supply chane management

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Management Information Systems

Supply ChainManagement Systems

Submitted to: Mr. Mohammed Faisal

By: Syed Asad Mehmood (MEN-2200475)

Term Report



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PrefaceThis Term Report provide me a great opportunity to learn and discuss the key components of aSupply Chain Management information system (SCMIS), its interaction with each other within SCand MIS, and their contribution to improve efficiency and coordination of firm. In this report, I alsotry to explore the technical standards or interfaces and potential problems.

In this report, I try my best possible efforts to explore and then deliver the supply chain perspectivesof information functionality and principles. Report will then continue on SCMSIS applications onthe transaction systems, management control, decision analysis and strategic planning application.We will complement the discussion with SCMIS supporting technologies and applications. Theconclusion will try to extract the major points in this report.

Finally, I would like to express my deep debt of gratitude to our course facilitator, Mr. MohammedFaisal, who have enriched us from the stream of his MIS and IT knowledge, and provided a deepinsight in to the technical complexities of the subject.

Syed Asad Mehmood

(MEN-2200475)

MBA-Evening Program



Evolution of Supply Chain Management

Firms willing to undergo the rigors of developing the integrated supply chains progress throughseries of phases, as shown in Figure 1.1.

During the past decades, globalization, outsourcing and information technology have enabled manyorganizations such as Dell and Hewlett Packard, to successfully operate solid collaborative supplynetworks in which each specialized business partner focuses on only a few key strategic activities.Traditionally, companies in a supply network concentrate on the inputs and outputs of the processes,with little concern for the internal management working of other individual players. Therefore, thechoice of internal management control structure is known to impact local firm performance.

Supply Chane Management - MIS Report.doc - of 22

SuppliersPhase 1:IndependentSupply-chainentities

Purchasing Production Distribution Customers

Suppliers Purchasing Production Distribution CustomersPhase 2:

InternalIntegration

Internal Supply ChainMaterial management department

Suppliers InternalSupplyChain

CustomersPhase 3:Supply ChainIntegration

Integrated Supply Chain

Developing Integrated Supply Chain – Fig 1.1



In the 21s

In the 21 st century, there have been few but very vital initiative trends in manufacturing businessenvironment that have significantly contributed to the development of supply chain networks. First,as an outcome of globalization and proliferation of multi-national companies, joint ventures,strategic alliances and business partnerships were found to be significant success factors, followingthe earlier "Just-In-Time", "Lean Management" and "Agile Manufacturing" practices. Second,technological changes, particularly the dramatic fall in information communication costs, a

paramount component of transaction costs, has led to changes in coordination among the membersof the supply chain network, that’s make supply chains an essential part of e-business.

Supply Chain System’s

Business ProcessIntegrations and the role of Internet

Internet played a revolutionary role in integrationof Customer and supplier interfaces.

Role of Internet

Following figure illustrates how the Internet can ultimately affect safety, the environment, energy,and economic growth through improved equipment utilization and integrated supply chainmanagement system.




The Internet provides a quick and efficient means to share information along the supply chain.Within the firm; ERP systems facilitate the flow of information across fictional areas, business units,geographic regions, and product lines. For manufacturing firm accurate information about itscustomer’s operations, such as current inventory positions, future demands and productionschedules, or expected orders for the firm’s product, suppliers’ location, price offered, enables firmto react effectively and efficiently.

The revolution of Internet has dramatically changed the way companies serve their customers anddeal with suppliers; it is the actual reason which revolutionized the integration of supply chain. Infollowing section we tries to explore the impact of the internet based technologies of components of customer and supplier interfaces:

Customer Interface (Down Stream)

The internal supply chain is extended to embrace suppliers and customers, thereby linking it to theexternal supply chains, which are not under the direct control of firm. The firm must change its focusfrom a product or service orientation to customer orientation, so that both benefit from improvedflows material and services..

Order-placement processIt involves the activities required to register the need for a product or service and to confirm theacceptance of the order.

These activities are initiated by customers but consummated by the firm producing the product or service, it is generated demand for the supply chain, it is firm’s advantage to make it simple and fast.

The Internet has enabled firms to reengineer their order placement process to benefit both thecustomer and the firm. It provides following advantages for a firm:

Cost Reduction : It reduces the cost by allowing greater participation by thecustomer.

