BY N.Vaishnavi Ratnam(1104012) J.

Divya(1104057) PGDM-IB

Information Technology as a Driver of Supply Chain

INTRODUCTION: Supply chain management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Recent development in technologies enables the organization to avail information easily in their premises. As a solution for successful supply chain management, sophisticated software systems with Web interfaces are competing with Web-based application service providers (ASP) who promise to provide part or all of the SCM service for companies who rent their service. These technologies are helpful to coordinates the activities to manage the supply chain. The cost of information is decreased due to the increasing rate of technologies. In the integrated supply chain model . Manager needs to understand that information technology is more than just computers. Except computer data recognition equipment, communication technologies, factory automation and other hardware and services are included.

The

importance

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information

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an

integrated

supply

chain

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environment:

Prior to 1980s the information flow between functional areas within an organization and between supply chain members organizations were paper based. The paper based transaction and communication is slow. During this period, information was often over looked as a critical competitive resource because its value to supply chain members was not clearly understood. IT infrastructure capabilities provide a competitive positioning of business initiatives like cycle time reduction, implementation, implementing redesigned cross-functional processes. Several well know firms involved in supply chain relationship through information technology. Three factors have strongly impacted this change in the importance of information. First, satisfying in fact pleasing customer has become something of a corporate obsession. Serving the customer in the best, most efficient and effective manner has become critical. Second information is a crucial factor in the managers' abilities to reduce inventory and human resource requirement to a competitive level. Information flows plays a crucial role in strategic planning.Knowledge is shared across cultural-boundaries, time-boundaries, and spaceboundaries to create strategic frontiers in global and virtual enterprises. Role of Information Technology in a Supply Chain y Effective use of IT in the supply chain can have a significant impact on supply chain performance

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

How Information technology is used at all phases Information Technology is used in all phases of decision making, strategic planning, operational etc.Demand planning, Forecasting, Global procurement management are some of the enabling tools on which the Global procurement strategies are built and managed. The availability of these sophisticated systems has further enabled companies to implement good and cost effective manufacturing practices like JIT, Kanban, VMI etc Examples: y Strategic: Information Technology is used in making strategic decisions like location decisions, search of Global markets ,Geographic Conditions, Transportation facilities and Demography. y Operational: what products will be produced during todays production run

IT is used in order to get the accurate information regarding the factors required to move goods from warehouse to customer y y y Inventory: demand patterns, carrying costs, stock out costs, ordering costs Transportation: costs, customer locations, shipment sizes Facility: location, capacity, schedules of a facility; need information about trade-offs between flexibility and efficiency, demand, exchange rates, taxes, etc. The Supply Chain IT Framework  The Supply Chain Macro Processes y y y y Customer Relationship Management (CRM) Internal Supply Chain Management (ISCM) Supplier Relationship Management (SRM) Plus: Transaction Management Foundation

Macro Processes in a Supply Chain

Customer Relationship Management through Information Technology The processes that take place between an enterprise and its customers downstream in the supply chain. As we have discussed, CRM is more than just software. For the purposes of this introduction - Information Technology (IT) and CRM have three key elements, namely Customer Touch Points, Applications, and Data Stores. This section is based loosely upon Raisch (2001) The eMarketplace. Customer Touch Points are vital since your business has a marketing orientation and focuses upon the customer and his or her current and future needs. This is the interface between your organization and its customers. For example you buy a new car from a dealership, and you enter a showroom. The dealership is a contact point. You meet with a salesperson that demonstrates the car. The salesperson is a contact point. You go home and look at the car manufacturer's website, and then send the company an e-mail. Both are contact points. Other contact points include 3G telephone, video conferencing, Interactive TV, telephone, and letters. Applications are essentially the software and programmes that support the process. Incidentally, this is what some would call CRM - but we know better. Applications serve Marketing (e.g. data mining software* and permission marketing**), Sales (e.g. monitoring Customer Touch Points), and Service (e.g. customer care). Data Stores contain data on every aspect of the customer, and the Customer Life Cycle (CLC). For example, an organisation keeps data on the products you buy, when you buy them, and where they are sent. Data is also kept on the web pages that you visit and the products that you consider, but then do not buy. Leads are stored here. Data on the life time value of individual customers is stored here, as well as details of how and when the customer was recruited, how - and for how long - individuals have been retained, and details of any products that have been extended to individuals are also stored. The data is analyzed using Applications.

