RECENT DEVELOPMENTS IN THE FIELD OF SCM

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29 Νοε 2013 (πριν από 3 χρόνια και 6 μήνες)

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RECENT DEVELOPMENTS IN THE FIELD OF SCM



Sabitha Z.B


School of Management Studies

CUSAT, Kochi
-

22

E
-
mail:
sabithazb@gmail.com


Abstrac
t: This article
examines

the recent developments
that
have

been
taking

place in the supply chain management

as a result of the advancement
that is happening in the field of IT and electronics
. Supply chain management
(SCM) is the practice of coordinating the design, procurement, and flow of
goods, services, information and finances, from raw material to parts s
upplier
to manufacturer to distributor to retailer to consumer. Recent advances in
supply chain technological support, process design, and management
strategies have created an increasingly complex set of administrative,
technological, and organizational i
ssues that must be resolved if they are to
lead to competitive advantage.

Latest developments in information
technology have propelled the Supply Chain Management concept to newer
dimensions.


Key words
: JIT,
RFID
, Benchmarking, Global SCM, ERP, EDI
, Quic
k
response, e
-
SCM, e
-
Business.




1.0

INTRODUCTION



Supply chain management (SCM) is the management of a network of interconnected
businesses involved in the ultimate provision of product and service packages required by e
nd
customers (Harland, 1996).

Supply chain management spans all movement and storage of raw
materials, work
-
in
-
process inventory, and finished goods from point of origin to point of
consumption (supply chain).


Another definition is provided by the APICS Dictionary when it defines SCM

as the "design,
planning, execution, control, and monitoring of supply chain activities with the objective of
creating net value, building a competitive infrastructure, leveraging worldwide logistics,
synchronizing supply with demand and measuring perform
ance globally."


"Supply Chain Management (SCM)" is to share information and management resources to
eliminate the waste of business processes as much as possible, as one business process
beyond the walls of companies, organizations, and divisions aiming
for total optimization.


The goal of Supply Chain Management (SCM) is to make money, i.e. to increase cash flow. To
keep a company in business the most important thing is to increase the flow of cash, which is
the blood of the company as a living entity. A
ccounting principle profit is now not enough for a
company and posting profit that does not increase cash flow will jeopardize the management of
the company in the deflation era of today .



Supply chain management synchronizes demand with a business unit as a whole by using
materials/parts and resource capacity such as machines and workers and considering
constraints (bottlenecks) to increase the flo
w from materials/parts supply to product selling, i.e.
the cash flow speed called "throughput"

.


The three major elements of supply chain management are demand, materials, and resource
capacity and the goal of supp
ly chain management is to increase the cash flow speed by
synchronizing business processes based on constraints. Indexes of the management are
neither cost nor efficiency, which are traditional accounting concepts, but throughput (item
flow), inventory, an
d expense aiming for total optimization

.


In short, supply chain management is cash flow management. In the age of mega
-
competition
where markets and competitors expand globally, supply chain management is an
indispensable
measure for a company to survive. Supply chain management is a concept that
challenges the conventional management index in which net profit may be posted by legally
capitalizing expenses even if market values of products decrease (the same activity as "st
ock
shuffling" by securities companies). Supply chain management is also a management tool that
provides a theoretical base to build a strategic relationship such as a virtual corporation in
global supply chain management


.



2.0
Activities/functions


Supply chain management is a cross
-
function approach including managing the movement of
raw materials into an organization, certain aspects of the internal processing of materials into
finished goods, and the movement of
finished goods out of the organization and toward the
end
-
consumer. As organizations strive to focus on core competencies and becoming more
flexible, they reduce their ownership of raw materials sources and distribution channels. These
functions are increa
singly being outsourced to other entities that can perform the activities
better or more cost effectively. The effect is to increase the number of organizations involved in
satisfying customer demand, while reducing management control of daily logistics op
erations.
Less control and more supply chain partners led to the creation of supply chain management
concepts. The purpose of supply chain management is to improve trust and collaboration
among supply chain partners, thus improving inventory visibility and

the velocity of inventory
movement.


Several models have been proposed for understanding the activities required to manage
material movements across organizational and functional boundaries. SCOR is a supply chain
management model promoted by the Supply C
hain Council. Another model is the SCM Model
proposed by the Global Supply Chain Forum (GSCF). Supply chain activities can be grouped
into strategic, tactical, and operational levels. The CSCMP has adopted The American
Productivity & Quality Center (APQC)
Process Classification FrameworkSM a high
-
level,
industry
-
neutral enterprise process model that allows organizations to see their business
processes from a cross
-
industry view
point.


Strategic level



Strategic network optimization, including the number, loc
ation, and size of
warehousing, distribution centers, and facilities.