Revenue Flow Increase : Can allow customer to use faster way of payments, likeCredit Cards etc..Global & Round the Clock Access: 24 Hours a day, across geographical boundaries operation unlike traditional bricks-and-mortar firms.

Pricing Flexibility: Firms can avoid the cost and delay of publishing newcatalogs; they can easily change prices on the web as the need arises.

Order-fulfillment processThe activities required to deliver a product or service to a customer. Here, we have separated theorder-placement process from the order-fulfillment process however, in many instances, they occur simultaneously.

Due to involvement of various manual aspects, that process is directly liked with firm’s competitive priorities falling under the categories of cost, quality, time or flexibility. However, Internet has played a pivotal role, which is discussed in following:

Information Sharing : Easily available and readily updated information enablesorder-fulfillment process to better anticipate the future needs of its customer.That lead to reduction in inventory cost and decreasing the time of fulfill orders.




Inventory Placement : Firm can make a fundamental supply-chain decision,where should distribution centers be added to position inventory closer to thecustomer?

Postponement: Firm can avoid customization to the last possible moment, sothat manufacturing process spends more of its time on standardized componentsand assemblies, which are less costly to produce.

Customer service management processCustomer service provides the source of customer information. It also provides the customer withreal-time information on promising dates and product availability through interfaces with thecompany's production and distribution operations.

Supplier Interface (Up Stream)

Vendor ManagementSupply chain management supports full vendor profiling, order status and history, notes, activities,

product associations and item specific vendor item codes, descriptions, and costing. Its attribution

system enables the definition and storage of any number of aspects of each vendor item in inventoryfor use in profiling and negotiation

Procurement processStrategic plans are developed with suppliers to support the manufacturing flow management processand development of new products. In firms where operations extend globally, sourcing should bemanaged on a global basis. The desired outcome is a win-win relationship, where both parties

benefit, and reduction times in the design cycle and product development is achieved. Also, the purchasing function develops rapid communication systems, such as electronic data interchange(EDI) and Internet linkages to transfer possible requirements more rapidly. Activities related toobtaining products and materials from outside suppliers. This requires performing resource planning,supply sourcing, negotiation, order placement, inbound transportation, storage, handling, and qualityassurance. Also, includes the responsibility to coordinate with suppliers in scheduling, supplycontinuity, hedging, and research to new sources or programs.

Enterprise Level Interface (Internal)

Product development and commercializationHere, customers and suppliers must be united into the product development process, thus to reducetime to market. As product life cycles shorten, the appropriate products must be developed andsuccessfully launched in ever shorter time-schedules to remain competitive. According to Lambertand Cooper (2000), managers of the product development and commercialization process must:

Coordinate with customer relationship management to identify customer-

articulated needs Select materials and suppliers in conjunction with procurement, and Develop production technology in manufacturing flow to manufacture and integrate into the best supply chain flow for the product/market combination.




Manufacturing flow management processThe manufacturing process is produced and supplies products to the distribution channels based on

past forecasts. Manufacturing processes must be flexible to respond to market changes, and mustaccommodate mass customization. Orders are processes operating on a just-in-time (JIT) basis inminimum lot sizes.

Also, changes in the manufacturing flow process lead to shorter cycle times, meaning improvedresponsiveness and efficiency of demand to customers. Activities related to planning, scheduling andsupporting manufacturing operations, such as work-in-process storage, handling, transportation, andtime phasing of components, inventory at manufacturing sites and maximum flexibility in thecoordination of geographic and final assemblies postponement of physical distribution operations

Outsourcing/PartnershipsThis is not just outsourcing the procurement of materials and components, but also outsourcing of services that traditionally have been provided in-house. The logic of this trend is that the companywill increasingly focus on those activities in the value chain where it has a distinctive advantage andeverything else it will outsource. This movement has been particularly evident in logistics where the

provision of transport, warehousing and inventory control is increasingly subcontracted to specialistsor logistics partners.

Also, to manage and control this network of partners and suppliers requires a blend of both centraland local involvement. Hence, strategic decisions need to be taken centrally with the monitoring andcontrol of supplier performance and day-to-day liaison with logistics partners being best managed ata local level.

