What is a Supply Chain?

In its broadest sense, supply chain refers to the way that the material flows through different organizations, starting with raw materials and ending with finished products delivered to the ultimate consumer. A supply chain is a sequence of suppliers, transporters, warehouses, manufacturers, wholesalers/ distributors, retail outlets and final customers. Different companies may have different supply chains due to the nature of their operations and whether they are primarily a manufacturing operation or service operation. Exhibit 1.1a illustrates a typical supply chain for a manufacturing organization and exhibit 1.1b illustrates a typical supply chain for a service organization.

Exhibit 1.1a: Supply Chain for a Manufacturing Organization

Supplier A

Supplier B

Storage

Mfg

Storage

Distribu tor

Retailer

Customer

Supplier C

Exhibit 1.1b: Supply Chain for a Service Organization

Supplier A

Storage

Service

Customer

Supplier B

A large company will have several supply chains. In a multi-divisional company with many product groups, there could be many different supply chains. For example, large companies such as Procter and Gamble or General Electric may use 50 to 100 different supply chains to bring their products to the market. There has been a great deal of interest recently in industry and academic in the subject of supply chain management. The function of SCM is to plan, organize, coordinate and control all supply chain activities.

Broad classification of a supply chain:

Parts of an SC Upstream supply chain

Description This part of supply chain is mainly concerned with the procurement of raw materials. It includes suppliers that could be manufacturers themselves.

Major activities Purchasing and shipping

Internal supply chain

This part starts from the time the raw material comes in the organization and continues till it gets transformed into finished goods and sends for distribution.

Material handling, inventory management, manufacturing and quality control.

Downstream supply chain

This part is mainly concerned with the processes involved in delivering the finished products from the internal

Packaging, warehousing and shipping. For these activities, many wholesalers and distributors are involved.

supply chain to the final customers

Types of supply chains:

The type of supply chain depends upon the nature of the company in question. The complexity of the supply chain is also attributed to the processes of the company in question. Following are the types of supply chain s that are generally found in businesses.

1. Integrated made-to-stock supply chain: the integrated made-to-stock model meets customer demand in real time. In this model, finished goods are stocked in the inventory and once a demand occurs, production restocks the goods. Demand is tracked in real time and an information system is used to modify the production schedules. Information system used here are fully integrated enterprise systems.

2. Continuous replenishment supply chain: In the continuous replenishment supply chain model, inventory is constantly replenished by continuously interacting with suppliers. Real time information is required regarding demand changes so that the desired replenishment schedules can me maintained. Again, at a larger level, the use of a real time IT system is a must in this type of model.

3. Build-to-order supply chain: as per the build-to-order supply chain model, processing customer orders begins as soon as they are received from the customers. Efficient management of spare parts, inventory and other suppliers is a must here. IT can be of high importance here in implementing for e.g. The just in time (JIT) approach or electronic data interchange (EDI)

4. Channel assembly supply chain: The channel assembly supply chain model is an improvement to build-to-order model. The parts of the product are assembled as the product moves through the distribution channel. A 3PL (third party logistics) firm accomplishes a part of an order. In the channel assembly model, almost no inventory is maintained. Customer orders come to terms when all items are placed together for delivery.

What is Supply Chain Management?

The Council of Logistics Management, USA has defined SCM as follows: Supply chain management encompasses the planning and management of all the activities involved in sourcing and procurement, conversion and all the logistic management activities. It also includes coordination and collaboration with the channel partners, intermediaries, third party service providers and customers. In essence SCM integrates supply and demand management with and across companies. 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. Supply chain management involves coordinating and integrating these flows both within and among companies. It is said that the ultimate goal of any effective supply chain management system is to reduce inventory (with the assumption that products are available when needed). 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. Supply chain management flows can be divided into three main flows:

Product/ Service flow Information flow Finance flow

RM- Supplier

Manufacturer

Distributors

Retailers

Customers

The product flow includes the movement of goods from a supplier to a customer, as well as any customer returns or service needs. The information flow involves transmitting orders and updating the status of delivery. The financial flow consists of credit terms, payment schedules, and consignment and title ownership arrangements. There are two main types of SCM software: planning applications and execution applications. Planning applications use advanced algorithms to determine the best way to fill an order. Execution applications track the physical status of goods, the management of materials, and financial information involving all parties. Some SCM applications are based on open data models that support the sharing of data both inside and outside the enterprise (this is called the extended enterprise, and includes key suppliers, manufacturers, and end customers of a specific company). This shared data may reside in diverse database systems, or data warehouses, at several different sites and companies. By sharing this data "upstream" (with a company's suppliers) and "downstream" (with a company's clients), SCM applications have the potential to improve the time-to-market of products, reduce costs, and allow all parties in the supply chain to better manage current resources and plan for future needs. Increasing numbers of companies are turning to Web sites and Web-based applications as part of the SCM solution. A number of major Web sites offer e-procurement marketplaces where manufacturers can trade and even make auction bids with suppliers. There are essentially three goals of SCM: To reduce inventory,

 To increase the speed of transactions with real-time data exchange, To increase revenue by satisfying customer demands more efficiently.

Supply chain management is the integration of various activities encompassed by the supply chain through improved supply chain relationships to achieve a sustainable competitive advantage. The supply chain encompasses all activities associated with the flow and transformation of goods from the raw materials stage through to the end users, as well as the associated information flows. Materials and the information flow both up and down the supply chain. The supply chain includes systems management, operations and assembly, purchasing, production scheduling, order processing, inventory management, transportation, warehousing and customer service. Supply chains are essentially a series of linked suppliers and customers; every customer is in turn a supplier to the next downstream organizations until a finished product reaches the ultimate end user.

Decision variables in managing supply chain:

1. Location: Its important to know where production facilities, stocking points and sourcing points are located; these determine the paths along which goods will flow. The organization should keep the stocking points close to production locations. This will help to reduce the wastage in the production and also inventory is available in least time. The organization should also select the sourcing points which are near to the organization this helps to reduce the carrying cost. A basic trade-off here is whether to centralized to gain economies of scale or decentralized to become more responsive by being closer to the customer. Companies must also consider the local area in which facility may be situated.

2. Production: an organization must decide which products to create at which plants, which suppliers will service those plant, which plants will serve as specific distribution center and how goods will reach the final customers. These decisions have a big impact on revenue, cost and customer service. Keep the production facilities near to the supplier this will help to reduce the carrying cost from the supplier. This will also help in reducing the inventory, also helps in reducing lead time and the product reaches faster to the market.

3. Inventory: Each link in the supply chain has to keep certain inventory of raw material, parts, subassemblies and other goods on hand as a buffer against uncertainties and unpredictabilitys. Shutting down an assembly plant because an expected part shipment dint arrives is expensive. But inventory costs money too, so its important to manage deployment strategies, determine efficient order quantities and reorder points, and set safety stock levels. Inventory has a direct

cost impact on a supply chain and it has a huge on responsiveness. In order to maintain the efficient inventory the organization should accurately determine following element:

Accurate demand forecasting. Set safety stick levels. Set reorder points Determine the lead time. Determine the level of product availability Determine the seasonal inventory.

Inventory also has a significant impact on the material flow time in a supply chain. Material flow time is the time that elapses between the point at which the material enters the supply chain to the point at which it exits. Another important area where inventory has a significant impact is throughput, the rate at which sales to the end customer occur. If the inventory is represented by I, flow time by T and throughput by R, the three can be related using Littles Law as follow: I = RT

For example, if the flow time of an auto assembly is 10 hours and throughput is 60 units an hour, Littles Law tells us that inventory is 60*10= 600 units. If we are able to reduce inventory to 300 units while holding throughput constant we would reduce our flow time by 5 hours (300/60). In this relation inventory and through must be in same relation. The logical conclusion here is that inventory and flow time are synonymous in a supply chain,

4. Transportation: how do materials, parts and products get from one link in the supply chain to the next? Choosing the best way to transport goods often involves training of the shipping cost against the indirect cost of inventory. For example, shipping by air is generally fast and reliable. Shipping by sea or rail will likely be cheaper especially for bulky goods and large quantity, but slower and less reliable. So if you ship by sea or rail you have to plan further in advance and keep larger inventory than you do if u ship by air. Transportation has an impact on both the responsiveness and efficiency. Faster transportation allows supply chain to be more responsive but reduces its efficiency. The type of transportation company uses also affects the inventory and facility location in the supply chain. Dell, for example uses air transportation from Asia because doing so allows company to lower the level of inventory it holds. Clearly such a practice increases responsiveness but decreases transportation efficiency because it is more costly than transporting parts by ship.

