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EBU6609 Logistics and Supply Chain Management
TOPIC 3: INFORMATION TECHNOLOGY IN A SUPPLY CHAIN
MS. BING HAN
EBU6609 LOGISTICS AND SUPPLY CHAIN MANAGEMENT 1

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􏰀The role of information and information technology in a Supply Chain
􏰀Historical development – IT
􏰀The Supply Chain IT Framework
o Customer Relationship Management (CRM) o Internal Supply Chain Management (ISCM) o Supplier Relationship Management (SRM)
􏰀The Future of ICT in the Supply Chain
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The Importance of Information
We believe those companies that position themselves to take advantage of the Internet to build information partnerships with their suppliers and customers, have the potential to fundamentally change the face of global competition… and change our definition of the value we provide to our customers and constituents.
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3 Types of Technologies
􏰀Product technologies – features & characters of a product/service oTrains, cars, airplanes;
三oDrones; Autonomous Vessels
􏰀Process technologies – methods, procedures
o ’s Model T assembly line – modern auto industry; oRFID, Chipping;
􏰀Information technologies – collection, storage, sending of data oInternet of Things;
oAI, Machine Learning
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Role of Information in a SC
create a coordinated supply chain
Information is a key driver that serves as the “glue” to –
Information must have the following characteristics to be
{◦ Accurate
◦ Accessible in a timely manner
◦ Information must be of the right kind
Information provides the basis for supply chain
management decisions pmiaef ◦ Inventory
◦ Transportation ◦ Facility
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The Importance of Information
1. Real-time information regarding availability, delivery, shipping, and invoices allows for improved customer satisfaction.
2. Substituting information for inventory or other resources reduces costs.
3. Information can be used to increase flexibility.
4. Information sharing is redefining supply chain
relationships.
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一Use of Information in a SC Information used at all phases of decision making:
strategic, planning, operational
◦ Strategic: location decisions
◦ Operational: what products will be produced during today’s production run
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Use of Information in a SC
􏰀Inventory: demand patterns, carrying costs, stock-out costs, ordering costs
􏰀Transportation: costs, customer locations, shipment sizes
􏰀Facility: location, capacity, schedules of a facility; need information about trade-offs between flexibility and efficiency, demand, exchange rates, taxes, etc.
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Information Strategy – Limitations
􏰀Information technology is an enabler, not a silver bullet. 􏰀Automating bad processes simply helps to make mistakes
􏰀The wrong technology strategy adds neither real value or improves customer satisfaction.
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Information Systems – timeline
Era of Supply Chain Management
“Dark Ages”
1960s-1970s 1980 1985 1991
Era of Material Management
EOQ MRP EDI JIT TOC ERP APS ERPII
ROP MPR II QR VMI DRP CPR ARP
XDM ECM CPFR
Adapted from Davis and Spekman “The Extended Enterprise”
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:Enterprise Resource Planning (ERP)
ERP Systems – a single database surrounded by application programs that take data from the database and either conduct analysis or collect additional data for the firm.
During the 1990s, half of the Fortune 1000 began implementation of ERP systems.
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ERP versus Traditional Systems
ERP Systems Traditional Systems
Systems implemented corporate wide
Single integrated system for all divisions and countries of operation
Single integrated database Data entered once Integrated, cross-functional
EBU6609 Logistics and Supply Chain Management
Systems usually implemented at the functional or department level
Different systems for different divisions or country operations
Multiple databases
Data entered several times Standalone
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ERP – Implementation Process
Define the current process “as is”
◦ Cross functional implementation team of subject matter
experts document the current processes.
Define what the “best-in-class” business process should be
◦ Explicitly state the final objective of the process.
◦ Identify what the ERP system will replace
◦ Identify how the benefits are likely to occur
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ERP – Implementation Process
Develop the system
◦ Consultants work in conjunction with those who are
most familiar with the business processes in question.