Performance MeasurementExperts found a strong relationship from the largest arcs of supplier and customer integration tomarket share and profitability. By taking advantage of supplier capabilities and emphasizing, a long-term supply chain perspective in customer relationships can be both correlated with firm

performance. As logistics competency becomes a more critical factor in creating and maintainingcompetitive advantage, logistics measurement becomes increasingly important because the

difference between profitable and unprofitable operations becomes more narrow.A.T. Kearney Consultants (1985) noted that firms engaging in comprehensive performancemeasurement realized improvements in overall productivity. According to experts internal measuresare generally collected and analyzed by the firm including

Cost

Customer Service

Productivity Measures

Asset Measurement

Quality




Supply Chain ManagementFlowsSupply chain management flows can be divided

into three main categories

The Product Flow

The product flow includes the movement of goods from a supplier to a customer, as well as anycustomer returns or service needs. The information flow involves transmitting orders and updatingthe status of delivery. The financial flow consists of credit terms, payment schedules, andconsignment and title ownership arrangements.

The Information Flow

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. Executionapplications track the physical status of goods, the management of materials, and financialinformation involving all parties.




Some SCM applications are based on open data models that support the sharing of data both insideand 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 diversedatabase systems, or data warehouses, at several different sites and ccompanies.

The Finance Flow

By sharing this data "upstream" (with a company's suppliers) and "downstream" (with a company'sclients), SCM applications have the potential to improve the time-to-market of products, reducecosts, and allow all parties in the supply chain to better manage current resources and plan for futureneeds.

Increasing numbers of companies are turning to Web sites and Web-based applications as part of theSCM solution. A number of major Web sites offer e-procurement marketplaces where manufacturerscan trade and even make auction bids with suppliers.

Supply Chain ManagementInformation System Information is the key to successful supply chain management because “no product flows until information flows”Following sections, we will discuss supply chain perspectives of information, functionality, and

principles. It will then continue on SCIS applications on the transaction systems, managementcontrol, decision analysis, and strategic planning application. We will complement the discussionwith SCIS supporting technologies and applications.

SCIS Information Layers

Information is viewed as one of the keys to logistics competitive advantage for the future. However,simple SCIS, which handles only basic order processing, is not adequate to achieve this goal.Competitive SCIS must include:

Transaction - Transaction processing systemThis level is the heart of SCIS, which initiates and records individual logistics activities. Transactionincludes order entry, inventory assignment, order selection, shipping, pricing, and invoicing andcustomer inquiry. Transaction system is characterized by formalized rules, large volume transactionsand an operational day-to-day focus, which focus on system efficiency (faster processing or higher transaction volume with fewer resources). Electronic data interchange (EDI) has become a

transaction system messaging standard.




Management Control - Management Information system This second level focuses on performance measurement and reporting to provide feedback. It is alsoimportant that SCIS be able to identify exceptions as they are being processed. Management controlexception information is useful to identify potential customer or order problems. For example,

proactive SCIS should be able to predict future inventory shortages based on forecast requirementsand anticipated receipts. Management control system includes the reporting module of inventoryinformation system.

Decision Analysis - Decision Support system

This third level includes decision applications to assist managers in identifying, evaluating, andcomparing logistic strategic and tactical alternatives. Typical analysis includes vehicle routing andscheduling, inventory management, facility location, cost-benefit analysis of operational tradeoffsand arrangements. It may include modeling and analysis tool, which can report a wide range of

potential alternatives. Unlike management control, decision analysis focused on evaluating futuretactical alternatives, and it needs to be relatively unstructured and flexible to allow considerations of a wide range of options. The users need relatively more expertise to use it. Decision analysis SCISemphasis shifts from efficiency towards effectiveness (i.e. identifying profitable vs. unprofitableaccounts). Decision analysis system may include (obviously) decision support system (DSS),enterprise resource planning (ERP), artificial intelligence application, and simulation/modelingsystem.

Strategic Level - Executive Information SystemThe last level focuses on information support to develop and refine supply chain strategy. Often it isan extension of the decision analysis level, but typically more abstracts, less structured and long-term focus. Examples of strategic planning decisions include synergies made possible throughstrategic alliance, development, and refinement of firm capabilities and market opportunities, as wellas customer responsiveness to improved service. The system may employ an executive informationsystem (EIS) with drill-down feature to let executives dig more information from the layers below.