5. Information: Information could be overlooked as a major driver in supply chain as it doesnt have physical structure. Information flow is the heart of supply chain. Information serves as the connection between various stages of supply chain allow them to coordinate their action and increase the supply chain profitability. It is also useful for the daily operations in the company. For example, warehouse management system uses information to give the warehouses inventory visibility. The company can then use this information to determine whether new orders to be filled.

Helps reduce variability in the supply chain. Helps improve forecast Helps coordination Better customer service Reduces lead time Reduces inventory.

Decision Phases in a Supply Chain

The three decision phases in a supply chain are: 1. Supply chain strategy or design 2. Supply chain planning and 3. Supply chain operation.

These three phases are briefly described in the following section. 1. Supply Chain Strategy or Design: The Company decides how to structure the supply chain during this phase. The chain's configuration and the processes each stage will perform are decided. Strategic or long-range decisions made by companies include (i) The location and capacities of production and warehousing facilities, (ii) Products to be manufactured or stored at various locations, (iii) Modes of transportation to be made available along different shipping legs and (iv) Type of information system to be utilized. The company's strategic objectives must be supported by its supply chain configuration. For instance, a company's decisions regarding the location and capacity of its manufacturing facilities, warehouses and supply sources are all supply ch ain desi g n or strategic decisions. Since these decisions are made for the long term, they are very expensive to be chan ged in the short term. Hence companies need to take into account uncertainty in anticipated market conditions over the next few years bef ore they make supply chain design decisions.

2. Supply Chain Planning: In this phase, companies define a set of operating policies that govern short-term operations. The configuration of supply chain determined in the previous phase establishes constraints within which planning must be carried out. The planning phase starts with a forecast for the coming year of demand in different markets. Supply chain planning includes decisions regarding the following. Which market to be served from which locations? The planned build up of inventories The subcontracting of manufacturing. The replenishment and inventory policies to be followed. Policies regarding back up locations in case of a stock out and The timing and size of marketing promotions.

Planning establishes parameters within which a supply chain will function over a specified period of time. However it must be ensured that planning decisions consider the uncertainty in demand, exchange rates and competition over the planning horizon.

3. Supply Chain Operations: Durin g this phase, companies make decisions for the time horizon (weekly or daily) re g ardin g individual customer orders. At this stage, the supply chain configuration is fixed and the plannin g policies already defined. The supply chain operation aims at implementing the operatin g policies in the best possible manner. Various activities involved in this phase are : (i) Allocatin g individual orders to inventory or production, (ii) Setting dates for fulfillin g orders, (iii) Generating pick lists at a ware house, (iv) Allocating an order to a particular shipping mode or shipment, (v) Getting delivery schedules of trucks and (vi) Placing replenishment orders. Because operational decisions are made in the short term, there is often less uncertainty about demand information.

The design, planning and operation of a supply chain strongly affect the overall profitability and success of a firm.

Difference between Supply Chain Management and Logistics:

Logistics management- Boundaries and Relationships: Logistics management activities typically includes inbound and outbound transportation management, fleet management, warehousing, material handling, order fulfillment, logistic network design, inventory management, supply/demand planning, and management of third party service logistics services providers. To varying degrees, the logistic functions also include sourcing and procurement, production planning and scheduling, packaging and assembly, and customer service. It is involved in all levels of planning and execution- strategic, operational and tactical. Logistics management is an integration function, which coordinates and optimizes all logistic activities, as well as integrates logistic activities with other functions including marketing, sales manufacturing, finance, and information technology.

Supply Chain Management- Boundaries and Relationships: Supply chain management is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high- performing business model. It includes all the logistic management activities noted above, as well as manufacturing operations and it drives coordination of processes and activities with and across marketing, sales, product design, finance, and information technology.

LOGISTICS
Narrower concept It is concerned with getting goods and services where they are required and when they are desired. There are 2 flows in logistics: Value flow (i.e. flow of goods and services) Information flow Broader concept

SCM

SCM encompasses all the activities associated with the movement of goods from the raw material stage to the end users. There are 3 flows in SCM: Value flow (i.e. flow of goods and services) Information flow Cash flow

Logistics is mainly concerned with optimizing flows within the organization, i.e. emphasize on Internal Integration.

SCM recognizes that internal integration by itself is not sufficient. So it emphasis on internal integration as well as on external integration (Integration with upstream suppliers and downstream suppliers)

The focus of logistic management is upon the

The focus of SCM is upon the management of

management of resources within the organization. Logistic is essentially a planning orientation and framework that seeks to create a single plan for the flow of product and information through a business. Logistics add value when inventory is correctly positioned to facilitate sales

relationship in order to achieve more profitable outcome for all parties in the chain. SCM builds upon this framework and seeks to achieve linkage and coordination between process of the other entities in the pipeline, e.g. suppliers and customers and organization itself. The best SCM practices when it excels in reducing in operating cost, improve assets productivity and compressing order cycle time.

Digital Business Transformation

The 21st century is witnessing a growing adoption of a new and extensive form of change management referred to as Digital Business Transformation (DBT). The basic premise of DBT involves a complete assessment and reinvention of a firm's overall operation to assure that the benefits of modern information technology are being fully deployed. DBT is about reinventing and positioning business operations, processes, and relationships to fully exploit information technology and to facilitate supply chain collaboration to achieve unprecedented levels of operational excellence. Focusing on information technology, DBT seeks to simultaneously meet the challenges and exploit the inherent opportunities of integrative management, responsiveness, financial sophistication, and globalization. Expanding Internet capabilities provide an information framework that can replace traditional one-to- one, one-to-many, or many-to-one communication with Web-based, simultaneous many-to-many connectivity. The potential exists for all firms participating in a supply chain to simultaneously have access to the same strategic and operational information. The potential of DBT is the synchronized distribution of information and knowledge across the supply chain. In essence, DBT is the forward-looking model for a business that is transitioning from the Industrial Age to the Information Age. Figure 1.4 provides a summary of DBT in the form of key paradigms. The six paradigms speak to the mindset leaders must adopt as they navigate the DBT journey. It should be clear that DBT is not a consulting project or a one-time improvement initiative. It is the process of reinventing a business to digitize operations and formulate extended supply chain collaboration.

The following discussion is based on Donald J. Bowersox, David J. Gloss, and Ralph Drayer, "The Digital Transformation: Technology and Beyond," Supply Chain Management Review(January 2005), pp. 22-29.

Six paradigms seem to frame the challenge of digitally transforming business. We call these paradigms the six Fs of going digital they speak to the mind set that leaders must adopt as they begin to reconfigure every aspect of their organization to contribute economic value

1. Fact-based management:- Fact-based management is a commitment to- even an obsession withdeveloping precise information on every facet of what the organization does and needs to do. Fact-based management provides answers to questions such as, why do we provide this service? What value does it add to customers? What are our precise performance expectations? How exactly do we meet and measure this expectation? Facts are not averages. Facts deal with specific performance, results in terms of specific customers. Managers must learn to understand and rapidly act on these results at the specific product level and customer purchase location.

2. Flexible: Driven by facts, successful firms demonstrate an inherent ability to rapidly adapt operations to pursue a new course of action. Confronted with a break through opportunity, they are agile enough to make adjustments quickly and commit the resources necessary to capitalize on the opportunity.

3. Focus on cash: A business exists to generate cash. Quarterly or annual earning are not the fuel of long term success. The only meaningful measure at the end of any day, week, month, or a year is the cash balance. As they make the digital transformation, companies must remember that cash pays bills, cash pays salary and wages, and cash pays shareholders dividends. The focus must be cash first, cash second and cash always

4. Fast return on investment (ROI): A business needs to make continuous investment in new products, services, technology, people and facilities. All investments are made with an expectation of financial return. The new mandate, however, is not just high rates of return but of high rate of returns fast. Payback periods need to be short and needs to yield positive returns- which translate to cash.

5. Fungible: Fungible means that business process is modular in design with maximum interchangeability. Modularity allows flexibility in process design and maximum incorporation of the principles of postponement and acceleration. The operational characteristic of agility, flexibility, sustainability, scale, scope, and responsiveness are attributes of fungible organizations.