Strategic partnerships with suppliers, distributors, and customers, creating
communication channels for critical information and operational improvements such
as cross docking, direct s
hipping, and third
-
party logistics.



Product life cycle management, so that new and existing products can be optimally
integrated into the supply chain and capacity management activities.



Information technology chain operations.



Where
-
to
-
make and make
-
buy
decisions.



Aligning overall organizational strategy with supply strategy.



It is for long term and needs resource commitment.


Tactical level



Sourcing contracts and other purchasing decisions.



Production decisions, including contracting, scheduling, and
planning process
definition.



Inventory decisions, including quantity, location, and quality of inventory.



Transportation strategy, including frequency, routes, and contracting.



Benchmarking of all operations against competitors and implementation of best
p
ractices throughout the enterprise.



Milestone payments.



Focus on customer demand and Habits.


Operational level



Daily production and distribution planning, including all nodes in the supply chain.



Production scheduling for each manufacturing facility in th
e supply chain (minute by
minute).



Demand planning and forecasting, coordinating the demand forecast of all customers
and sharing the forecast with all suppliers.



Sourcing planning, including current inventory and forecast demand, in collaboration
with all

suppliers.



Inbound operations, including transportation from suppliers and receiving inventory.



Production operations, including the consumption of materials and flow of finished
goods.



Outbound operations, including all fulfillment activities, warehousin
g and
transportation to customers.



Order promising, accounting for all constraints in the supply chain, including all
suppliers, manufacturing facilities, distribution centers, and other customers.



From production level to supply level accounting all trans
it damage cases & arrange
to settlement at customer level by maintaining company loss through insurance
company.


3.0
Supply Chain Decisions


We classify the decisions for supply chain management into two broad categories
--

strategic
and operational. As t
he term implies, strategic decisions are made typically over a longer time
horizon. These are closely linked to the corporate and guide supply chain policies from a
design perspective. On the other hand, operational decisions are short term, and focus on
a
ctivities over a day
-
to
-
day basis. The effort in these type of decisions is to effectively and
efficiently manage the product flow in the "strategically" planned supply chain.

There are four major decision areas in supply chain management: 1) location, 2)
production, 3)
inventory, and 4) transportation (distribution), and there are both strategic and operational
elements in each of these decision areas.

3.1
Location Decisions

The geographic placement of production facilities, stocking points, and sourcing
points is the
natural first step in creating a supply chain. The location of facilities involves a commitment of
resources to a long
-
term plan. Once the size, number, and location of these are determined, so
are the possible paths by which the product flow
s through to the final customer. These
decisions are of great significance to a firm since they represent the basic strategy for
accessing customer markets, and will have a considerable impact on revenue, cost, and level
of service. These decisions should
be determined by an optimization routine that considers
production costs, taxes, duties and duty drawback, tariffs, local content, distribution costs,
production limitations, etc. Although location decisions are primarily strategic, they also have
implicat
ions on an operational level.

3.2
Production Decisions

The strategic decisions include what products to produce, and which plants to produce them in,
allocation of suppliers to plants, plants to DC's, and DC's to customer markets. As before,
these decision
s have a big impact on the revenues, costs and customer service levels of the
firm. These decisions assume the existence of the facilities, but determine the exact path(s)
through which a product flows to and from these facilities. Another critical issue i
s the capacity
of the manufacturing facilities
--
and this largely depends

on

the degree of vertical integration
within the firm. Operational decisions focus on detailed production scheduling. These decisions
include the construction of the master production

schedules, scheduling production on
machines, and equipment maintenance. Other considerations include workload balancing, and
quality control measures at a production facility.

3.3
Inventory Decisions

These refer to means by which inventories are managed.

Inventories exist at every stage of the
supply chain as either raw material, semi
-
finished or finished goods. They can also be in
-
process between locations. Their primary purpose

is

to buffer against any uncertainty that
might exist in the supply chain. S
ince holding of inventories can cost anywhere between 20 to
40 percent of their value, their efficient management is critical in supply chain operations. It is
strategic in the sense that top management sets goals. However, most researchers have
approached

the management of inventory from an operational perspective. These include
deployment strategies (push versus pull), control policies
---

the determination of the optimal
levels of order quantities and reorder points, and setting safety stock levels, at e
ach stocking
location. These levels are critical, since they are primary determinants of customer service
levels.