SCIS Application Architecture

Core Transactions Operations Application ModulesOperations include the transaction activities necessary to manage and process orders, operatedistribution facilities, schedule transportation, and integrate procurement resources. This process iscompleted for both customer and enterprise replenishment orders. Customer orders reflect demands

placed by enterprise customers. Replenishment order control finished good movement betweenmanufacturing and distribution facilities. This core SCIS application make extensive use of EDI and

bar code technology.

Customer’s order will be processed. If the desired product is available in the inventory, the productwill be shipped accordingly. But if the product is not available, a schedule for production has to bemade, which later may trigger procurement process. Not those other modules, which sometimesconsidered external to SCIS such as MRP (Manufacturing Requirement Plan) module, will definitely

be affected by the SCIS.

Management Control ModuleIn order to monitor the transaction layer applications, reports to the supervisors are generated. Someof the application in this level differs for interaction required. Some application will report instantlyfor every new order entered, and always require manual intervention for approval. Such systems donot illustrate the exception-based criteria discussed earlier, since all replenishment orders requireexplicit approval. Applications that are more sophisticated automatically place replenishment ordersand monitor their progress through the replenishment cycle. The sophisticated applications illustratea more exception-based philosophy, since planners are required to intervene only for “exceptional”replenishment orders.

One of the concerns of this application is to measure whether the customer service level established by the management has been achieved or not. Naturally, it involves measuring other modules as wellsuch as inventory level, turn over and productivity level. In some implementation, the control systemapplication may involve some low level decision support system, forecasting, or planning features.The division stated in this paper is not meant to be rigid.

Decision, Forecasting and Planning ModulePlanning, decision-making and coordination include the activities necessary to schedule

procurement, production, and logistic resource allocation throughout the enterprise. Specificdecision includes managerial objectives, determination of logistics, manufacturing, and procurementrequirement.




Another integral part of DSS, is modeling and simulation module. Modeling can be defined as the process of developing a symbolic representation of a total system. A model must accuratelyrepresent the ‘real world’ and be managerially useful. For example, for some reason the demand of acertain product drops, the model should give some suggestion how much the procurements for

production need to be reduced. Simulation is a technique used to provide a model of a situation so

that management can determine how the system is likely to change through the use of alternativestrategies.

The model is tested using known facts. By utilizing expert system, modeling & simulation tools,DSS can forecast and predict appropriate inventory level, procurement, or distribution strategies.

Strategic Planning ApplicationsThe Executive Information System (EIS) allows executives to see critical information at a glance.EIS is a critical management tool that allows users to visualize up-to-the-minute company status inone quick and easy to read reference. EIS data is displayed graphically, and the information or thegraph can be viewed from a different angle. A summary form displays the crucial data elements of the company on asingle screen, and allows for drill-downs to detailed information. EIS has bring theinformation of SCIS to the executive managers. Performance and best practice can be charted across

areas such as sales, billing, parts, scheduling, stock control, and materials. Managers responsible for one of these parts of the business can look at their own cube view and analyze historical and currenttrends.

SCIS Supporting Technologies and Application

InternetThe Internet enhances the communications capabilities both within organization and between theorganizations. Using the Internet is simply another step in the long path to seamlessly connectingevery process in the business operation to integrate operations better. Whether by the web, EDI,satellite communications or cell phone, information that is available in real time and in advanceallows synchronization of operations and advanced planning. The Web's impact however is changing

competitive relationships. For example, smaller firms frequently cannot afford to invest in EDI, butthe threshold cost of entry into the Web is relatively inexpensive and can be rapidly implementedand access is nearly universal. Access to technology via application service providers (ASP) makessophisticated supply chain software more accessible to small as well as large companies. Thethreshold cost of adopting modern technology is lowered encouraging adoption of technology andagain, there is easier access to technology to smaller business, increasing their competitiveness withlarger competitors. EDI is currently being used for all of the most common business transactionssuch as purchase

Electronic Data InterchangeEDI is currently being used for all of the most common business transactions such as purchaseorders, invoices, quotes, bills of lading, electronic fund transfer (EFT), status report, and receivingadvice. It is also used for some very specific transactions such as residential mortgage insuranceapplications, healthcare claim payments, and material safety data sheets. EDI has replaced manytraditional modes of transmission of documents, such as mail, telephone, and even faxes.

