Mis In Scm- Project Report

Introduction to Supply Chain Management Supply chain management is concerned with the efficient integration of suppliers, factories, warehouses and stores so that merchandise is produced and distributed: – In the right quantities – To the right locations – At the right time In order to – Minimize total system cost – Satisfy customer service requirements Fierce competition in today’s global markets, the introduction of products with shorter life cycles, and the heightened expectations of customers have forced business enterprises to focus attention on, their supply chains. This has been made easier by the use of software for managing the demand and supply chain. Using supply chain software, a manufacturer can communicate with his suppliers constantly about the raw materials required for production. This enables the supplier to plan and supply the raw materials according to the manufacturer’s demand. On the other hand, demand chain software provides the channel members and the employees of a manufacturer with accurate and up-to-date information about the goods and services available with the manufacturer, their prices, the distributors and the suppliers in a particular region. Supply chain management is a set of processes which helps organizations develop and deliver products. A supply chain comprises of multiple companies working together as a single entity with complete transparency of information and accountability between them. Through the supply chain, the flow of information, material and payment between the business entities takes place. The product flow describes the processes involved in transforming raw materials into finished goods. The information flow describes the future requirements (raw material, tools, products etc.) and the order delivery status. Supply chain management also involves the integration of ad hoc and fragmented processes into a consolidated system. Process optimization helps organizations reduce the total cost of the order to delivery process by trading off inventory, transportation and distribution costs. Though traditional optimizations methods help reduce costs, they can’t handle real life interdependencies between processes. If the business applications are not integrated retailers, manufacturers, distributors and other business entities will only be able to reduce their direct cost and not the operational costs. Till large scale optimization models were developed, the visibility of information required to synchronize supply chain operations was minimal. Inadequate information visibility led to excess inventory and huge transportation costs. But now organizations are well equipped with sophisticated tools like Rhythm from i2 technologies and advanced planning and optimization tool from SAP. These technologies 1

help the organizations predict demand, convey inventory levels and solve transportation costs.

ProcessView Of SupplyChain Supply ChainPlanning InformationFlows

supplier

Product Flows

Manufacturing

Product Flows

Distribution

Product Flows

Retailer

Product Flows

Payment Flows

Supply Chain

Advanced Planning and Scheduling Systems 2

customer

The supply chain influences all aspects of organization. Managing all supply chain activities efficiently is an important task for an organization. For Long, companies have been evaluating various ways to meet the delivery promises made to the customers. For this, they have been using technology systems like MRP, MRPII and ERP. However, these systems have their own shortcomings. For a given manufacturing scheduled, these systems could not take into account the actual availability of production resources such as raw materials. These systems did not take into account the delays that could occur in procuring the raw material. The forecasts made by these systems were not hundred percent accurate. Developed in the early 1990s, Advanced Planning and Scheduling (APS) systems work on the principles that if the information relating to all the entities in a supply chain – suppliers, manufacturers, retailers and business partner – is integrated and made available to all other entities, it will result in the production of the right production the required quantity with the required number of people and on-time delivery to the customer. These applications aim to reduce the inventory that a company stocks through accurate forecasting, near perfect scheduling and reduced cycle times. Customer satisfaction levels are increased as the good are delivery on-time due to increased efficiency in the distribution process. APS consists of information technologies – software and hardware, business processes, and tools for measuring performance. The information technology allows communication flow between the manufacturer and the supplier. An APS system is implemented either as a stand-alone solution or integrated with an enterprise system. The enterprise system for smaller companies may be accounting packages, while for medium and large companies they could be ERP systems. An APS systems includes a number of software solutions for different problems. The price of an APS systems ranges from US$50,000 to several millions depending on the functionality of the system.