6. Frugal: Capital investment, cash velocity, and the flat organizational structure with focused human resources are the characteristics of a frugal enterprise. Frugal enterprises are lean in every conceivable way. Overhead is minimal. Operations are focused on cash generations. Lean is an enterprise wide attribute that must permeate every facet of every process. In frugal enterprises, the real benefits are cash and dividends, no fringe benefits or luxurious environments. At the end of the day, employees work for income and owners invest for the dividends with the business success, both constituents will benefit from the enterprises success.

Problems along the supply chain and their IT solutions:

There are a lot of uncertainties and encompassing supply chain. Also, a supply chain continuously pursues to coordinates its activities, units and alliances. These 2 factors are the main problems in an SC. Let us discuss these problems. Some of the uncertainties in supply chain are demand forecast, delivery times and problems with material quality. Some of the coordination problems are lack of connectedness between departments, misinformation or late information. Following are the problems along the supply chain. Poor customer service: the customer does not get what they require at the appropriate time or he receives poor quality of products. High inventory cost: If a company has a high inventory costs and no synchronization between stocks and demand, its product are bound to give higher costs and thus put that business in the bad position.

Loss of revenue: A company has too many non-value-added activities. Extra cost of expediting shipments: If customers orders are not shipped on time or are shipped using costly means, customers would be unhappy and may not remain faithful. Bullwhip effect: If a company has erratic shifts in orders (bullwhip effects) along the supply chain, it is bound to face production and inventory problems. Phantom stock outs: Customers are told that a product is out of stock while in rality it is available. Finding effective solutions to these problems is a must for a company to survive. IT is capable of providing such solutions. Turban et al. (2004) gave some examples of how IT solves recurrent supply chains problems:

IT Tools Artificial Neural Network (ANN)

Supply Chain Problems There is a need to derive meaning from complicated or imprecise data. Anns replace the need to manually build complex formulas. They can also be used to complete complex logistical challenges such as truck routing.

Electronic Data Interchange (EDI) Electronic document management systems

Slow delivery of paper documents.

Repeated process activities due to wrong shipments, poor quality, etc. and accumulated work orders between supply chain processes

Genetic Algorithms Groupware

Need for inventory optimization, scheduling problems etc. Waiting times between chains segments is excessive; Poor coordination, and communication; decline in the value of parts and components that stay too long in storage.

Intelligent systems

Learn about the delays after they occur or learn about them too late.

The Internet and Internet 2

Lack of communication or flow that is too slow; Redundancies in the supply chain, too many purchasing orders, too much packaging and handling.

Intranets and extranets

Waiting times between supply segments is excessive; lack of information or slow flow; decline in the value parts and

components that stay too long in storage. JIT systems High inventory cost and poor workflow due to improper scheduling of materials. Robotics Delays in shipments from warehouses.

Limitations of Existing IT systems: The design of the existing IT systems may impose restrictions on the ability to meet the demands of the supply chain mangers. Extra investment will be required to remove such limitations. These restrictions plainly arise from the departmental design of the IT systems. This is explained below. Departmental Nature of Application Design. The core applications are generally structured in departmental terms, i.e. each application supports business processes used within a department. For example, the warehouse applications will only process a ll transactions for a warehouse; inventory applications will be concerned only with the movement and storage of the materials in the inventory, etc. In this architecture, any single business process that spans multiple departments will be , supported. By a sequence of transactions occurring in multiple discrete applications responsible for the departments involved. Such a sequence cannot be coordinated or automated unless the applications are integrated. A departmental design creates three major hurdles in designing the IT systems for supply chain. I. Lack of Orchestration Ability By definition, supply chain must span multiple departments acting in concert for the various business processes. When the applications are loosely coupled, the supply chain process orchestration will be disjoint and poorly controlled. For example, a goods receipt note in a warehouse receiving application will not automatically be considered for a picklist operation, unless the receiving, the order matching, and the cargo planning functionalities are orchestrated across the various applications. Careful attention needs to be given to ensure that such applications are able to work in a coordinated manner, if they are to play a role in the supply chain management.

II. Lack of a Uniform Data Model

Since a supply chain spans multiple departments, it is necessary to have a standardized data nomenclature across the applications. If the data model differs across the applications, it becomes hard to manage the supply chain. A heterogeneous data model reduces the manager's ability to compare, control and
w il l

validate the health of the supply chain. For example, the Engineering Bill of Materials (BOM) may differ from Production BOM in many companies. It is not a problem for the respective department to manage their workbut it becomes difficult to manage the extended supply chain. To address this problem, IT organization needs to employ methodologies and tools such as Master Data Management to harmonize the data model and ensure a uniform treatment of the data. The supply chain management requires a fair amount of third-party data, i.e. data which is neither owned nor controlled by the enterprise. Getting this data from outside trading partners is difficult because the partner will generally resist sharing this information. This problem is out of scope for IT, and requires negotiations and trust-building initiatives. However, even where such data is available (through Vendormanaged-inventory initiatives with retail stores; or EDT-based collaboration with suppliers), such data is not in a form or definition consistent with the enterprise data model. Before such data can be added to the enterprise databasefor further analysis by the supply chain managerit needs to be harmonized and synchronized with the enterprise data model. Portal technologies or object-oriented technologies could partially address the latter problem. However, doing this requires special technology skills not easily available to the IT organization in a manufacturing company.

Problem of Absent Data Under the departmental structure of applications, the data controlled by each application is the one directly required by the specific transac tions in that department. Supply chain managers are often concerned with the data relating to the overall process. Such data does not fall within any single departmental boundary. This creates an important limitation for managing supply chains. The data required to manage the supply chain does not exist in any application, and must be computed from multiple data points that may be controlled/owned by different applications. Thus, a new set of programs and data structures become necessary to address the needs of supply chain managers. Such programs generally do not exist in the Transaction Engineespecially the loosely coupled core applications. The following example will illustrate this problem:A perishable product is made in a factory, dispatched to a warehouse, and from there it is dispatched to the retail store. In this movement, the finished goods inventory application will create a dispatch note listing the item code, quantity dispatched and the date (optionally, time) of dispatch. The

warehouse receiving application will record the receipt of the item, the quantity and the date (optionally, time) of receipt and will allocate the shelf location. The logistics application will match the inventory to a sales order, and generate a pick list noting the item code, quantity, date (time), carton/crate number and the truck details. On arrival the retail store will accept the shipment, sign the warehouse dispatch note and proceed to make appropriate entries into its own store applications. Suppose, because of the deteriorating road conditions, the supply chain manager of the product is now concerned with the time-to--dispatch and wants to keep it to a minimum. It will be clear that such time-todispatch has not been captured by any application in this sequence. It is not known when the item was actually loaded on the truck and when the truck actually reached the customer. The time of customer receipt may be captured in the retail store application, but that data is no longer available to the supply chain manager, since the store is not controlled by the organization.

Information System Functionality

From its inception, logistics focused on product storage and flow through the supply chain. Information flow and accuracy was often overlooked because it was not viewed as being critical to customers. In addition, information transfer rates were limited to manual processes. There are four reasons why timely and accurate information has become more critical in logistics system design and operations. First, customers perceive information about order status, product availability, delivery tracking, and invoices as a necessary dimension of customer accommodation. Customers demand real-time information. Second, with the goal of reducing total supply chain assets, managers realize that information can be used to reduce inventory and human resource requirements. In particular, requirements planning based on current information can reduce inventory by minimizing demand uncertainty. Third, information increases flexibility with regard to how, when, and where resources may be utilized to gain strategic advantage. Fourth, enhanced information transfer and exchange utilizing the Internet is facilitating collaboration and redefining supply chain relationships: Supply chain information systems (SCIS) are the thread that links logistics activities into an integrated process. The integration builds on four levels of functionality: (1) transaction systems, (2) management control, (3) decision analysis, and (4) strategic planning. Figure 5.1 illustrates logistics activities and decisions at each level of information functionality. As the pyramid shape suggests, management control, decision analysis, and strategic planning enhancements require a strong transaction system foundation.