Work through all final “bugs” and then “flip the switch.” ◦ A danger that often exists when flipping the
switch—switching over from the old system to the new system—is that the company may not be ready for the change, nor is the system completely configured to handle the specific activities that keep the business running.
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ERP – Competing Viewpoints
􏰀ERP systems are viewed with great optimism and serious skepticism.
􏰀Some companies have achieved seamless integration 􏰀Some managers claim ERP vendors “overpromise
and underdeliver”
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二ERP – Implementation Issues
Never-ending implementation: Many firms adopt ERP systems module by module extending the implementation period. Even simple implementations take a year or more. Complex implementations have taken close to a decade.
Importance of process mapping: Each application captures data for and about a process. Process mapping documents each process in detail helping managers gain a real understanding of how it works.
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:ERP – Implementation Issues
Process redesign: Combining a new ERP system with a bad process usually leads to unsatisfactory results—the same old mistakes are made more rapidly. ERP implementation can drive the adoption of new business practices and processes.
Use of consultants: There is a learning curve inherent in any new technology, knowledgeable consultants can help.
◦ Relying solely on outside consultants can lead to an expensive implementation that doesn’t meet the company’s needs.
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ERP – Implementation Issues
Excessive cost: Without proper planning, costs and timelines can quickly exceed the budget.
◦ The average total cost of ERP ownership ranged from $400,000 to $300 million with an average cost of $15 million.
◦ Implementation time estimates and financial budgets are often exceeded by 50 to 100 percent or more.
Resistance to change: Employees and managers often prefer the legacy systems and are resistant to change.
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:ERP – Implementation Issues
Errors during implementation: Glitches or errors in new systems may become evident only after implementation.
◦ Hershey’s failed to capture orders for 5 weeks before Halloween; Result – 19% drop in 3rdQ net income.
◦ To avoid this problem, companies can:
1.gradually phase in new systems while phasing out old ones
2.run both systems in parallel until the “bugs” have been worked out 3.utilize pilot projects at a limited number of divisions or locations.
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ERP – Implementation Issues
Rapid technological change: Rapid technological change can render new systems obsolete complicating cost-benefit analyses.
◦ Early adopters of a new technology have the benefit of being ahead of the competition
◦ Early adopters run the risk of acquiring an untested technology that could disrupt the firms’ entire operations
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ERP – The Future
ERP systems were designed to enhance internal firm communication thereby facilitating exchange with external parties.
Growing demand for collaboration among supply chain partners resulted in the proposal of two new syEstems: n n n n
◦ Cloud ERP – Netsuite, Salesforce ◦ Mobility – on mobile devices
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Top ERP Vendors
This industry is expected to generate a revenue of around 47 billion [2] during the forecast period of 2017-2022. In terms of CAGR (compound annual growth rate), the market is estimated to tread forward at the rate of 7%.
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Source: Apps Run The World, December 2018. [3]
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E-Commerce and the Internet
The use of Internet technology has reduce the cost of providing, collecting, and communicating information electronically.
◦ Internet – provides unlimited access
◦三Intranet – provides systems access to a limited number of parties; avoids custom interfaces, incompatible hardware types, and special connection procedures
◦ Extranet – allow limited access to certain applications and data to external users
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-E-Commerce and the Internet
Electronic-commerce is the automation of commercial transactions using computers and networked communication technologies.
◦ Electronic Data Interchange (EDI) ◦ Internet
◦ Electronic funds transfer
◦ Electronic bulletin boards
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E-Commerce and the Internet
◦ Centralization of inventory
◦ Centralization of shipping locations
◦ Reduction of safety stock
◦ Consolidation of inbound transportation
◦ Real-time capture and distribution of demand and inventory information
E-commerce can reduce costs by allowing for:
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E-Commerce and the Internet
E-commerce can enhance revenue by:
◦ Removing time and location constraints
◦ Allowing direct to customer sales
◦ Allowing real-time access to demand in inventory data facilitating better decision-making
◦ Allowing instantaneous and flexible introduction of products and product mixes
◦ A三llowing the customer to instantly pay for orders reducing cash-to-cash cycle time
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Radio Frequency Technology
Radio frequency transmissions between computer
systems and mobile operators.