Forecasting and Inventory Management 3

Manufacturers invest substantial amount on maintaining inventory which consists of raw materials and finished goods. Thus managing inventory forms an integral part for any organization. Inventory management can be defined as the process of planning and controlling inventories in the supply chain of an organization. In other words it is about maintaining a preferred stock of certain specified products. The objective behind inventory management is to optimize inventory investment, manufacturing, profitability, distribution, operations and return on investment. Forecasting of inventory is another problem that the companies face which leads to excess or insufficient inventory. Hence, forecasting inventory is requirements accurately forms the core of an efficient inventory management system. It is important for a company to make appropriate decisions as far as its inventory is concerned. This affects the company’s strategic goals i.e. its profitability and competitiveness. A company which has good inventory management system can utilize opportunities to improve its bottom line. A number of inventory forecasting software’s are available in the market which enable a manufacturer to forecast, plan and optimize inventory quickly accurately. Inventory forecasting softwares: 1. Valogix

VALOGIX® Inventory Planner is a next generation inventory forecasting and planning tool that will forever change the way you plan your inventory. VALOGIX Inventory Planner is a PC-based inventory planning software solution. It enables you to forecast, plan, and optimize inventory with less effort and more accuracy. And the application is affordable, fast, and easy to use. It is a smart system and does the complex computations for you. VALOGIX Inventory Planner determines which items to stock, which items to order, and which items are excess or overstocked. It manages an unlimited number of items and locations, and provides flexibility while different planning parameters allow more precise planning. VALOGIX Inventory Planner helps you manage by exception. The software’s intelligence provides “Alerts” of potential problems, before they occur... saving you valuable time and assisting you to avoid potentially serious Customer Satisfaction problems.

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VALOGIX Inventory Planner works on Windows based systems. VALOGIX Inventory Planner’s automated installation tool makes it fast and simple to install. Installations are scripted and supported by our professional staff. 2. Smart Forecasts

SmartForecasts delivers accurate sales and demand forecasts, improved demand planning, and optimized safety stock and inventory levels for thousands of managers and planners in a wide variety of industries. Manufacturers, distributors, and retailers can easily create accurate demand forecasts for each product item they produce and sell. They can also optimize their inventories with accurate reports of item-specific safety stock requirements necessary to hit the inventory “sweet spot” –the amount of inventory which minimizes costs while satisfying service level goals. SmartForecasts accomplishes all this at processing speeds exceeding 250,000 items per hour on a standard Windows workstation. You can integrate SmartForecasts directly with all major ERP and SCM systems, as well as host databases such as Oracle, SQL Server and IBM DB2.

Two editions of Smart Forecasts software: Smart Forecasts Enterprise Smart Forecasts Commercial

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Visibility across Supply Chain Typically supply chain partners do not share their business information with other partners. For example a manufacture does not share his production details with his suppliers. This leads to difficulty for the supplier to plan his production process. Visibility across supply chain means integrating information on the suppliers’ rate of productio0n, lead times and the manufacturers’ requirements of raw materials to optimize the business processes and increase overall efficiency of the supply chain. From manufacturers point of view visibility refers to his ability to track the performance of suppliers. Distrust between supply chain partners, cost of integration and technology limitations of supply chain partners are some of the reasons for reduced visibility across the supply chain. Increase in visibility helps in cutting down growing competition. It also helps in better inventory management and cost savings. A manufacture can respond to sudden changes in the supply and demand change in the market if proper visibility is maintained. It provides a centralized control and visibility across orders, shipment and inventory processes. It also helps the customers with online tracking of their order status.

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Collaborative Planning, Forecasting and Replenishment Developed by the voluntary Inter-industry Commerce Standards Organization (VICS), Collaborative planning, forecasting and replenishment (CPFR) is the sharing of business information such as promotional planning and merchandising planning among the business chain partners for errorless forecasting and automatic replenishment of goods. CPFR aims to improve the flow of goods from the suppliers to the manufacturer and finally to the retailer. It identifies errors in the forecasts relating to the ordering and inventory management functions of the organization. Under CPFR, the manufacturer’s business information such as sales history and planned sales is collated with the suppliers’ information such as availability of raw materials and lead times. Both are integrated and the information is used to draw up an efficient plan of raw material supply, thus improving the profitability of all supply chin partners. Once deployed, the CPFR system allows both the manufacturer and the supplier to access information through the internet. The supplier can constantly monitor the manufacturer’s inventory levels and whenever the stick with the manufacturer falls below a certain fixed level, the CPFR system signals the supplier by sending an automatic email. The supplier then suppliers the required stock and thus an efficient replenishment system is put in place. In the 1990s, the global communications leader Motorola faced problems in meeting customer demand during year-end shopping seasons. Distributors regularly overorder for the shopping season, and therefore Motorola had to maintain huge inventories, just to handle these large orders. This left Motorola with a lot of inventory after the season. To avoid this, Motorola deployed a CPFR system in its personal communications division in August 2003. The system was developed by Manugistics Group Inc., an SCM specialist. The system helped Motorola to collaborate with its suppliers and customers to improve the efficiency of the forecasts, reduce excess inventory and improve customer service. The collaboration was further extended to other areas like designing and managing sales promotions and developing new products.