INFORMATION FUNCTIONALITY

Strategic planning

Strategic alliance formulation Development and refinement of capabilities and opportunities Focused/profitbased customer service analysis

Decision analysis

Vehicle routing and scheduling Inventory levels and management Network/facility and integration Vertical integration vs. third-party/ outsourcing. Financial management Quality measurement Productivity measurement Customer service measurement

Management control

Transaction system

Order management Inventory assignment Order selection

Shipping Customer Pricing and invoicing service measurement Productivity measurement Customer inquiry

A transaction system is characterized by formalized rules, procedures, and standardized communications; a large volume of transactions; and an operational, day-to-day focus. The combination of structured processes and large transaction volume places a major emphasis on information system efficiency. At the most basic level, transaction systems initiate and record individual logistics activities and functions. Typical transaction functionality includes order entry, inventory assignment, order selection, shipping, pricing, invoicing, and customer inquiry-For example, the customer order entry transaction enters a customer request for products into the information system. The order entry transaction initiates a second transaction as inventory is assigned to the order. A third transaction is then direct warehouse operations to accumulate the order. A fourth transaction initiates order shipment to the customer. The final transaction creates the invoice and a corresponding account receivable. Throughout the process, the firm and customer expect realtime information to be available concerning order status. Thus, the customer order performance cycle is completed through a series of information system transactions.

The second SCIS level, management control, focuses on performance measurement and reporting. Performance measurement is necessary to provide feedback regarding supply chain performance and resource utilization. Common performance dimensions include cost, customer service, and productivity, quality, and asset management measures. As an example, specific performance measures include transportation and warehousing cost per hundredweight, inventory turnover, case fill rate, cases per labor hour, and customer service perception. While it is necessary that SCIS report historical system performance, it is also necessary for the system to identify operational exceptions. Exception information is useful to highlight potential customer or operational problems_ For example, proactive SCIS should be capable of identifying future inventory shortages based on forecast requirements and planned inventory. Exception reporting should also identify potential transportation, warehouse, or labor constraints. While some control measures, such as cost, are well defined, other measures, such as service and quality, are less specific. For example, customer service can be measured internally, from the enterprise's perspective, or externally, from the customer's perspective. While internal measures are relatively easy to track, information concerning external measures is more difficult to obtain, since it involves the customer. The third SCIS level, decision analysis, focuses on software tools to assist managers in identifying, evaluating, and comparing strategic and tactical alternatives to improve effectiveness. Typical analyses include supply chain design, inventory management, resource allocation, routing, and segmental profitability. Decision analysis SCIS should ideally include database maintenance, modeling, analysis, and reporting. Like management control, decision analysis may include operational considerations such as vehicle routing and warehouse planning. Decision analysis is also being used to manage customer relationships by determining the trade-offs associated with having satisfied and successful customers. Strategic planning, the final SCIS level, organizes and synthesizes transaction data into a relational database that assists in evaluating various strategies. Essentially, strategic planning focuses on information to evaluate and refine supply chain and logistics strategy. Examples of strategic planning include the desirability of strategic alliances, development and refinement of manufacturing capabilities, and opportunities related to customer responsiveness. The relative shape of Figure 5.2 illustrates SCIS development characteristics and justification. Development and maintenance costs include hardware, software, communications, and human resources. In the past, most systems development focused on improving transaction system efficiency. While these investments originally offered returns in terms of speed and lower operating costs, there are currently fewer improvement opportunities. Most SCIS development and implementation is now focused on enhanced supply chain system integration and more effective decision making.

Comprehensive Information System Integration

A comprehensive SCIS initiates, monitors, assists in decision making, and reports on activities required completing operations and planning. The major system components are: 1) Enterprise Resource Planning (ERP) or legacy system, 2) communication systems, 3) execution systems, 4) planning systems.

1. ERP or legacy systems:

ERP stands for Enterprise Resource Planning. It is a class of software package which aims to integrate all departments and functions across an organization into a single computer system that can serve all those departments particular needs. ERP combines different department systems into a single database; so different departments can easily share information and communicate with each other. Therefore ERP ensures accurate and up-to-date information is fed into Supply Chain Management System for accurate supply chain planning. It integrates all data and processes of an organization into one single and centralized system. These systems comprise of many components of hardware and software, in order to achieve integration from various departments in the organization. It uses a single database to store data for various functions of the organization. ERP is a term originally derived from MRP II (Manufacturing Resource Planning) that followed material requirements planning (MRP). MRP is typically handle the manufacturing process for company and ERP systems handle the logistics, sales and distribution, inventory, shipping, finance, and accounting along with manufacturing. Earlier this integrated system was useful for large organizations only to handle their wide resources, but nowadays use of ERP has changed and is extremely comprehensive, today it can refer to any type of company, small/medium/large. Enterprise Resource Planning is an industry term for the broad set of activities that helps to integrate all the functions of the organization such as manufacturing, supply chain management, financials, projects, human resources and customer relationship management. ERP software applications can be used to manage product planning, purchase, inventory, interacting with suppliers, customer relationship management service, and order tracking. Enterprise Resource Planning software provides a birds eye view to the management to control the business activities, including sales, marketing, dispatch, billing, production management, inventory management, quality management and personal management. Software system can be considered as ERP if providing an organization with functionality for two or more systems. An Ideal ERP consists of following modules Manufacturing: MRP, Production planning, workflow management, quality control, BOM, manufacturing process, etc.

Financial: A/C payable, A/C receivable, fixed asset, General ledger, cash management, work center, chart of account etc. Inventory: GRN, gate pass, Quality check, inventory management, ABC analysis, fast moving items etc. Purchase: Supplier scheduling, order entry, purchase order amendment etc. Sales: Pre-sales activities, post sales activities, CRM, sales and marketing, commission, customer contacts, customer supports etc. HRM: Benefits, attendance, training, recruiting, payroll, appraisal, interview, employee masters, etc Advantages of ERP ERP is software which integrates all functionalities of the organization in a single database. It streamlines all the business processes and gives desired result on a click of a button. Earlier ERP was for big organization due to its cost, but now it is made for SMEs (Small and Medium Enterprises) of different segments.

ERP software incorporates a large amount of industry specific business functionalities which will ensure less customization or sometime no customization (except reports) to make the package suitable to your business operations. Most important advantage of ERP software is integration of all the business solution in a single platform, which reduces unnecessary paper work, documentation, repeated entry, cycle time etc. The software also comes with its framework of upgrades to changing technologies.

In the ERP software business functionalities and operating processes are built into standard software codes, thus it require lesser time to understand process related issue of implementation and gives industry specific best practices. ERP software automates the business processes and also forces its own logic (industry specific) on the business. Verticalization (industry specific) of ERP is increasingly becoming the buzzword across all the ERP vendors. While the other standard solutions may give 55-65% to your business, the same can be as high as 90% with industry specific solutions. Accounting application is another advantage of ERP. It can integrate the costing, profit, and revenue information of sales that are made etc. Other Advantages

Speeding up the whole manufacturing process Better and systematic inventory handling with ABC analysis WIP control Easy project management Accessing the status of the goods on a click of a button fast transmit commodities through online transactions Fastens the creation of reports Reduce paper works and repeated entries Quick processing of information Servicing the customer effectively in time Solving the customer problems quickly Information based decision Better financial reports Better supply chain management Better vendor management Reduce process cycle time

2. Communication systems:
Communication system facilitates flow of information across supply chain. Figure 5.3 illustrates the major communication components required for supply chain operations. Logistics information consist of real time data on company operations and inbound material, production, inventory, customer shipment, and new customer orders. From a supply chain perspective, firms need to make order, shipment, and billing information available to suppliers, financial institutions, carriers, and customers. Various communication technologies:

1. Bar coding and scanning:

Bar codes can be seen on virtually all types of consumer packaged goods today. A bar code is a sequence of parallel bars of various widths with varying amounts of space between the bars. The pattern and spacing of the bars convey information such as letters, numbers and special characters. These bars are optically read by scanning them with a beam of light. The information contained in the bars is read directly into a computer, stored and downloaded into the computer system at a later time. Bar coding can be useful in logistics applications mainly in the order placement and management of office supplies, with positive results. The firm can reduce cash tied up in inventory, require less warehouse space,

reduce manpower requirement and reduce cycle time substantially. Further, by bar coding inbound shipments, the entire materials function can get more accurate accounts of actual receipts. Receiving also can be automated, which further contributes to cycle time reduction and data accuracy. These data can automatically used by the accounts payable department for generating checks and reconciling invoices with purchase orders and receiving. Due to its enormous advantages, the bar code technology is advancing rapidly.