◦ Used extensively in warehouse and distribution center operations
Improves picking efficiency and accuracy
Radio frequency identification tags (RFID) – coded electronic chips embedded in the product or in product packaging.
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Radio Frequency Identification (RFID)
􏰀Unlike barcodes, RFID does not require line of sight to be scanned.
􏰀RFID tags can hold much more information than bar codes.
􏰀RFID information can be unique to every product, not just a specific type of item or UPC code.
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Radio Frequency Identification (RFID)
􏰀RFID is used extensively in warehouse and distribution centre operations, which improves picking efficiency and accuracy;
􏰀Other benefits include: time-saving; easy to track; large volume of information gathered at the same time;
􏰀But barcodes are still in use, especially at POS (point of sales) level, due to its low-cost and compatibility with existing information systems.
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RFID – 3 benefits
The Supply Chain IT Framework
The Supply Chain Macro Processes
◦ Customer Relationship Management (CRM) ◦ Internal Supply Chain Management (ISCM) ◦ Supplier Relationship Management (SRM)
◦ Plus: Transaction Management Foundation
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Macro Processes in a Supply Chain
Supplier Relationship Management (SRM)
Internal Supply Chain Management (ISCM)
Customer Relationship Management (CRM)
Transaction Management Foundation (TFM)
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Customer Relationship Management (CRM)
The processes that take place between an enterprise and its customers downstream in the supply chain
Key processes: l◦ Marketing
◦ Order management ◦ Call/Service center
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Internal Supply Chain Management
Includes all processes involved in planning for and fulfilling a customer order
ISCM processes: ◦ Strategic Planning ◦ Demand Planning ◦ Supply Planning
◦ Fulfillment
◦ Field Service
There must be strong integration between the ISCM and CRM macro processes
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ISCMISR.MY
Key processes:
◦ Design Collaboration ◦ Source
◦ Negotiate
◦ Supply Collaboration
There is a natural fit between ISCM and SRM processes
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Supplier Relationship Management
Those processes focused on the interaction between the
enterprise and suppliers that are upstream in the supply chain
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The Transaction Management Foundation
􏰀Enterprise software systems (ERP)
􏰀Earlier systems focused on automation of simple transactions and the creation of an integrated method of storing and viewing data across the enterprise
􏰀Real value of the TMF exists only if decision making is improved
􏰀The extent to which the TMF enables integration across the three macro processes determines its value
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The Future of IT in the Supply Chain
􏰀At the highest level, the three SCM macro processes will continue to drive the evolution of enterprise software
􏰀Software focused on the macro processes will become a larger share of the total enterprise software market and the firms producing this software will become more successful
􏰀Functionality, the ability to integrate across macro processes, and the strength of their ecosystems, will be keys to success
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Source: Forbes, July 2018. [4]
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Supply Chain IT in Practice
􏰀Select an IT system that addresses the company’s key success factors
􏰀Take incremental steps and measure value 􏰀Align the level of sophistication with the need for
sophistication
􏰀Use IT systems to support decision making, not to make decisions
􏰀Think about the future
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Further readings
1. Core Text, Ch4; Chopra & Meindl, Ch17.
2. https://www.marketwatch.com/press-release/erp-software- market-2018-global-trends-statistics-size-share-regional-analysis- by-key-players-industry-forecast-by-installation-application- industry-verticals-2018-06-19
3. https://www.appsruntheworld.com/top-10-erp-software- vendors-and-market-forecast/
4. https://www.forbes.com/sites/louiscolumbus/2018/07/28/sap- leading-the-fast-growing-scm-market-with-26-share/
5. http://www.globaltrademag.com/global-logistics/infographic- technology-enhancing-supply-chain-management
6. https://financesonline.com/erp-trends/
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