3.4
Transportation Decisions

The mor
e choice aspect
s

of these decisions are the more strategic ones. These are closely
linked to the inventory

decisions, since the best choice of mode is often found by trading
-
off the
cost of using the particular mode of transport with the indirect cost of inventory associated with
that mode. While air shipments may be fast, reliable, and warrant lesser safety s
tocks, they are
expensive. Meanwhile shipping by sea or rail may be much cheaper, but they necessitate
holding relatively large amounts of inventory to buffer against the inherent uncertainty
associated with them. Therefore customer service levels, and geo
graphic location play vital
roles in such decisions. Since transportation is more than 30 percent of the logistics costs,
operating efficiently makes good economic sense. Shipment sizes (consolidated bulk
shipments versus Lot
-
for
-
Lot), routing and scheduli
ng of equipment are key in effective
management of the firm's transport strategy.


4.0

DEMAND MANAGEMENT


Demand planning has enabled companies to more accurately forecast what their industry,
market and customers will require. Armed with advanced tools, technologies and
forecasting methodologies, businesses have honed their ability to view numbers and
predict

information within various contexts, model independent and dependent demand
among products and channels, and generate statistically based forecasts based on the
most recent data, causal factors and events. This has helped fulfill the demands of a more
cha
llenging customer base; better leverage past product performance; more effectively
predict and manage replenishment; align price and profit margins; and maintain a leaner,
more profitable supply chain overall. More recently, enterprises are focusing on man
aging
demand, rather than simply reacting to it. Demand management takes supply chain
management to the next level by enabling an automated “ecosystem” that simultaneously
maps demand forecasting against factors like supply restrictions, customer commitmen
ts,
inventory counts, financial predictions, as well as patterns of behavior that can affect
demand at any given time.
Demand planning has enabled companies to more accurately
forecast what their industry, market and customers will require.

Demand manageme
nt is a
more proactive approach than its predecessors


relying on highly sophisticated
quantitative analytics and advanced modeling techniques to preset tolerance levels,
predict and pinpoint problem areas, monitor and adjust strategies dynamically, and
a
chieve real time visibility and synergy across all channels.


A comprehensive demand management solution should

enable a business to:



Synchronize global planning



Forecast only the products and components that make sense from a profit and/or strategic
perspective



Utilize best
-
of
-
breed statistical forecasting techniques



Employ a forecasting tool that balances performance and scalability



Apply event
-
based planning



Perform real
-
time data synchronization.



Employ rules
-
based modeling



Simplify multidimensiona
l analysis with easy
-
to
-
use tools



Afford a seamless workflow



Benefit from an open, services
-
based, 64
-
bit architecture and a common Web interface



Utilize industry
-
standard databases



Employ automated, closed
-
loop, industry
-
specific workflows based on best p
ractices



Gather predictive intelligence with “proactive “demand indicators



Enable more efficient collaboration with all internal stakeholders and external partners.



5.0

E
-
BUSINESS, INFORMATION SHARING AND KNOWLEDGE MANAGEMENT



The internet is playing an increasing role in the search for efficient supply chain management
(SCM), but the novelty of both the concept of SCM and the internet has placed the combination
of the two in the position of finding the
right balance of both.
Th
e Internet has many impacts on
the supply chain.



One is the impact of
e
-
business
, which refers to the ability of a firm to electronically
connect, in multiple ways, many organizations, both internally and externally, for
many
different purposes.



Another impact refers to
information sharing
, how the Internet can be used as a medium to
access and transmit informatio
n among supply chain partners.



Third type of impact of the Internet on SCM is called
knowledge management
(KM).

The

Internet not only
enables supply chain partners to access and share information, but also
to create, storage, dissemination and application of organizational knowledge. KM refers to
the set of processes or practice of developing in an organization the ability to create,
acq
uire, capture store, maintain and disseminate the organization's knowledge
.



One of the most recent applications of computer technology involves the Internet in the area of
information sharing and supply chain management. Like many changes experienced in other
areas of business, the introduction of computer technology brought unpre
cedented changes in
the way organizations manage their information sharing processes. From their use in product
development to surveys of after
-
sales customer satisfaction, computers have been playing
pivotal roles in the flow of information, not only with
in individual organizations but also between
organizations.B2B exchanges have been significantly affected by the transformation in
information sharing processes. Starting with the automated order entry system in the mid
1970s, computer technology has facil
itated information sharing between organizations involved
in inter

organizational transactions.

B2B exchanges using Internet
-
based communication
systems have attracted special attention because of their market growth potential and impact
on business struct
ures throughout the world.

Even before the Internet became

available for
commerce, business managers were

thrilled by the prospect of its efficiency,

effectiveness and
innovation, which they believed

would overcome barriers in time and geography

and improv
e
in
ter
-
organizational relationship.
The core of its benefits is cost reduction, which

results from
timely and speedy transactions,

inventory reduction, easy access to new markets

and
suppliers, and efficient management of the

whole supply chain process, t
o name a few. In the

1980s and early 1990s, many American

companies introduced inter
organization networks

in
their supply chain management which enabled

them just
-

in
-
time procurement.