2. Satellite:
Satellite technology allows communication across an expansive geographical area such as a region or even the world. The technology is similar to that of microwave dishes used for home television n areas the reach of cable. It helps in two way communication between corporate headquarters, vehicles and remote operational locations. Satellite communications provides a fast and high volume channel for information movement. Schneider National, a nationwide truck load carrier, uses communication dishes mounted on its trucks to enable 2 way communications between drivers and their dispatchers. Such real time interaction provides up-to-date information regarding location and delivery information. Allowing dispatchers to redirect trucks according to need or congestion. Retail chains also use satellite communication to quickly transmit sales information back to head quarters. Wal Mart uses daily sales figures to drive stores replenishment and to provide input marketing regarding local sales patterns.

3. Intranets and Extranets:

Intranets are networks within a business that use the internet technologies to facilitate corporate communications. It is limited for use only by the users that have the authority to use that network. Companies use intranets for sharing corporate information among their employees. Many applications like HR policies and procedures, information sharing, telephone directories, customer databases, product information, catalogues etc can be shared on corporate intranets. An extranet is a type of inter-organizational information system. They are secured networks that connect the intranets of several business partners. They create powerful inter-organizational communication and collaboration system. It aims at providing a platform for collaboration between suppliers, customers and other business partners. Extranets can be accessed through internet. An extranet uses servers TCP/IP protocols, emails, web browsers, virtual private network (VPN) technology. It is far less costly than proprietary networks.

4. Radio-Frequency Exchange
Radio-frequency data communication (RFDC) technology is used within relatively small areas, such as distribution centers, to facilitate two-way information exchange. A major application is real-time communication with mobile operators such as forklift drivers and order selectors. RFDC allows drivers to have instructions and

priorities updated on a real-time basis instead of using a hard copy of instructions printed hours earlier. Realtime or Wi-Fi transmissions guide work flow, offer increased flexibility and responsiveness, and can improve service using fewer resources. Logistics RFDC applications also include two-way communication for warehouse picking, cycle counts, verification, and label printing. Advanced RFDC capabilities in the form of two-way voice communication are finding their way into logistics warehouse applications. Instead of requiring warehouse operations personnel to interface with a mobile or handheld computer, voice RFDC prompts operators through tasks with audible commands and waits for verbal responses or requests. United Parcel Service uses speech-based RFDC to read zip codes from incoming packages and print routing tickets to guide packages through their sortation facilities. The voice recognition systems are based on keywords and voice patterns of each operator. The primary benefit of voice- based RFDC is an easier operator interface; since keyboard data entry is not required; two hands are available for order picking.

Radio-frequency identification (RFID) is a second form of radio-frequency technology. RFID can be used to identify a container or its contents as it moves through facilities or on transportation equipment. RFID places a coded electronic chip in the container or box. RFID chips can be either active or passive. Active chips continuously emanate radio waves so that product can be located in a warehouse or a retail store, using receivers located throughout the store. Active chip technology is good for locating product in a facility as well as for identifying when it is moving in and out of the facility Passive chips respond only when they are electronically stimulated by having the product pass through a relatively small gateway or portal that has scanners built in. Since the product must be passed through a gateway for passive chips to operate, these can be used only for tracking product movement in, out, and around a facility. With current technology, the cost of active chips (GEN II) is approximately 10 times that of passive chips because of the need for a battery and larger antenna. As the container or box moves through the supply chain, it can be scanned for an identifying code or even for the list of contents. Retailers are beginning to use RFID to allow entire cartloads of merchandise to be scanned simultaneously. WalMart and other major retailers are requiring that their major suppliers place RFID tags on their cases to facilitate processing in distribution warehouses, receipt at stores, and shelf restocking. While it is too early to assess the impact of RFID applications at the retail level, it is anticipated that placing REID tags on cases should reduce distribution, warehouse and retail handling expense and reduce stock outs.

5. EDI
Electronic data interchange (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 messages 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 distinguishes 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 interpretation 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.

6. XML
Extensible Markup Language (XML) is a flexible computer language that facilitates information transfers between a- wide range of applications and is readily interpretable by humans. It was published in 1998 by the World Wide Web Consortium to facilitate information transfer between systems, databases, and Web browsers. Since EDI is very structured, the setup cost and required expertise are relatively high, limiting applications to situations involving high transaction volumes. XML is emerging as the information transfer medium between firms and service providers that do not have transaction volumes to justify EDI. XML facilitates communication by breaking down many information technology barriers that have constrained EDI adoption. A basic XML message consists of three components: the actual information being transmitted, data tags, and a document type definition (DTD). The data tag is a key feature, as it defines the data being transmitted. For example, in a shipment XML, the tag for address would be address and might appear <address>123 Main St.</address>. The tags tell computers what the data between the brackets are and where the data should go in a database or Web page. The use of common terms and the lack of sequencing requirements make XML transactions much easier to use than EDI. The XML DTD tells the computer what document format to refer to when decoding a message. A DTD is essentially a template that maps out a standard form, its tags, and their relation in a database. For

example, there would be separate schema for customer orders, advanced shipping notifications, or transportation documentation. In situations characterized by low volume, XML is superior to EDI for three reasons. First, it is not expensive to install. It is easy to design an application and requires much less time to implement. Second, XML is easy to maintain because it can be easily converted to Hyper Text Markup Language (HTML), the language of Web browsers. This makes it much easier to modify and share data between applications finally; XML is more flexible, allowing for broad applications and quick definition and extension of standards.

3. Executive system:
Enterprise executive systems works in conjunction with the firms ERP to provide specific functionality to support logistics operations. While some ERP systems support functionality, others lack functionality to facilitate warehouse and transportation operations. Selected executive system modules include transportation management system (TMS), warehouse management system (WMS) and yard management system (YMS). Most executive systems are bolted on or integrated into the ERP system to facilitate data exchange.

LOGISTICS INFORMATION SYSTEM

The major purpose for collecting, retaining, and manipulating data within a firm is to make decisions, ranging from strategic to operational, and to facilitate the transactions of the business. More efficient logistics operations are possible from the benefits that timely and comprehensive information can provide within the firm, as well as from the benefits of sharing appropriate information among other channel members. This has led companies to think of information for logistics purposes as a logistics information system. LIS can be represented can be represented as soon in the following figure. The LIS shoukd be comprehensive and capable enough to allow for communication not only between functional areas of the firm (marketing, production, finance, logistics etc) but also between the members of the supply chain (vendors and customers)

LOGISTIC INFORMATION SYSTEM

Internal Finance marketing logistics manufacturing purchasing

External customers Vendors Carriers supply chain partner

OMS

WMS

TMS

1. The Order Management System

The order management subsystem (OMS) manages the initial contact with the customer at the time of product inquiries and order placement. It is the front-end system of the LIS. The OMS communicates with the warehouse management system to check product availability, either from inventories or from the production schedules. This provides information about the location of the product in the supply network, quantity available, and possibly the estimated time for delivery. Once product availability is acceptable to the customer, credit checking may occur whereby the OMS communicates with the company's financial information system to check customer status and verify credit standing. Once the order is accepted, the OMS will allocate the product to the customer order, assign it to a production location, decrement inventory, and when shipping has been confirmed, and prepares an invoice. The OMS does not stand in isolation from the other information systems of the firm. If the customer is to be served effectively, information must be shared. For example, if the OMS is to provide order tracking, the transportation management system will be interrogated. Communication compatibility is essential.

It should be noted that while the discussion has focused on the orders beingreceived by a firm, there is a similar OMS for the purchase orders placed by the company. Whereas a customer-based OMS will maintain data oriented around the firm's customers, the purchase-based OMS will concentrate on the company's vendors, showing their delivery performance ratings, costs and terms of sale, capabilities, availabilities, and financial strength. Vendors are constantly monitored and reports prepared that assist in optimizing vendor selection.

2. The Warehouse Management System

The warehouse management system (WMS) may contain the OMS, or it may be treated as a separate entity within the LIS. The WMS must at least tie back to the OMS so to sales department knows what is available for sale. It is an information subsystem assisting in the management of product flowing through the stored in the facilities of the logistics network. The key element can be identified as 1. Receiving, 2. Put away, 3. Inventory

management, 4. Order processing and retrieving and 5. Shipment preparation. All of these elements will appear in the WMS of a typical distribution warehouse, but some may not be present in the warehouse used primarily for long term storage or those having very high turnover. Receiving- this is the entry or check in point for information into WMS. Product is off loaded from the receiving carrier at the warehouse inbound dock and identified by product code and quantity. Data about the product are entered into the WMS using bar code scanners, radio frequency (RF) data communication terminals, or manual keyboards. Weight, cube, and package configuration of the product are known by matching the product code against an internal product file.