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

Data Mining/Web Mining/Business Intelligence  Data mining is the process of using mathematical techniques to look for hidden patterns in groups of data, thereby discovering previously unknown relationships among the many pieces of information stored in a database  A data warehouse is a database that contains huge amounts of data, such as customer and sales data Supplier Relationship Management y Those processes focused on the interaction between the enterprise and suppliers that are upstream in the supply chain y Key processes: o Design Collaboration o Source o Negotiate o Buy o Supply Collaboration y There is a natural fit between Internal supply chain Management and SRM processes

The Transaction Management Foundation y y Enterprise software systems (ERP) Earlier systems focused on automation of simple transactions and the creation of an integrated method of storing and viewing data across the enterprise

y y

Real value of the TMF exists only if decision making is improved The extent to which the TMF enables integration across the three macro processes determines its value

Information Technology for Supply Chain Management  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) Enterprise Resource Planning (ERP) 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. Major ERP systems:SAP R/3,Oracle,PeopleSoft (have been merged by Oracle),Toyota uses PeopleSoft and SAP,Microsoft Dynamics (formerly Microsoft Business Solutions - Great Plains) E-Business and ERP Systems  An e-business must keep track of and process a tremendous amount of information  Businesses realized that much of the information they needed to run an e-business stock levels at various warehouses, cost of parts, projected shipping dates could already be found in their ERP system databases  A major part of the online efforts of many e-businesses involved adding Web access to an existing ERP system

 Many e-businesses want the same things from their business infrastructure  Thus, rather than custom build applications, many companies prefer to use prepackaged ERP system software, which is often more efficient and less expensive to implement How information Technology made the buying experience a different one through E-commerce and Social networking thereby increasing the sales. 50% of Social networkers consider information shared on their networks when making a purchase decision. The highest performing businesses use consumer insights in 80% of sales and merchandising. Get up close and personal Consumers want personalized discounts and want to engage with retailers to develop products catered to their preferences and needs. In fact, 78% of consumers say they are likely to co-createhelping retailers develop new products and services that they prefer. Generation Y will change the retail world Gen Y'rs is eager to forge ahead with new channelsand they most likely use two or more technologies to shop. They feel that retailers can improve most by building technologies into the overall shopping experience. For example, this generation of consumers are interested in using their remote controls to buy items advertised on television. It's not just about price It's about the right offer at the right time. And that requires intelligence. Using analytics to spot trends early and proactively structure planning and inventory efforts will allow retailers to shape demand, rather than react to demand. Retailers have to narrow down the assortment to map tightly to consumer preferences and make sure the product is available. Trends point to smarter consumers driving the marketplace The IBM Institute for Business Value surveyed more than 30,000 consumers in the United States, Canada, United Kingdom, Brazil, India and China to determine how they choose where to shop, what shopping methods they prefer and what they will demand from retailers in the future.

IBM's newest survey reveals that consumers want to use multiple technologies to shop and purchase, making price comparisons and instant brand critiquesor criticismsavailable to a much wider audiences than ever before. The study also reveals three fundamental realities of the new marketplace. Earlier systems focused on automation of simple transactions and the creation of an integrated method of storing and viewing data across the enterprise, how latest technology made it easier through new technologies like Enterprise Resource Planning, Electronic Data Interchange, Material Requirements Planning. The Future of IT in the Supply Chain y At the highest level, the three SCM macro processes will continue to drive the evolution of enterprise software y Software focused on the macro processes will become a larger share of the total enterprise software market and the firms producing this software will become more successful y Functionality, the ability to integrate across macro processes, and the strength of their ecosystems, will be keys to success Application of using Information and Technology in SCM: In the development and maintenance of Supply chain's information systems both software and hardware must be addressed. Hardware includes computer's input/output devices and storage media. Software includes the entire system and application programme used for processing transactions management control, decision-making and strategic planning. Recent development in Supply chain management software is:

1.Base Rate, Carrier select & match pay (version 2.0) developed by Distribution Sciences Inc. which is useful for computing freight costs, compares transportation mode rates, analyze cost and service effectiveness of carrier. 2. A new software programme developed by Ross systems Inc. called Supply Chain planning which is used for demand forecasting, replenishment & manufacturing tools for accurate planning and scheduling of activities. 3. P&G distributing company and Saber decision Technologies resulted in a software system called Transportation Network optimization for streamlining the bidding and award process.

4. Legibility planning solution was recently introduced to provide a programme capable managing the entire supply chain. Limitations of using Information and Technology in SCM: 1) Global Considerations in Using SCM/ERP Systems

 Time differences  Language issues  Currency exchange rates  Tax  Different accounting systems  Culture and religion holidays 2) Internet and security restrictions 3) Implementation of ERP kind of system is Costly affair 4) Use of IT in transactions and information sharing is linked, Inflexible technology selected for transaction execution might hinder use of IT in information sharing. Conclusion: World is shrinking day by day with advancement of technology. Customers' expectations are also increasing and companies are prone to more and more uncertain environment. Companies will find that their conventional supply chain integration will have to be expanded beyond their peripheries. The strategic and technological innovations in supply chain will impact on how organizations buy and sell in the future. However clear vision, strong planning and technical insight into the Internet's capabilities would be necessary to ensure that companies maximize the Internet's potential for better supply chain management and ultimately improved competitiveness. Internet technology, World Wide Web, electronic commerce etc. will change the way a company is required to do business. These companies must realize that they must harness the power of technology to collaborate with their business partners. That means using a new breed of SCM application, the Internet and other networking links to observe past performance and historical trends to determine how much product should be made as well as the best and cost effective method for warehousing it or shipping it to retailer. References www.managementstudyguide.com www.google.com www.ibm.com www.worldscibooks.com