CPFR Model The CPFR model presents the aspects in which industries focus. The model provides a basic framework for the flow of information, goods, and services. In the retail industry the “retailer typically fills the buyer role, a manufacturer fills the seller role, and the consumer is the end customer.” The center of the model is represented as the consumer, followed by the middle ring of the retailer, and finally the outside ring being the manufacturer. Each ring of the model represents different functions within the CPFR model. The consumer drives demand for goods and services while the retailer is the provider of goods and services. The manufacturer supplies the retailer stores with product as demand for product is pulled through the supply chain by the end user, being the consumer.

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Some of the main processes shown in the model can be found in the second ring that has arrows in a circular pattern. This is displayed with collaboration arrangement, joint business plan, sales forecasting, order fulfillment etc. This stage will be described in detail below: “Strategy & Planning, Collaboration Arrangement is the process of setting the business goals for the relationship, defining the scope of collaboration and assigning roles, responsibilities, checkpoints and escalation procedures. The Joint Business Plan then identifies the significant events that affect supply and demand in the planning period, such as promotions, inventory policy changes, store openings/closings, and product introductions.” “Demand & Supply Management is broken into Sales Forecasting, which projects consumer demand at the point of sale, and Order Planning/Forecasting, which determines future product ordering and delivery requirements based upon the sales forecast, inventory positions, transit lead times, and other factors.”

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“Execution consists of Order Generation, which transitions forecasts to firm demand, and Order Fulfillment, the process of producing, shipping, delivering, and stocking products for consumer purchase.” “Analysis tasks include Exception Management, the active monitoring of planning and operations for out-of-bounds conditions, and Performance Assessment, the calculation of key metrics to evaluate the achievement of business goals, uncover trends or develop alternative strategies”. Eg. Wall-mart supply chain and logistics management.

VICS CPFR Model: Establish the ground rules for the collaborative relationship. Determine product mix and placement, and develop event plans for the period. •

Collaboration Arrangement o Setting the business goals and defining the scope for the relationship o Assigning roles, responsibilities, checkpoints and escalation procedures

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Joint Business Plan: o Identifies the significant events that affect supply and demand, such as promotions, inventory policy changes, store openings / closings, and product introductions.

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Collaborative Design For the purpose of reducing product cycle time and lead times of new product, companies are looking at new ways of designing products. Under collaborative designing, product development teams and individuals spread across different geographical locations collaborate with each other through internet to arrive at a product design. Collaboration in business can be found both inter- and intra-organization and ranges from the simplicity of a partnership to the complexity of a multinational corporation. Collaboration between team members allows for better communication within the organization and throughout the supply chains. It is a way of coordinating different ideas from numerous people to generate a wide variety of knowledge. The recent improvement in technology has provided the world with high speed internet, wireless connection, and web-based collaboration tools like blogs, and wikis, and has as such created a "mass collaboration." People from all over the world are efficiently able to communicate and share ideas through the internet, or even conferences, without any geographical barriers. For example: we can take the example of Wal-Mart, the communication is such like that if one store lacks in some product or fall of sales of some product occurs then the nearest shop where that product has high sales , the second will call for that product to the first shop.