Putaway. The incoming product needs to be temporarily stored within the warehouse. The WMS retains the space layout within the building and the inventory stored in the locations. Based on available space and stock layout rules, the WMS assigns the incoming product to a specific location for later retrieval. If multiple products. Are to be stored in multiple locations on the same trip, the WMS can specify the putaway sequence and route to minimize travel time. The stock level at each affected location is incremented and the inventory location record is adjusted. Inventory management. The WMS monitors the product levels at each stocking location in the warehouse. If inventory levels are under the local control of the warehouse, then the replenishment quantities and timing are suggested according to specified rules. The request for replenishment is transmitted to the purchasing department or directly to vendors or company plants through EDT or the Internet. Order processing and retrieving. Planning for stock retrieval in the warehouse, that is, picking the items requested on an order is perhaps the most valuable aspect of the WMS. Stock retrieval is the most labor intensive and usually the most expensive part of warehouse operations. The WMS, with its internal decision rules, will, upon receiving an order, decompose the order into item groups that require different types of processing and picking. Items will be grouped according to the location where inventory is stored. Some items require picking in small, split case quantities, whereas others are picked in fullcase or pallet-load quantities. Still others may be picked from separate, secured areas of the warehouse. Each area has different picking characteristics to the extent that it is inefficient to simply pick the order in its entirety in one pass through the warehouse. The WMS splits the order judiciously for efficient order picking and schedules the order flow through the various areas of the warehouse so that the items arrive at the shipping dock as a complete order and in the proper sequence with other orders to be loaded onto a truck or railcar for delivery.

In addition, the WMS subdivides the items within an order-picking area among the order pickers to balance picker workload. Then, items assigned to a particular worker are sequenced for picking to minimize distance traveled, bending and fatigue, and picking time. Shipment preparation. Orders are often picked in waves through the warehouse, meaning that from among all orders, a subset will be processed at one time. The size of this order subset and the orders within it are selected based on shipment considerations: Orders for customers located within the same proximity are picked simultaneously to arrive at the shipping dock and truck stall at the same time. Estimates are made of cube and weight of the multiple customer orders to be placed on a truck, container, or rail car. Color-coding the merchandise flowing from the different areas of the warehouse aids in assembling the merchandise common to an order and sequencing it onto the delivery vehicle for most efficient routing. In the case of retail merchandise, price tags may be affixed so that the items may be placed on retail shelves without further handling. Overall, the 1NMS aids managing warehouse operations in the form of labor planning, inventory-level planning, space utilization, and picker routing. The WMS shares information with the OMS and TMS to achieve integrated performance.

Example
A large drug store chain receives weekly orders from several hundred of its retail stores, or about 50 orders per day in a particular warehouse. A local warehouse supplies stores with general merchandise. Pharmaceuticals are supplied from a centralized warehouse. Upon receipt of the orders at company headquarters, the orders are split between the two product categories. Pharmaceutical orders are filled first and shipped to the local warehouse, to be merged with the general merchandise part of the order going to the same store. Then, at the local warehouse, orders are further split into items that are picked from split-case, full-case, bonded (secured), and bulk areas. Since about 8,000 of the 12,000 items stocked in the warehouse require picking from split-case areas, good management of this labor-intensive area is essential. To do this, the portion of the items in the split-case picking area is further subdivided for each order picker. The order picker processes only those items in his or her immediate zone. The picking sequence of the items is established from the routing rules within the WMS.

The WMS controls the timing for the start of picking in all the areas of the warehouse so that the elements of the order arrive at the shipping dock at approximately the same time. Identifying stickers are placed on the cartons and tote boxes so that the complete order may be assembled at the shipping dock for load ing onto a delivery truck that will ultimately contain as many as five separate store orders.

Every time stock replenishment merchandise from vendors is received, information about the incoming

products is then entered into the WMS. The WMS then assigns the product to storage locations and maintains a record of the age of the product to control retrieval sequencing.

3. The Transportation Management System

The transportation management system (TMS) focuses on the inbound and outbound transportation of a firm and is an integral part of the LIS, as shown in Figure 5-6. Like the WMS, it shares information with other LIS components, such as order content, item weight and cube, quantity, promised delivery date, and vendor shipping schedules. Its purpose is to assist in the planning and controlling of the firm's transportation activity this involves (1) mode selection, (2) freight consolidation, (3) routing and scheduling shipments, (4) claims processing, (5) tracking shipments, (6) and freight bill payment and auditing. A particular firm's TMS may not contain all of these elements. Each activity will be discussed in light of informational requirements and decision assistance provided by the TMS.

Mode selection. Many firms transport in multiple shipment sizes that result in . multiple freight services to consider. Transport service choices typically range from small airfreight and ground package carriers to ocean container and rail carload movements. The TMS can match shipment size with transport service cost and performance requirements, especially where there are competing choices involved. A good T/VIS will store data on multiple modes, freight rates, expected shipment times, mode availability, and service frequency and will suggest the best carrier for each shipment.

Freight consolidation. A very valuable function for the TMS is to suggest the patterns for consolidating small shipments into larger ones. Since a primary characteristic of freight rates is that unit shipping costs drop disproportionately as shipment size increases, shipment consolidation can result in substantial transport cost savings, especially when shipment sizes are small. The TMS can keep track of, in real time, shipment sizes, destinations, and promised delivery dates. From this information and using internal decision rules, economical loads can be built while considering delivery service goals.

Routing and scheduling shipments. When a firm owns or leases-a fleet of vehicles, careful management is required to ensure that the fleet is operated efficiently with order information from the OMS and orderprocessing information from the WMS, the TMS assigns loads to vehicles and suggests the sequence in which the vehicle stops should be made. Time windows during which stop offs can be made, pickup of returning merchandise from the stop off points, planning for back hauls, driver restrictions on length of driving and rest breaks, and utilization of the fleet across multiple time periods all need to be considered. The TMS retains data on stop locations; vehicle type, number, and capacity; stop loading/unloading times; stop time windows; and

other restrictions on the route. Given this background information, shipments to be made in the current period are planned using decision rules or algorithms imbedded in the TMS.

Claims processing. It is inevitable in transportation that some shipments will be damaged. By retaining such information as shipment content, product value, carrier used, origin arid destination, and liability limits, many claims can be processed automatically or with minima/ human intervention.

Tracking shipments. Information system technology has played a major role tracking the progress of shipments once they have been transferred to transport carriers. Bar coding, radio transmission en route, global positioning systems, and on-board, computers are key information system elements that allow the location of shipments to be known in real time. Tracking information from the TMS can then be made available to the shipments' receivers through the Internet or other electronic means. Even estimates of arrival times can be calculated.

The small-shipment carriers such as DHL, Airborne Express, FedEx and UPS are at the forefront in such information system development, since it is customer satisfaction that they sell. Guaranteed delivery service is often promised, and a sophisticated shipment tracking system helps fulfill the goal.

Application
Federal Express bar codes every shipping document with a unique number for easy and rapid identification of a package throughout its journey. The bar code is scanned at the point of entering the delivery system, at sorting, during delivery, and at the destination point. Installed in the delivery trucks are small computers that accept radio communications. This allows the trucks to be routed for pickups and deliver ies, as well as to serve as a data input point for information about shipment and truck location. The delivery agent carries a handheld scanner that reads the shipment number at the time of pickup or delivery. The scanning device, with its coded information, can be plugged into the truck's on-board computer and read into the database of the company's transportation information system. Satellite communication and global positioning systems represent the latest technologies to be integrated into tracking systems. In just-in-time systems, where uncertainties in shipment arrivals can cause serious consequences for production operations, navigational satellites are being used to identify the exact location of truckload shipments as they move through the distribution pipeline and to maintain real-time communication with drivers to report breakdowns and delays, and to estimate arrival times.