The immediate
connection between a buyer

and a supplier increases coop
eration and efficiency

between
firms. The success of worldwide retail

chain Wal
-
Mart frequently has been attributed to the

electronic data interchange (EDI) system installed

among its pool of suppliers. Also, the
ubiquity of the

Internet allows more compan
ies to operate on a

common platform without heavy
investment in

closed
information networks such as EDI
.
Knowledge Management (KM) is
concerned with the creation, storage, dissemination, and application of organizational
knowledge. Successful KM rests upon

an organization possessing a supportive culture
characterized by high trust and the ready sharing of needed information, sufficient
technological sophistication, and appropriate attitudes and motivation towards organizational
success . To achieve success
at SCM, an organization must possess

and share

knowledge
about many different facets of this process. The knowledge sources are both internal to the
organization (e.g., knowledge of the whereabouts of subassemblies, knowledge of sources of
manufacturing de
lays) and external to the organization (e.g., knowledge of the final customer's
expectations, knowledge of where en
-
route components are and when they are expected to
arrive at their destinations). Lack of knowledge sharing between members of the supply ch
ain
has been shown to significantly affect overall performance. KM can enhance the degree of
success of existing SCM efforts as well as increase the likelihood of success of new SCM
undertakings.


6.0
Quick Response

QR is a management concept created to in
crease consumer satisfaction and survive
increasing competition from new competitors. It intends to shorten the lead time from receiving
an order to delivery of the products and increase the cash flow.


The QR (Quick Response) system, a production and dist
ribution system for quick response to
the market, was developed for the U.S. textile industry to survive the global competition with
low
-
cost foreign companies.

QR was created from a project to improve the supply chain
management of the daily necessities i
ndustry such as the textile industry and ECR (efficient
consumer response) concept was created by the processed food distribution industry. Both
concepts were developed from the standpoint of increasing consumer satisfaction

and as a
mean to survive agains
t certain
types of competitors that producer
-
retailer alliances call
discounters and category killers. These concepts intend to shorten lead times from order
receipt to delivery, minimize unsold inventory by holding minimum inventory levels, and
increase c
ash flow.

QRM extends basic principles of time
-
based competition while including these new aspects
[6]
:



Singular focus on lead time reduction



Focus on manufacturing
enterprises



Clarification of the misunderstanding and misconceptions managers have about how
to apply time
-
based strategies



Companywide approach reaching beyond shop floor to other areas such as office
operations and the supply chain



Use of cellular organi
zation structure throughout the business with more holistic and
flexible cells



Inclusion of basic principles of systems dynamics to provide insight on how to best
reorganize an enterprise to achieve quick response



New material planning and control approach

(POLCA)



Specific QRM principles on how to rethink manufacturing process and equipment
decisions



Novel performance measure



Focus on implementation and sustainability



Manufacturing Critical
-
path Time (MCT) metric to measure lead times
.



7.0
JUST
-
IN
-
TIME

(
JIT
)


Just
-
in
-
time

(
JIT
) is an inventory strategy that strives to improve a business's return on
investment by reducing in
-
process inventory and associated carrying costs. Just In Time
production method is also called the Toyota Production System. To meet
JIT objectives, the
process relies on signals between different points in the process, which tell production when to
make the next part. Implemented correctly, JIT focuses on continuous improvement and can
improve a manufacturing organization's return on i
nvestment, quality, and efficiency. To
achieve continuous improvement key areas of focus could be flow, employee involvement and
quality. Quick notice that stock depletion requires personnel to order new stock is critical to the
inventory reduction at the
center of JIT. This saves warehouse space and costs. However, the
complete mechanism for making this work is often misunderstood.

For instance, its effective application cannot be independent of other key components of a lean
manufacturing system or it can

"...end up with the opposite of the desired result." In recent
years manufacturers have continued to try to hone forecasting methods (such as applying a
trailing 13 week average as a better predictor for JIT planning, however some research
demonstrates th
at basing JIT on the presumption of stability is inherently flawed.


7.1

BENEFITS


Main benefits of JIT include:



Reduced setup time.

Cutting setup time allows the company to reduce or eliminate
inventory for "changeover" time. The tool used here is SMED

(single
-
minute exchange of
dies).



The flow of goods from warehouse to shelves improves.

Small or individual piece lot sizes
reduce lot delay inventories, which simplifies inventory flow and its management.



Employees with multiple skills are used more effic
iently.

Having employees trained to work
on different parts of the process allows companies to move workers where they are
needed.



Production scheduling and work hour consistency synchronized with demand.

If there is no
demand for a product at the time, it

is not made. This saves the company money, either by
not having to pay workers overtime or by having them focus on other work or participate in
training.



Increased emphasis on supplier relationships.