Supplier relationship Management The efficiency of a company depends on its ability to communicate with its suppliers and other channel partners. In the industry, different components and materials holds varying levels of importance in the production process. Also the relation with suppliers and different channel partners also varies. There are two types of relationship between supply chain partners: 1. Commodity based relationship 2. Strategic relationship

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Commodity Based Supplier Relationship Companies are often negligent in maintaining relationship with the supplier of Commodities .Price is the major factor that influences the purchasing decision for commodity products. Other factors include the physical proximity of the supplier customer services offered by him the level of quality required and the quality maintained by the supplier .Most of Commodities required by the companies are available several suppliers. Thus the companies can easily switch from one supplier to another supplier in case of any problems with the existing suppliers. Therefore companies do not pay much attention to relation with commodity suppliers, so that they can retain their flexibility. However Companies can obtain consistent quality and reliable delivery of commodities through strong relationship with the commodity suppliers. They can also reduce costs by choosing different procurement methods for purchasing direct material and indirect material.

Traditional direct commodity relationships Purchasing department often focus more on the procurement of direct material than indirect material. They consider cost as well as the ability of the supplier to deliver product on time in their commodity purchasing decision .they also have agreements with the supplier to ship the commodities on consignment enabling them to pay only for the amount of material actually used in production .The department purchase from a particulars as long as the he deliver the commodity at a price agreeable to the former. That is the supplier of Commodities and supplier of indirect material are treated alike .Long term relationship are not maintained by companies with either of them. 11

Companies require their supplier to deliver the right product at the right time. This means that they should not have insufficient inventory at certain times and the surplus inventory at other times. However often for various technician and non technician reason, companies are unable to communicate information about last minute changes in production schedules and material requirement to the suppliers. Sometimes the supplier fail to ship the material on time .To accommodate such contingencies companies and suppliers tent to maintain inventory levels higher than the required levels, leading to accumulation of inventory.

Enabled direct commodity relationship: Product scheduling and purchasing of direct commodities can be significantly improved through E- business .It enables companies to share forecasts inventory. Information and production schedules electronically with the supplier .Instead of stacking up inventory, information flows help maintaining just adequate inventory. The real time exchange of information between the suppliers and the company allows them to Co-ordinate their activities respond to current changes in demand and supply effectively and plan or possible changes in the future. Companies can improve the efficiency of their material management system by collaborating with key suppliers. They may adopt an E-nabbed Vendor Managed Inventory (VIM) system to allow the key suppliers to determined inventory requirement replenish the inventory from time to time and send shipment notices VIM reduces the cost and cycle time of commodity purchase minimize the need of human interference and chance of wrong or missed deliveries .however the success of VIM depends on company willingness to share information such as demand forecasts current inventory level and logistic information with its suppliers. An important force in the micro environment of company is the supplier i.e. those who supply the input like raw material and components of the company. Eg: NIRMA & TATA MOTOR Because the sensitivity of suppliers companies like NIRMA & TATA MOTOR goes for Backward Integration .In Backward Integration Company expand its actives towards the supply of raw material or components.

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Strategic Supplier Relationships To run a good business, company should always be act as a good communication unit. As we know company deals its business not for their purposely only but for the welfare of the other companies to. Many companies focus on maintaining relationships with the suppliers of key components critical in their manufacturing process. Maintaining good relationship with suppliers gives various advantages to manufacturing company also and to the supplier to. Advantages like, Maintaining long term contract would enable the supplier to invest more and more in plants and machinery and other fixed assets and such investment leads to cost reduction for the manufacturer. It also helps in sharing risk, cost cutting and joint technology development. To obtain the right quantity and quality of parts at the right time manufacture therefore should be in regular touch with the supplier. Sometimes company outsourcers some components to external manufactures. These manufacture or out sources manage many operations of the company s value chain and thus become important business partners. Certain outsourcers may manage the same operations for other companies also. Many a time’s manufacture and supplier relationship doesn’t work because of the reasons like

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Mostly in the trading market industry if the supplier is the leader in that industry then he is not inclined to develop a long - term relationship with the buyer due to his status. The efficiency of the supplier plays an important role in building a long term relationship. If the supplier is not capable of providing better equipment or technology, manufactures shift to others suppliers terminating the relationship.