Application

A contract trucking company is now using a two-way mobile satellite communication and positionreporting system to monitor the location of its trucks in order to improve performance under just-in-time programs. The heart of the system is a small in-truck computer that is able to communicate with a navigational satellite. The satellite can pinpoint the geographical location of the truck anywhere. Messages between drivers and headquarters may be exchanged without the need of telephone communication. Freight bill payment and auditing. Determining the freight charges for shipments can be complicated because of the many exceptions that can be placed on freight rates. Since carriers charge only the lowest applicable rate, when a rating error occurs, the shipper can make a claim on the carrier for the difference between the actual charges and the lowest charges. It is the responsibility of the shipper (party _purchasing the transportation service) to audit freight bills for these errors and apply for a rebate from the carrier. Freight bill auditing can be a labor-intensive activity due to the large number of routes and rate combinations. The computer-based TMS can quickly search for the minimum cost routing and compare the cost to that on the freight bill. Freight bill payment can also be facilitated in the TMS. Rather than a decision- assisting use of the TMS, bill payment is a transactional activity. Here the TMS records that shipment has been made and requests the companys financial information system to execute payment to the carrier, often electronically. Only a limited description of the LIS and its components can be provided since the features vary with the needs of a particular application. For example, some warehouse management systems might further include radio frequency control of all tasks, standards and performance measures, stock cycle counting, and dock scheduling, to name a few. The TMS might include mode selection, routing of full vehicle loads, and performance measurement of carriers. However some of the fundamental capabilities of the LIS have been discussed that illustrate how information technology is having an impact on the planning and control of operations.

4. Planning systems:
ERP systems in general dont evaluate alternative strategies or assist with decision making. Supply chain planning systems often termed as Advanced Planning and Scheduling (APS) systems, are designed to assist in evaluating supply chain alternatives and advise in supply chain decision making. Sophisticated supply chain planning systems are available that permits evaluation of complex alternatives under the tight decision time constraints. Typical supply chain planning applications include scheduling, inventory resource planning and transportation planning. Using historical and current data, APS software systematically identifies and evaluates alternative courses of action and recommends a solution within the constraints imposed. Typical constraints involve production, facility, transportation, inventory, or raw material limitations.

Planning systems can generally be grouped into two categories strategic and tactical. Strategic planning systems are designed to analyses where there are large number of alternatives and data outside the range of current history is required. Examples of strategic planning applications include supply chain network design and structural and structural analyses. Tactical planning focuses on operational issues as constrained by short-term resource constraints such as production, facility, or vehicle capacity. The information support for tactical planning is typically available from the firms data warehouse. Tactical planning processes evaluate customer requirements and identify an operational combination of production, inventory, facilities, and equipment that can be utilized within capacity constraints.

Role of Information Technology in Supply Chain Management: Supply chain management (SCM) is concerned with the flow of products and information between supply chain members' organizations. Recent development in technologies enables the organization to avail information easily in their premises. 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 (Fig.1) bi-directional arrow reflect the accommodation of reverse materials and information feedback flows. 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.

Integrated supply chain model

Bi-directional arrow reflects the accommodation of reverse materials and information feedback flows. Managers need 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 of information in an integrated supply chain management 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. Supply chain organizational dynamics: All enterprises participating in supply chain management initiatives accept a specific role to perform. They also share the joint belief that they and all other supply chain participants will be better off because of this collaborative effort. Power with in the supply chain is a central issue. There has been a general shift of power from manufacturers to retailers over the last two decade. Retailers sit in a very important position in term of information access for the supply chain. Retailers have risen to the position of prominence through technologies. The Wal-Mart & P&G experiences demonstrate how information sharing can be utilized for mutual advantage. Through sound information technologies Wal-Mart shares point of sale information from its many retail outlet directly with P&G and other major suppliers.

The development of Inter organizational information system for the supply chain has three distinct advantages like cost reduction, productivity, improvement and product/market strategies. Barrett and Konsynsik have identified five basic levels of participation of individual firms with in the interorganizational system.

1. Remote Input/output mode: In this case the member participates from a remote location within the application system supported by one or more higher-level participants.

2. Application processing node: In this case a member develops and shares a single application such as an inventory query or order processing system.

3. Multi participant exchange node : In this case the member develops and shares a network interlinking itself and any number of lower level participants with whom it has an established business relationship.

4. Network control node: In this case the member develops and shares a network with diverse application that may be used by many different types of lower level participants.

5. Integrating network node: In this case the member literally becomes a data communications/data processing utility that integrates any number of lower level participants and applications in real times. Four fundamental mistakes made when determining information requirements are as follows: 1. Viewing system as functional instead of cross-functional. 2. Interviewing managers individually instead of jointly. 3. Not allowing for trial and error in detail design process. 4. Asking the wrong question during the interview Information and Technology: Application of 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, decisionmaking 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. Logitility planning solution was recently introduced to provide a programme capable managing the entire supply chain.

Business Software Solutions from Microsoft

Microsoft dynamics (formerly Microsoft Business Solutions) offers integrated business applications for small and mid-sized organizations and divisions of large enterprises as well. It creates applications and services for retailers, manufacturers, wholesale distributors and service companies. Sr. No 1 Analytics Manage budgets, create and consolidate reports and look for trends and relationships in any part of your business. 2 Portals Deliver access to the data, application and services to your employees, customers and business partners need via a web browser, and see them work more efficiently with you. 3 Customer Relationship Management Manage customer groups, create and launch marketing campaigns, track customers activity and organize sales and after sales activities. 4 E-commerce Let customers and suppliers do business with you anytime through web sites or by connecting their system directly to yours. Microsofts integrated applications Applications Description

Field service management

Set and manage service contracts, enter and track service calls, view schedules and optimize workloads across resources.

Financial management

Control your general ledger, payables, receivables, inventory, sales process, purchasing, fixed assets and cash flows. Perform reconciliations and collections

HR management

Manage your human resource by mapping, recruitment and employee to skills development and processing of payroll and benefits.

Manufacturing

Coordinate your entire manufacturing process from product configuration and supply and capacity

requirement planning to scheduling and shop floor. 9 Project Management and Manage your resources, forecast your cost and budgets, Accounting track time and expenses and organize contracts and billing. 10 Retail management Run retail operations from point of sale to delivery. Increase customer flow, speed up lines and tasks, control inventory and automate purchasing. 11 Supply chain management Organize single or multiple site warehouses, handle order promising, demand planning and online collaborations with suppliers.

Microsofts integrated applications and its business solutions Sr.No 1 Application Analytics Solutions Microsoft Dynamics AX, Enterprise Reporting, Microsoft Dynamics GP, Microsoft Dynamics NAV, Microsoft Dynamics SL. 2 Portals Microsoft Dynamics GP, Microsoft Dynamics NAV Portal, Microsoft Dynamics SL, Enterprise Portal. 3 Customer Relationship Management Microsoft Dynamics AX, Microsoft Dynamics SL, Field Service Management, CRM, Outlook with

Business Contact Manager. 4 E-commerce Microsoft Dynamics AX, Microsoft Dynamics GP, Microsoft Dynamics NAV, Microsoft Dynamics SL, Business Network, Small Business Manager. 5 Field service management Microsoft Dynamics GP, Microsoft Dynamics NAV, Microsoft Dynamics SL. 6 Financial management Microsoft Dynamics GP, Microsoft Dynamics NAV, Microsoft Dynamics SL, Small Business Manager, Microsoft Dynamics AX. 7 HR management Microsoft Dynamics GP, Microsoft Dynamics NAV, Microsoft Dynamics AX. 8 Manufacturing Microsoft Dynamics GP, Microsoft Dynamics NAV, Microsoft Dynamics AX. 9 Project Management and Microsoft Dynamics GP, Microsoft Dynamics NAV, Microsoft Dynamics AX, Microsoft

Accounting

Dynamics SL. 10 Supply chain management Microsoft Dynamics GP, Microsoft Dynamics NAV, Microsoft Dynamics SL, Small Business Manager, Microsoft Dynamics AX, Business Network.

So we can see that there is virtually solution for everything that a business needs. What is highlighted here is that there are solutions aplenty and the need is to only use them effectively to gain business advantage.