A company without inventory does not want
a supply syst
em problem that creates a part shortage. This makes supplier relationships
extremely important.



Supplies come in at regular intervals throughout the production day.

Supply is
synchronized with production demand and the optimal amount of inventory is on han
d at
any time. When parts move directly from the truck to the point of assembly, the need for
storage facilities is reduced.



8.0

LEAN SUPPLY CHAIN MANAGEMENT

Lean supply chain management is not exclusively for those companies who manufacture
products,
but by businesses who want to streamline their processes by eliminating waste and
non
-
value added activities. Companies have a number of areas in their supply chain where
waste can be identified as time, costs or inventory. To create a leaner supply chain
companies
must examine each area of the supply chain.


Understanding the difference between value and waste and value
-
added and non
-
value
-
added
processes is critical to understanding lean. Sometimes it is not easy to discern the difference
when looking at
an entire supply chain. The best way is to look at the components of the supply
chain and apply lean thinking to each one and determine how to link the processes to reduce
waste.


8.1
Creating Value


Lean principles focus on creating value by:


Specifying value from the perspective of the end customer

Determining a value system by:

Identifying all of the steps required to create value

Mapping the value stream

Challenging every step by asking why five times

Lining up value, creating steps so
they occur in rapid sequence

Creating flow with capable, available, and adequate processes

Pulling materials, parts, products, and information from customers

Continuously improving to reduce and eliminate waste


The value stream consists of the value
-
addin
g activities required to design, order, and provide
a product from concept to launch, order to delivery, and raw materials to customers. To
develop a value stream map for a product, you select a product family and collect process
information. Then, you map

the steps in sequence and by information flows; this is called a
current
-
state map. The current
-
state map provides a clear picture of the processing steps and
information flow for the process as it exists today. Next, you search the map for improvement
op
portunities using the concepts of lean, and create a future
-
state map. This will portray a
vision of the future for the process or supply chain you are creating. This future
-
state map
helps you to visualize the roadmap to get from the current state to the
future state.


Mapping the value stream for the supply chain is a similar process. However, the current
-
state
map includes product flow, transportation links, defects and delivery time and steps, and
information flow. After creating the current
-
state map
for the supply chain's value stream,
supply chain partners should scrutinize it for bottlenecks, waste, and process improvements.
They should use what they discover to create future
-
state maps for the supply chain. An ideal
-
state map can also be created th
at provides a vision of how the supply chain could look if
perfect integration of all components were to occur. This is in effect an entitlement map for the
supply chain process.


Here's how it works: A current
-
state map might indicate that flow within fac
ilities is well defined,
but that transportation methods between facilities is creating excess inventory and is not cost
effective. The current state map may also show a weakness in the information flow that is not
adding value to the process. The future
-
s
tate map should create flow between facilities,
leveling pull within each facility, and eliminating waste. The method for leveling pull might be to
install frequent transport runs or milk runs. Information flow could be improved by installing a
Web
-
based p
rocess to allow real
-
time flow of information between all supply chain partners as
demand changes. The ideal
-
state map of this supply chain might have a greatly compressed
value system with relocated operations and short transportation deliveries.


9
.0
BENCHMARKING



Benchmarking

is the process of comparing one's business processes and performance metrics
to industry bests and/or best practices from other industries. Dimensions typically measured
are quality, time and cost. Improvements from learning mea
n doing things better, faster, and
cheaper. It involves management identifying the best firms in their industry, or any other
industry where similar processes exist, and comparing the results and processes of those
studied to one's own results and processe
s to learn how well the targets perform and, more
importantly, how they do it.

The term benchmarking was first used by cobblers to measure
people's feet for shoes. They would place someone's foot on a "bench" and mark it out to make
the pattern for the sho
es. Benchmarking is most used to measure performance using a specific
indicator (cost per unit of measure, productivity per unit of measure, cycle time of x per unit of
measure or defects per unit of measure) resulting in a metric of performance that is th
en
compared to others.


Also referred to as "best practice benchmarking" or "process benchmarking", it is a process
used in management and particularly strategic management, in which organizations evaluate
various aspects of their processes in relation to
best practice companies' processes, usually
within a peer group defined for the purposes of comparison. This then allows organizations to
develop plans on how to make improvements or adapt specific best practices, usually with the
aim of increasing some as
pect of performance. Benchmarking may be a one
-
off event, but is
often treated as a continuous process in which organizations continually seek to improve their
practices.


9
.1
TYPES



Process benchmarking

-

the initiating firm focuses its observation and investigation of
business processes with a goal of identifying and observing the best practices from one or
more benchmark firms. Activity analysis will be required where the objective is to
benchmark cost

and efficiency; increasingly applied to back
-
office processes where
outsourcing may be a consideration.