Traditional strategic component supplier relationship In the traditional set up, the company sends its agent to discuss details with the supplier and finalize design specification, price and delivery schedules before the production of a critical component begins. As production gets under way too, the company needs to contact with supplier every now and then because so that necessary changes can be done in manufacturing process. If cases where suppliers reside far away from the manufactures, manufacturing companies need to acquire the technology of facilitate real-time communication with the suppliers. These two parties have to communicate regularly whether there are obstacles in demand forecast and production. it will be dangerous if the company doesn’t inform the changes in demand the supplier will not able to serve the company effectively E-enabled strategic component supplier relationship: To launch their product ahead in market against their competitors they need to contain product development cost and maintain low prices. E-business technology brings easier to process the components and bring down their cost. It also collaborate with the strategic components suppliers so that new and improved components can be designed .through these new technologies , the company can be in constant contact with the supplier regarding product specification , changes in design , inventory , pricing , demand forecast and production schedules , but at much lower cost than the traditional communication methods. Modern supply chain tools provide a number of features that enables a company to manage supplier relationship, multi-organizations collaboration and inventory cost. They automate much of the negotiation process and, make online bidding much easier for the both the parties. Such technology is necessary in developing longterm relationships, since locating strategic components suppliers and especially those who meet high standards of quality is difficult. For the better communication and proper delivery and acceptance of goods and materials many companies nowadays using software’s and different kind of system. In olden days during 80’s and 90,s many firm used old and traditional technique to

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communicate with the intermediaries, but now the scenario has changed many organization run their business in proper format as well as use easy technology. Examples of Strategic Supplier Relationship Bose Corporation: Bose Corporation has attempted to eliminate both purchasers and sales people by bringing suppliers into the manufacturing process. Suppliers have access to Bose’s data, employees and processes. They work with Bose’s engineers on present and future products. The reduction in personnel reduces costs for both sides, and a direct contact between the user and producer enhances quality and innovation. JC Penny and Levi Strauss: JC Penny and Levi Strauss (Levi’s) are linked with an electronic Data interchange (EDI) that allows Levi Strauss to obtain sales data. Levi Strauss obtains data on the exact size of jeans sold in individual stores. This data allows Levi Strauss to better plan the production process as well as better control inventory and delivery. This saving leads to a reduction in costs and prices benefiting both JC Penny and Levi Strauss.

Integration of SCM with Legacy Application Supply chain solution typically integrates planning and execution capabilities. But creating infrastructure for a real time supply chain has become increasingly difficult because of continuous improvement in technology and the increases in the number of partner for any given firm. Supply chain application should be designed in such way that they are compatible with the existing .ERP system at other business functions and other legacy system existing in a firm .The supply chain solution need to use the ERP system integrated the function and information in more than one organization at time .An important decision in SCM is the choice of new technologies by predicting the capabilities that are likely to be required to service customer in the future. The supply chain enables a company to provide its suppliers real time access the demand information .When the company headquarter its forecasts the demand the statistics are made available to all the partner and suppliers across the global along with the production schedule and customer order information. Any subsequent changes are updated so that the activities are synchronized. Thus the supply chain achieves complete integration of partner and suppliers and enables the company to more receptive to changes in customer preferences and to manufacture and to manufacture and deliver the product on time.

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For successful supply chain management it is essential that organizations shift from an enterprise-centric to a partnership-centric business model. For this organization need to integrated their operations and strategies with inventory increase those of their trading partner suppliers and customers. Excess the cost of production and this made many organizations such as Wal-Mart and Intel streamlines their supply chain. The distribution and retailers are the closest to customer and hence they get accurate consumption information .If this information is used with the appropriate replenishment optimization software manufacturing organizations can estimate future demand and plan their production accordingly .Moreover with growing customer awareness about buying options companies have to meet the challenges of product customization. As the customer order cycle has become unpredictable companies such as Dell have developed a build to order strategy using e- business technology

