new process
in its IT system.
troubles can be found in both business and in
technical issues
Business issues
Requires employees to operate according to new
process.
These may be difficult to learn
getting the entire org on board with the
changes bought about by a new IT system is particularly
difficult because top management is not actively involved
in making this transaction.

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 Technical issues
there are tremendous technical hurdles to overcome in
getting new IT system operational
When firm switches over to a new system without
proper integration ,The new system is unable to
perform all that was promised and sometimes even
performs worse than the system it was replacing.
Even when the employees are bought into new
process.

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 2)A firm still faces risks ones its IT
systems are operating
The more a firm relies on IT to make decisions and
execute processes, the higher is the risk that any
sort of IT problem, ranging from software glitches to
power outages to viruses, can completely shut down
a firms operations . These are the serious risks that
a firm plan to face.

© 2007 Pearson Education

 Each of the major categories above has its own
mitigation strategies. With regards to implementing
IT system, there are three ideas to keep in mind.
 install new IT system in a incremental fashion rather
than in a “big bang” approach.
Firms can run a duplicate system to make sure the
new system is performing well.
Implement only the level of complexity that ones
need .

© 2007 Pearson Education

 On the operational side mitigation strategies include
data backup systems running in parallel in case one
should suffer a problem, and a range of security
software products that can help to keep a companies
system safe. In addition, picking systems that have
flexibility to change if need be can be important.

© 2007 Pearson Education

 Supply chain IT in practice
Here the manager need to keep in mind several general
ideas when they are making a decision regarding supply
chain IT.
Select an IT system that addresses the companies key
success factors .
Take incremental steps and measure values.
Align the level of sophistication with the need of
sophistication.
Use IT system to support decision making, not to make
decisions.
Think about the future.
© 2007 Pearson Education