Bar CodingEveryday we use bar codes in our daily life. When we buy any product from supermarket they will

put the bar codes and scan it and on the operating side, the scanning of the bar codes will reduce thestock and it will trigger the ordering tick. These bar codes will help a lot in logistic and supply. Bar




codes technology is advancing rapidly replaced many traditional modes of transmission of documents, such as mail, telephone, and even faxes.

Freight Information and Tracking SystemThe idea of ‘extending the conveyor belt’, is that the extensive use of logistics information systemwill eventually lead to minimal warehouse usage. Naturally, if most of the goods are not in the

warehouse, they must be moving somewhere. Actually, the goods are being distributed to somedestination. This is why there is a need to have an efficient and effective freight transportationsystem to ‘extend the conveyor belt’. To accomplish this objective, the freight information andtracking system is very important.

Manufacturing Resource Planning (MRP I)In some SCIS scenario, the computer based Manufacturing Resource Planning (MRP) I is used tointegrate both production and inventory control system. The objective is to minimize inventorieswhile maintaining adequate materials for the production process. MRP I systems offer manyadvantages over traditional systems, including: improved business results, improved manufacturing

performance results, better manufacturing control, more accurate and timely information, lessinventory and less material obsolescence, etc. But MRP I does have a number of drawbacks. It doesnot tend to optimize materials acquisition costs. Because inventory levels are kept to a minimum,

materials must be purchased more frequently and in smaller quantities. This results in increasedordering costs and higher transportation bills. And in one word, each unit costs higher, because thefirm is unlikely to get a large volume discounts. That’s why, it is very important to make use suchefficient & effective freight transport system.

Enterprise Resource Planning (ERP / MRP II)Enterprise Resource Planning (ERP) software products are designed to be the vehicle for companiesto control, monitor and coordinate the activities in all of their locations. This application sitssomewhere between the Executive Information System (EIS) and the lower specific DecisionSupport System application (such as the previously mentioned SCIS DSS).

It was a concept developed by Gartner Group describing the next generation of manufacturing business systems and manufacturing resource planning (MRP II) software. Beyond the standard

functionality that is offered, other features are included, e.g., quality, process operationsmanagement, and regulatory reporting. In addition, the base technology used in ERP will give users

both software and hardware independence as well as an easy upgrade path. Key to ERP is the way inwhich users can tailor the application behavior so it is intrinsically easy to use.

The ERP management methodology builds on the theory that an enterprise can maximize its returns by maximizing the utilization of its fixed supply of resources. And information technology, with itsincreasing computer power and the ability to correlate pieces of information, has proven to be the

best tool to do so.

Supply Chain Management Available Product-shape Solutions

These software solutions usually, Includes demand forecasting tools and planning capabilities toallow all supply chain members to coordinate their activities and adjust their production levels

Firms offering SCM software:

o i2 Technologies RHYTHM

o Manugistics




Pull System

Successful integration enables the supply chain to move from a push to a pull fulfillment strategy.The traditional model of a push supply chain had been to forecast demand, produces the product for stock and locate it close to the customer to meet demand. This achieved production andtransportation cost efficiencies but at the expense of holding large inventories. Pull systems, such as

assemble to order or build to order, result in postponing the production of the product or holdinginventories as upstream in the supply chain as possible. Pull systems are more responsive to actualcustomer demand and result in the movement of smaller quantities more frequently. Quick responsein retailing, efficient consumer response in grocery, stockless inventory in health care, JIT inmanufacturing is examples of pull strategies.

Improved Planning and Execution of Processes through Collaboration

Modern supply chains operate on information, including the status of goods in transit. With thisvisibility of moving or standing inventory, various participants in the supply chain can plan andsynchronize their processes better. This requires logistics service providers to have the capability totrace and track shipments under their control and making this information readily accessibleinternally and to customer or supply chain collaborates. The availability of up to date informationabout demand leads to better forecast accuracy and a clearer understanding about downstreamdemand. This leads to fewer rush orders which require costly expediting by premium transportationand greater consolidation possibilities.