E- Commerce
E-commerce started with EDI and is about buying and selling. Internet-based e-commerce relies on the development of the Internet as a communication medium. It is the development of the World Wide Web that has made e-commerce possible. The first success story in e-commerce is attributed to the virtual bookstore, amazon.com. There are many e-commerce companies like amazon.com that are valued at millions of dollars. there are many categories of e-commerce by transaction, e.g. business to business (B2B), business to government (B2G), consumer to consumer (C2C), etc. some of the many benefits that e-commerce can offer are as follows: It benefits the suppliers as they can have a global presence and benefits customers as they can have

global choice. It benefits suppliers by improving competitiveness and customers by improving the quality of service. Like in the case of Dell, it gives opportunities of mass customization to the supplier and the opportunity of getting personalized products to the customer. It minimizes supply chains and hence enables quick responses to customers. It substantially reduces the cost incurred by the supplier and hence reduces the final price for the customer. It generates novel business opportunities for the supplier and new services for the customer.

Presently, there are many companies that not only use e-commerce for buying and selling but also for the ways in which they stock and supply goods. Large warehouses with big supplies are becoming redundant and small warehouses with more frequent deliveries are in vogue. The online environment has made it possible to minimize handling, respond quickly and minimize resource and still remain competitive. There are many examples of sites offering online auctions (e.g. www.bazee.com), online machinery auction sites (e.g., www.auctionindia.corn), third party customer response sites (e.g., www.tcil.com), online flower shops (e.g., www.phoolwala.com) and an online dealers' community of Asia's biggest IT Market (www.ripithub.com). These are, of course, just few examples. There is a lot of time and effort being devoted to generate new models with e-commerce and SCM in mind. Two such examples are described below: Nagurney et al. (2005) developed a supply chain network model in which both physical and electronic transactions are allowed and in which supply-side risks as well as demand-side risks are included in the formulation. The model consists of three tiers of decision-makers: the manufactures the distributors and the retailers, with the demands associated with the retail outlets being random. The optimizing behavior of the various decision makers was centered on the manufacturers and the distributors being multi-criteria decision makers and concerned with both profit maximization and risk minimization. This is the first multi-tiered supply chain network equilibrium model with e-commerce as well as supply-side and demand-side risks. Piramuthu (2005) developed a framework with machine learning for automated supply chain configuration. Once a supply chain is configured, researchers and practitioners were more interested in ways to improve performance given that initial configuration. However, recent developments in e-commerce applications and faster communication over the Internet in general necessitates the dynamic (re) configuration of supply chains over time to take advantage of better configurations Piramuthu (2005) showed performance improvements of the adaptive supply chain configuration framework over static configurations.

PRIMARY RESEARCH
FUTURE SUPPLY CHAIN SOLUTIONS LTD.

About the company: Future Supply Chain Solutions Ltd. provides consumer logistics and supply chain
solutions for consumer products, such as fashion, food, home, and general merchandise. It offers supply chain management, factory-gate logistics, storage and fulfillment, retail store replenishment, movement, cold chain management, freight forwarding, custom clearances, reverse logistics, warehousing, transportation, international logistics, and distribution services. The company serves retail outlets in India. Future Supply Chain Solutions Ltd. was formerly known as Future Logistics Solutions Ltd. and changed its name in August 2009. The company was founded in 2007 and is based in Mumbai, India. Future Supply Chain Solutions Ltd. operates as a subsidiary of Pantaloon Retail (India) Ltd. Future Supply Chains has developed expertise in Supply Chain Management of consumer product categories such as Fashion, Food, Home and General Merchandise. The company operates from 60 strategically located hubs, servicing more than 2600 retail outlets spread across the length and breadth of the country. Its network of facilities and specialized expertise enable it to manage more than 3 million SKUs. This requires 30 distinct supply chains to be managed simultaneously, each with their own specific requirements that need customized solutions. Internationally, most retailers handle fewer SKUs as they are in the form of pallets. In India, however, the consumer supply chain is unique as the SKUs are in pieces - resulting in very large numbers. Over the years, Future Supply Chains has learned the intricacies of the Indian market and has fine-tuned its systems and designed Supply Chain Solutions that are uniquely Indian. Future Supply Chains transportation capability enables it to implement Factory-Gate logistics involving pickup of goods from vendors across the country, national distribution of goods, and city logistics that includes store deliveries and home deliveries. Future Supply Chains is the first organized intra-city transportation services company in India - carrying out not only B2B deliveries but also B2C deliveries in the form of thousands of home deliveries every day across the country, especially for Furniture and Consumer Durables.

FSCS operates 30 different supply chains:

Technology
Future Supply Chains has embarked on a strategy that leverages IT as an enabler to serve its customers faster and better. The company's investments in IT help it differentiate itself from the competition with value added services and lower supply chain costs. The Cornerstones of the company's IT Strategy are as under:

Infrastructure - Future Supply Chains networks and applications have been customers' scalability, reliability and availability requirements.

created to support its

Its warehouses are wireless and equipped to

enable RF applications; and its transportation fleet will soon be GPS/GPRS enabled for vehicle tracking purposes. Integration - Easy Information and Data exchange is crucial to the 3-PL (3rd Party Logistics) Business, towards which the company has built a robust and user friendly Integration backbone that seamlessly connects with any customer system and supports all industry standard formats/protocols of information exchange. Functional Portfolio - One of the reasons for Future Supply Chains unmatched operational efficiency is the functional portfolio of applications the company has built/ implemented and how they enable its Business processes. Currently the company is in the midst of implementing a State of the art Warehouse management System (WMS) for its key distribution centers. The company's transportation network is supported by a GPS/GPRS enabled Vehicle Tracking System, Load Planning, Freight Audit/Matching and Systems.

Solutions/ Services offered by Future Supply Chain Solutions Ltd.

We are completely geared with the expertise and experience to tackle any challenge in the arena of supply chain management. In addition to the critical reservoir of knowledge, we also have the widespread network and the infrastructure to facilitate optimal efficiency in deliveries and cost advantages.

We offer a single window for all supply chain solutions, such as:
Supply Chain Management Factory-gate logistics Storage & fulfillment Retail store replenishments Movement (nationwide and intra-city) Cold chain management Freight forwarding Custom clearances Reverse logistics Distribution services

We also provide a spectrum of value added services such as:

Inventory planning & control support Vendor management Supply chain network modeling Bar coding services

INTERVIEW
1. According to you, is Information technology (IT) very essential in carrying out successful SCM? Yes. Technology is an enabler which can definitely increase efficiency within Supply Chain. Technology helps in reducing the uncertainty and managing variability and thus helps in taking informed decisions. Moreover, in todays competitive environment it is very essential to perform the activities at a faster pace and with accuracy and this can be achieved using Information Technology 2. Who are the competitors of Future Supply Chain Solutions? How does FSCS distinguish itself from its competitors? Gati, DHL, Safexpress, DIESL, etc. We have proven expertise in managing variability and reducing uncertainty of our customers; thus increasing their sales and profitability. While competitors claim, they would not be able to prove.

3. What are the various technologies used in Future Supply Chain Solutions? ERP SAP System Warehouse- Warehouse Management System (WMS), Put-to-Light Sortation System (PTL) Stores - ARS (Automatic Replenishment System) Transportation- Transport Management System (TMS), GPS-enabled Vehicle Visibility System (VVS) Communication- Intranet, EDI (electronic data interchange- transaction of documents in electronic form like e-purchase order, invoices) VRMP Vendor Relationship Management Portal 4. After introducing these technologies has there been any improvement in companys performance in terms of productivity or profits? Productivity and efficiency has definitely increased. For eg: WMS has increased the service efficiency because the company could handle multiple SKUs. TMS could provide real time visibility of the consignments and therefore the exceptions could be easily identified and addressed Increased customer satisfaction and confidence owing to real time tracing and visibility. PTL helped in increasing the sorting efficiency and accuracy

5. What were the problems faced by the company prior to introducing these systems? Manual errors Increased time and effort Less accuracy Timely information not available to the users and stakeholders

6. Any suggestions by which efficiency of SCM can be further improved. Integrated SCM is very essential. This means integration between our suppliers system, our customers system and other stakeholders. Involvement of all the SCM elements and greater transparency between each one of them can prove to be beneficial and IT can very much help in achieving this Bar-coding all the boxes within the supply chain Route planning and optimization

Index Introduction

Objective of the project

1. To understand what is supply chain management? 2. How IT can help in supply chain management? 3. Various IT systems that can be implemented in the organization, which would provide it a competitive edge. 4. Practical example of an organization that is actually using these technologies.

Importance of project
Primary & secondary data Limitation

Primary research About the company Various technology used Interview Industrial visit

Suggestions and recommendation Conclusion Acknowledgement Annexure Bibliography