Types of Inter-Enterprise Integration The extent supply chain integration affects the performance of an organization. For high performance and efficiency, a tightly-coupled chain needs to be designed. Inter-enterprise integration is possible through three types of supply chain responsive, enterprising, and intelligent. Responsive supply chains enable quick response to customer requirement. This is also called available-to-promise (ATP) as the commitment to deliver is made on the basis of the available of the inputs .Hence, companies’ adoption the build-to –order. ATP tracking monitors material availability in the enter supply chain and thus facilitates checking material availability, assigning delivery dates and finally meeting the delivery schedule. Enterprising supply chain aim to bring about changes in the supply chain in response to changes in customer demand as quickly as possible. To compete effectively, companies should respond quickly to changing market condition and customer preference. This requires two ways integration (up and down) in the supply chain

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Intelligent supply keep fine-turning the weak links (to make them strong) in the supply chain on the basis of changing market condition to gain competitive advantage over other. Eg. Banking Industry. The following situations are indications of lack of integration between planning and execution: • • •

Inconsistent customer service because of too high and too inventory levels No demand forecast or analysis of the impact of demand on production due to lack of trust between production and marketing department Too many stock-outs because improper inventory management

The major problem that companies face in supply chain management is the lack of integration between different processes. Hence, companies should ensure efficient, collection, structuring and sharing of information in the supply chain. They should also make use of enterprise-level software application for collaboration planning and execution. ERP provides the necessary support for the SCP (supply chain planning) modules. With the help of ERP, SCP processes can determine the demand for a product, the raw materials required, the time taken to manufacture and deliver the product and the inventory stock of the finished goods and raw materials. SCP application should be flexible enough to accommodate multiple planning strategies like profitable-to-promise, available-to-promise, etc. several variable like pricing, production schedules, and transportation schedules are affected whenever a customer requires a few changes in the order placed.. An SCP application records these changes and makes them visible to all the people involved in the process. This makes it possible to coordinate the delivery schedules, promotion schedule, etc since it acts as a single information source, different department can coordinate their activities optimally.

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RFID Technology Technologies changes are occurring faster than ever in this decade. Supply chain applications affected by these changes. For instance, the introduction of barcodes enabled retailers to track customer demand by using point -of -scale scanners which capture information accurately at a lower cost. The same information can be shared and provided to supply chain partners on a real-time basis bringing down the cost of providing such information drastically. Radio frequency identification (RFID) is a technology through which stored data can be remotely retrieved. The use of RFID technology to track the movements of goods started in the 1980s and quickly became popular. RFID technology uses a small device called a tag which contains a microchip and an antenna. There are several methods of identification, but the most common is to store a serial number that identifies a person or object, and perhaps other information, on a microchip that is attached to an antenna (the chip and the antenna together are called an RFID transponder or an RFID tag). The antenna enables the chip to transmit the identification information to a reader. The reader converts the radio waves reflected back from the RFID tag into digital information that can then be passed on to computers that can make use of it.

Key components of RFID: 19

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An RFID tag consists of a microchip attached to an antenna. RFID tags are developed using a frequency according to the needs of the system including read range and the environment in which the tag will be read. Tags are either active (integrating a battery) or passive (having no battery). Passive tags derive the power to operate from the field generated by the reader. An RFID reader, usually connected to a Personal Computer, serves the same purpose as a barcode scanner. It can also be battery-powered to allow mobile transactions with RFID tags. The RFID reader handles the communication between the Information System and the RFID tag. An RFID antenna connected to the RFID reader can be of various sizes and structures, depending on the communication distance required for a given system's performance. The antenna activates the RFID tag and transfers data by emitting wireless pulses. Frequency Band

Description

Range

125 - 134 KHz

Low Frequency

To 18 inches

13.553 - 13.567 MHz *

High Frequency

3 - 10 Feet

400 - 1000 MHz

Ultra-high Frequency

10 - 30 Feet

2.45 GHz

Microwave

10+ Feet

An RFID station, made up of an RFID reader and an antenna. It can read information stored into the RFID tag and also update this RFID tag with new information. It generally holds application software specifically designed for the required task. RFID stations may be mounted in arrays around transfer points in industrial processes to automatically track assets as they are moving through the process.