The visibility of inventory while it is in transit also improves distribution efficiency and reduces

inventories. For example, there is a demand for a product that is not in stock at a warehouse location.That location orders additional inventory even though there is inventory in transit that would meetthe need. Knowing that there is inventory in transit and whether it would arrive in time to be usedcan reduce the safety stock held in a specific location, reduce unnecessary inventory ordered andreduce expediting of product.

Manufacturers gain significant operational benefits from information sharing and collaborativeforecasting. Knowledge of actual sales and better forecasts of actual consumer sales enables themanufacturer to reduce the "bullwhip" effect, level their production of finished goods and plan their




Supplier and Customer Selection and Relations

As the term implies, supply chains are actually made up of a number of links that are connected tomake a stronger chain or, in the case of business, a more profitable company. Unfortunately, many

businesses looking to streamline their production and cut their costs by updating their supply chainsleave out some of the critical links in the chain. When any link is not figured into the big picture,

problems arise and the supply chain does not function smoothly.

Software Planning and implementation

The first part of making an effective supply chain understands the different links involved. The firstof these links, software, is often the one most frequently ignored by businesses since it all beginswith a great deal of careful planning. Because supply chains are complex and are important to theoverall success of a company's operations, businesses must make sure that they know what resourcesare involved and know how to measure their system's effectiveness once it is in place. Part of the

planning also involves selecting the individuals who will be in charge of setting up, implementing,and overseeing the supply chain system once it is ready.

One of the biggest problems many supply chain management systems face is a lack of quality data.Many businesses simply fail to realize that the supply chain results can only be as good as the datathe system or software is using.

Cost Involved

To take advantage of so many benefits of supply chain systems, companies must be willing to footthe costly bill that goes with implementing the technology. The combined costs of the software, thehardware, the consultations, and the training for some companies could cost millions to put in place.Even though that amount of expenditure may seem high when the economy is in uncertain waters,companies who have completed the implementation successfully are generally pleased with theeffects it has had on their bottom lines.

Increased pressure on customer service and assets utilizations

While taking the advantage of so many benefits of supply chain systems, companies negativelyconsiders the increasing cost of depreciation of assets and customer service staff and supportingequipment due to optimal utilization.

The Global Supply Chain Issues

With increased globalization and offshore sourcing, global supply chain management is becoming animportant issue for many businesses. Because global supply chain management usually involves a

plethora of countries, it also usually comes with a plethora of new difficulties that need to be dealtwith appropriately. One that companies need to consider is the overall costs. While local labor costsmay be significantly lower, companies must also focus on the costs of space, tariffs, and other expenses related to doing business overseas. Additionally, companies need to factor in the exchangerate. Obviously, companies must do their research and consider all of these different elements as partof their global supply management approach.




overcome, another major issue may still loom ahead: finding real cost-reduction in the supply chain.Unfortunately, the unanticipated costs of running the supply chain often surprise managers and forcecompanies to make some tough decisions. Thankfully, understanding what causes or drives thesecosts is half the battle.

Overall supply chains can be tremendous assets to companies and their vendors, but they often come

with a price. Businesses must be willing to change their attitudes, their routines, and their ideas of how things need to run. A failure to do this means that not only will the supply chain fail, but the businesses involved will likely lose a great deal of money in the process.

The scope of SCM keeps growing within a company and across enterprises, and the demand for effective planning and execution makes it extremely difficult to dismiss new technology and cling totraditional solutions over the long term. Operations research provides excellent procedures for

planning at strategic, tactical and operational levels, and supply chain software companies contributeto further adoption of Operation Research procedures. We need to understand and benefit from thelessons companies learned in the past five years and keep pushing for a ssuccessful collaboration of the fields of IT and Operation Research and their joint contribution to supply chain management.

Because the supply chain is so wide reaching, its success depends on nearly all departments within acompany. However, the effort to improve supply-chain performance must be driven by top senior management. Since the supply chain has become the key opportunity to gain competitive advantage,senior management needs to constantly remind their organizations that an improved SCMIS

performance is a business issue, not a logistics or computer systems issue.


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