Financial benchmarking

-

performing a financial analysis and comparing the results in an
effort to assess your overall competitiveness and productivity
.



Benchmarking from an investor perspective
-

extending the benchmarking universe to
also compare to peer companies that can be considered alternative investment
opportunities from the perspective of an investor.



Performance benchmarking

-

allows the initia
tor firm to assess their competitive position
by comparing products and services with those of target firms.



Product benchmarking

-

the process of designing new products or upgrades to current
ones. This process can sometimes involve reverse engineering wh
ich is taking apart
competitors products to find strengths and weaknesses.



Strategic benchmarking

-

involves observing how others compete. This type is usually
not industry specific, meaning it is best to look at other industries.



Functional benchmarking

-

a company will focus its benchmarking on a single function to
improve the operation of that particular function. Complex functions such as Human
Resources, Finance and Accounting and Information and Communication Technology are
unlikely to be directly com
parable in cost and efficiency terms and may need to be
disaggregated into processes to make valid comparison.



Best
-
in
-
class benchmarking

-

involves studying the leading competitor or the company
that best carries out a specific function.



Operational bench
marking

-

embraces everything from staffing and productivity to office
flow and analysis of procedures performed



Energy benchmarking

-

developing an accurate model of a building's energy
consumption with the purpose of measuring reductions in usage.


10.0

ENTERPRISE RESOURCE PLANNING


Enterprise resource planning

(
ERP
) integrates internal and external management information
across an entire organization, embracing
finance
/
accounting
, manufacturing, sales and service,
etc. ERP systems automate this activity with an integrated software application. Its purpose is
to facilitate the flow of information betwee
n all business functions inside the boundaries of the
organization and manage the connections to outside stakeholders.

ERP systems can run on a variety of hardware and network configurations, typically employing
a database to store data.


ERP systems typ
ically include the following characteristics:



An integrated system that operates in (next to) real time, without relying on periodic
updates.



A common
database that

supports all applications.



A consistent look and feel throughout each module.



Installation
of the system without elaborate application/data integration by the
Information Technology (IT) department.




10
.1
Advantages


The fundamental advantage of ERP is that integrating the myriad processes by which
businesses operate saves time and expense.
Decisions can be quicker and with fewer errors.
Data becomes v
isible across the organization.

Tasks that benefit from this integration include:



Sales forecasting, which allows inventory optimization



Order tracking, from acceptance through fulfillment



Reve
nue tracking, from
invoice

through cash receipt



Matching
purchase orders

(what was ordered), inventory receipts (what arriv
ed), and
costing

(what the vendor invoiced)

ERP sy
stems centralize business data.

Benefits of this include:



Eliminates synchronizing changes between multiple systems

consolidation of
finance,
marketing and sales, human resource, and manufacturing applications



Enables standard product naming/coding.



Provides comprehensive enterprise view (no "islands of information"). Makes real

time information available to management anywhere, anytime to make
proper
decisions.



Protects sensitive data by consolidating multiple security systems into a single
structure.


10.2
Disadvantages



Customization is problematic.



Re

engineering business processes to fit the ERP system may damage
competitiveness and/or diver
t focus from other critical activities



ERP can cost more than less integrated and/or less comprehensive solutions.



High switching costs increase vendor negotiating power vis a vis support,
maintenance and upgrade expenses.



Overcoming resistance to sharing
sensitive information between departments can
divert management attention.



Integration of truly independent businesses can create unnecessary dependencies.



Extensive training requirements take resources from daily operations.


11.0
ELECTRONIC DATA INTERCHA
NGE (EDI)



EDI
is the structured transmission of data between organizations by electronic means. It is
used to transfer electronic documents or business data from one computer system to another
computer system, i.e. from one trading partner to another
trading partner without human
intervention.


It is more than mere e
-
mail; for instance, organizations might replace bills of lading and even
cheques with appropriate EDI messages. It also refers specifically to a family of standards.


In 1996, the National Institute of Standards and Technology defined electronic data
interchange as "the computer
-
to
-
computer interchange of strictly formatted messages that
represent documents other than monetary instruments. EDI implies a sequence of mess
ages
between two parties, either of whom may serve as originator or recipient. The formatted data
representing the documents may be transmitted from originator to recipient via
telecommunications or physically transported on electronic storage media." It d
istinguishes
mere electronic communication or data exchange, specifying that "in EDI, the usual processing
of received messages is by computer only. Human intervention in the processing of a received
message is typically intended only for error conditions,

for quality review, and for special
situations. For example, the transmission of binary or textual data is not EDI as defined here
unless the data are treated as one or more data elements of an EDI message and are not
normally intended for human interpret
ation as part of online data processing." [1]


EDI can be formally defined as the transfer of structured data, by agreed message standards,
from one computer system to another without human intervention.