RFID tags are attached to manufactured products. The tags emit signals that are read using transmitters. These transmitters are connected to the ERP systems in the company. When the product with the RFID tag passes through an electro-magnetic zone, the tag responds to the reader’s signal and transmits the information back to the reader. Thus, accurate information reading the movement of goods from the suppliers’ plants to the distribution centers and finally to retail stores, is captured in real time. RFID is most commonly used in retail businesses. RFID provides benefits to both retailers and their suppliers by tracking the movement of a product from the time of production stage to the stocking stage, to the point where the end-customers purchases it. By keeping products with RFID tags on shelves with built-in readers, the movement of the tagged product is monitored and communicated to the computers in the stores. Thus the stock situation is brought to the notice of the concerned department constantly and

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replenished accordingly. This reduces the amount time the employees put into monitoring stock levels.

Applications of RFID •

Asset management 21

RFID tags can be permanently attached to capital equipment and fixed assets. Fixed position readers placed at strategic points within the facility can automatically track the movement and location of tagged assets with 100 percent accuracy. This information can be used to quickly locate expensive tools or equipment when workers need them, eliminating labor-wasting manual searches. Readers can be set to alert supervisors or sound alarms if there is an attempt to remove tagged items from an authorized area. By tracking pallets, totes and other containers with RFID, and building a record of what is stored in the container as items are loaded, users can have full visibility into inventory levels and locations. With visibility and control, manufacturers can easily locate items necessary to fill orders and fulfill rush orders without incurring undue managerial or labor time. •

Production Tracking Manufacturers can reduce their working capital needs by taking advantage of RFID to provide greater visibility into work-in-process tracking and materials inventory. By applying RFID tags to subassemblies in the production process, rather than to finished goods, manufacturers can gain accurate, real-time visibility into work-in-process in environments where bar codes are unusable. Industrial control and material handling systems can integrate with RFID readers to identify materials moving down a production line and automatically route the items to the appropriate assembly or testing station.

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Inventory Control The main benefits to using RFID in the supply chain come from improved inventory tracking. Manufacturers, distributors, logistics providers and retailers can all use RFID for inventory applications, and in carefully planned systems, may share the same tags to reduce implementation costs. By using the highly accurate, real-time and unattended monitoring capability of RFID to track raw materials, work-in-process and finished goods inventory manufacturers can improve visibility and confidence into their inventory to enable overall inventory levels, labor costs and safety stocks to be reduced. To secure inventory from theft and diversion, readers could be set to sound alarms or send notification if items are placed in unauthorized areas of the facility or removed from storage without prior approval.

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Pricing and Promotion Demand and Revenue Management solutions track point-of-sale, on-shelf, and inbound inventory information to support real-time, store-level pricing and 22

promotion optimization. These solutions provide vendors running programs in stores with the ability to optimally price and promote their products according to inventory position and sell-through rates. Through RFID, manufacturers and retailers have real-time visibility to what items are selling versus those that are not. Also, product-specific attributes can be monitored in real time, including: o o o

Product spoilage Product expiration Product obsolescence

By receiving real-time updates to what products are selling, price lists can be monitored and updated. Additionally, you can develop and run markdown and promotional strategies based on market information telling you exactly what is happening at the point of sale. •

Shipping & Receiving The same tags used to identify work-in-process or finished goods inventory could also trigger automated shipment-tracking applications. Items, cases or pallets with RFID tags could be read as they are assembled into a complete customer order or shipment. The individual readings could be used to automatically produce a shipment manifest, which could be printed in a document, recorded automatically in the shipping system, encoded in an RFID tag, printed in a 2D bar code on the shipping label, or any combination. Having complete shipment data available in an RFID tag that can be read instantly without manual intervention is very valuable for cross-dock and high-volume distribution environments. Incoming shipments can be automatically queried for specific containers. If a sought-after item was present, it could be quickly located and selected.