12
.0

RADIO
-
FREQUENCY IDENTIFICATION

(
RFID
)

Supply chain management objective is to increase the long
-
term performance of individual
companies and the overall supply chain by maximizing customer value
and

minimizing
costs. RFID is a technology with unique characteristics that make it suitable
to

enh
ance
data collection processes along the supply chain. EPC Global, the standards body sets the
standards for how basic product information is encoded in the RFID chips. The vision that
drives the developments of standards is the universal unique identifica
tion of individual
items. The unique number, called EPC (electronic product code) is encoded in a Radio
Frequency Identification (RFID) tag. There are three types of RFID tags, all of which can
either be read
-
write or read only.



Passive Tags
-

simply stor
e data and draw power from a reader whose electromagnetic
wave induces a current in the tag’s antenna for short
-
range communication (up to 10 m).



Semi
-
passive Tags
-

use an integral battery to run the chip’s circuitry but draw power from
the reader to com
municate.



Active Tags
-

are capable of communicating over greater distances (up to 100m) but are
currently far more expensive.

The benefit of an EPC code is primarily derived from the ability to automatically pin
-
point
the exact location of goods and doc
uments anywhere within an extended enterprise. Such
ability leads to the following benefits:

• Enhance supply
-
chain control.

As the location of a part can be identified at every transfer point with accuracy, the whole
supply
-
chain can be controlled wit
h close to 100% accuracy.

• Security and authentication.

A RFID tag can be written with an identifier chosen by the enterprise. This unique identifier
can be used to authenticate a part or a document. The RFID technology also supports
encryption and oth
er security models so that a tag cannot be easily duplicated or forged.

• Enhanced customer service.

The RFID technology can promote customer service by allowing faster check
-
outs,
returns, and personalization of service.

RFID will have a significant im
pact on every facet of supply chain management

from the
simple tasks, such as moving goods through loading docks, to the complex, such as
managing terabytes of data as information about goods on hand is collected in real time. It
has a potential to dramati
cally improve supply chain by reducing costs, inventory levels,
lead times, stock outs and shrinkage rates; increasing throughput, quality, manufacturing
flexibility, inventory visibility, inventory record accuracy, order accuracy, customer service,
and th
e collaboration among supply chain members.

The automatic identification of products with RFID in the warehousing and distribution
centre environments has a consequence: increased visibility and accuracy of the
inventory. This increases the warehousing e
fficiency and order accuracy. At the same time
it reduces shrinkage, stock outs and inventory levels. The increased warehousing
efficiency has as a consequence a reduction in the operation costs, which translates into
increased profits and also a reduction

in lead times. Reduced lead times means increased
customer service as well as decreased inventories along the supply chain. Ultimately,
reduced inventories increase ROI.

The use of RFID systems to track asset provide a distinctive set of benefits. RFID t
ags
enable an increased visibility and accuracy of the asset pool. This visibility and accuracy
impacts six main areas: operating costs, shrinkage, lead times, inventory visibility and
accuracy, customer service and integration among parents. RFID streamli
ne the
management of assets (such as machinery or containers) and increase the efficiency by
reducing the equipment needed or reducing labour, thus translating into higher profits.
Reduced assets shrinkage, increase ROI. Lead times (total cycle time) are r
educed with
the increased efficiency to handle the assets the automatic identification of products inside
the store would increase the inventory visibility and its accuracy.


12
.1
BENEFITS


Asset Tracking



It's no surprise that asset tracking is one of
the most common uses of RFID. Companies can
put RFID tags on assets that are lost or stolen often, that are underutilized or that are just hard
to locate at the time they are needed. Just about every type of RFID system is used for asset
management. NYK Lo
gistics, a third
-
party logistics provider based in Secaucus, N.J., needed
to track containers at its Long Beach, Calif., distribution center. It chose a real
-
time locating
system that uses active RFID beacons to locate container to within 10 feet.


Manufac
turing



It

has been used in manufacturing plants for more than a decade. It's used to track parts and
work in process and to reduce defects, increase throughput and manage the production of

different versions of the same
product


.


Supply
Chain Management



RFID technology has been used in closed loop supply chains or to automate parts of the
supply chain within
a company's control for years.
As standards emerge, companies are
increasingly
turning to RFID to track shipments among supply chain partners

.


Retailing



Retailers such as Best Buy, Metro, Target, Tesco and Wal
-
Mart are in the forefront of RFID
adoption. These retailers are currently focused on improving supply chai
n efficiency and
making sure product is on the shelf when customers want to buy it

.


Payment Systems



RFID is all the rage in the supply chain world, but the technology is also catching on as a
convenient paymen
t mechanism. One of the most popular uses of RFID today is to pay for
road tolls without stopping. These active systems have caught on in many countries, and quick
service restaurants are experimenting with using the same active RFID tags to

pay for meals
at
drive
-
through


windows.



Security and Access Control



RFID has long been used as an electronic key to control who has access to office buildings or
areas within office buildings. The first access control systems used low
-
frequency RFID tags.

Recently, vendors have introduced 13.56 MHz systems that offer longer read range. The
advantage of RFID is it is convenient (an employee can hold up a badge to unlock a door,
rather than looking for a key or swiping a magnetic stripe card) and because the
re is no contact
between the card and reader, there is less wear and tear, and therefore less maintenance.



As RFID technology evolves and becomes less expensive and more robust, it's likely that
companies and RFID vendors will develop many new applicatio
ns to solve common and unique
business problem
.


13
.0
GLOBAL SUPPLY CHAIN MANAGEMENT


With increased globalization and offshore sourcing, global supply chain management is
becoming an important issue for many businesses. Like traditional, supply chain
management,
the underlying factors behind the trend are reducing the costs of procurement and decreasing
the risks related to purchasing activities. The big difference is that global supply chain
management involves a company's worldwide interests and supp
lier
s rather than simply a local
or national orientation.
Because global supply chain management usually involves a plethora of
countries, it also usually comes with a plethora of new difficulties that need to be dealt with
appropriately. One that companie
s need to consider is the overall costs. While local labor costs
may be significantly lower, companies must also focus on the costs of space, tariffs, and other
expenses related to doing business overseas. Additionally, companies need to factor in the
exch
ange rate. Obviously, companies must do their research and give serious consideration to
all of these different elements as part of their global supply management approach.


Time is another big issue that should be addressed when dealing with global suppl
y chain
management. The productivity of the overseas employees and the extended shipping times
can either positively or negatively affect the company's lead time, but either way these times
need to be figured into the overall procurement plan. Other factor
s can also come into play
here as well. For example, the weather conditions on one side of the world often vary greatly
from those on the other and can impact production and shipping dramatically. Also, customs
clearance time and other governmental red tap
e can add further delays that need to be
planned for and

figured into the big picture.
Besides contemplating these issues, a business
attempting to manage its global supply chain must also ask itself a number of other serious
questions. First, the company
needs to make decisions about its overall outsourcing plan. For
whatever reason, businesses may desire to keep some aspects of supply chain closer to
home. However, these reasons are not quite as important as other countries advance
technologically. For ex
ample, some parts of India have now become centers for high
-
tech
outsourced services which may once have been done in
-
house only out of necessity. Not only
are provided to companies by highly qualified, overseas workers, but they are being done at a
fracti
on of the price they could be done in the United States or any other Western country

.


Another issue that must be incorporated into a global supply chain management strategy is
supplier selection. Comparing v
endor bids from within the company's parent
-
country can be
difficult enough but comparing bids from an array of global suppliers can be even more
complex. How to make these choices is one of the first decisions companies must make, and it
should be a decis
ion firmly based on research. Too often companies jump on the lowest price
instead of taking the time to factor in all of the other elements, including those related to money
and time which were discussed above. Additionally, companies must make decisions
about the
number of suppliers to use. Fewer supplies may be easier to manage but could also lead to
potential problems if one vendor is unable to deliver as expected or if one vendor tries to
leverage its supply power to obtain price concessions

.


Finally, companies who choose to ship their manufacturing overseas may have to face some
additional considerations as well. Questions regarding the number of plants that are needed,
as well as the locations for those plants can
pose difficult logistical problems for companies.
However, it often helps to examine these issues in terms of the global supply chain. For
example, if a business uses a number of vendors around Bangalore, India than it may make
sense to locate the manufact
uring plant that would utilize those supplies in or around
Bangalore as well. Not only will this provide lower employee costs, but overall shipping and
tariff expenses should also be reduced. This would then save the company money
.


14
.0
CONCLUSION


Globalization and the advancement in IT has
shrunken the world into a single market where the
customers itself is getting internationalized or rather globalized. The increasing demands and
expectations of the customers make the market highly competitive wh
ich pushes the
companies into a highly uncertain environment where survival is very difficult and at a higher
cost. For an effective and efficient performance in

all aspects the companies need
s to
be
perfect in their functions enabling them to provide pro
ducts and services to the needed. For this
the companies should
go beyond their conventional
supply chain management systems.
The
strategic and technological innovations in supply chain will impact on how organizations buy
and sell in the future. However c
lear 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.

The
SCM applicatio
n is getting advanced day by day with the aid of internet various softwares
developed for particular supply operation needs. Companies must utilize these

new breed
s

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.









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