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Regulatory Compliance Companies that transport or process hazardous materials, food, pharmaceuticals and other regulated materials could record the time they received and transferred the material on an RFID tag that travels with the material. Updating the tag with real-time handling data creates a chain of- custody record that could be used to satisfy regulatory reporting requirements.

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Returns & Recall Management Companies could supplement the basic shipment identification information by writing the specific customer and time of shipment to the tag immediately prior to distribution. Producing and recording this information would provide several benefits. In the event of a recall, companies could trace specific shipments to specific customers, which would enable a highly targeted notification and return operation and avoid a costly general recall. For general returns, companies could verify that the customer returning merchandise is actually the customer who

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received it, which would deter diversion, counterfeiting and other forms of return fraud. •

Service and Warranty Authorizations Authenticating the product and customer with proprietary information could also be used to authorize warranty and service work. Upon completion of repairs or service, a record of the activity performed could be encoded on the tag to provide a complete maintenance history that travels with the item. If future repairs or service are required, a technician could access the item's complete maintenance and configuration information without accessing a database simply by reading the tag. This application ensures workers have necessary information if no database access is available, and eliminates the need and expense of making phone calls or wireless data inquiries to access records.

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Transportation As with order management, RFID updates can drive substantial visibility and optimal adaptability to your transportation plan. Proactively detecting when an order is over, short, damaged, or incorrect enables you to take control of your transportation plan, which directly affects your financial and service level goals.

Advantages of using RFID 24

RFID technology, combined with the recent Auto ID initiatives led by the Massachusetts Institute of Technology, is gaining momentum. These advances offer a standardized and scalable approach that can be deployed across the extended enterprise to suppliers, manufacturers, distributors and logistics partners to provide very reliable and cost-effective visibility at the item, case or pallet level.

Concerns Surrounding RFID •

Privacy concerns Arguably the biggest concern about the RFID technology is the worry that it will infringe on the privacy of buyers. The RFID tags would be able to scan buyer behavior at the point of purchase and even after that. Many people consider it a breach of privacy. This is leading to a major public outcry against the use of RFID technology.

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High investment The initial investment by companies for adopting RFID is fairly large. So many organizations are shirking away from the idea of investing in RFID technology. There are others who are conducting an in depth cost benefit analysis before taking the plunge.

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Limited range So far the RFID technology has a limited range in terms of frequency. Therefore many are skeptical about the efficacy of the technology and are questioning the claims made by the developers.

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Health concerns Since RFID technology operates on the principle of radio frequency wave emission, health concerns are propping up. A long tem exposure to radio waves causes many diseases like cancer, ulcers and skin deformities.

Summary and Conclusion 25

Supply chain management is concerned with the efficient integration of suppliers, factories, warehouses and stores so that merchandise is produced and distributed in the right quantities to the right locations at the right time. It also involves the integration of ad hoc and fragmented processes into a consolidated system. Advanced Planning and Scheduling (APS) aims to reduce the inventory that a company stocks through accurate forecasting, near perfect scheduling and reduced cycle times. Customer satisfaction levels are increased as the good are delivery on-time due to increased efficiency in the distribution process CPFR aims to improve the flow of goods from the suppliers to the manufacturer and finally to the retailer. It identifies errors in the forecasts relating to the ordering and inventory management functions of the organization. Under CPFR, the manufacturer’s business information such as sales history and planned sales is collated with the suppliers’ information such as availability of raw materials and lead times. COLLABORATIVE DESIGNING: In collaborative designing, product development teams and individuals spread across different geographical locations collaborate with each other through internet to arrive at a product design. Collaboration in business can be found both inter- and intra-organization and ranges from the simplicity of a partnership to the complexity of a multinational corporation SUPPLIER RELATIONSHIP MANAGEMENT COMMODITY BASED: Traditional direct commodity relationships: To accommodate Contingencies that occurs due to miscommunication in information between companies and suppliers. Suppliers tend to maintain inventory levels higher than required stocks, leading to accumulation of inventory. Enabled direct commodity relationships Product scheduling and purchasing of direct commodities can be significantly improved through E- business .It enables companies to share forecasts inventory. Information and production schedules electronically with the supplier .Instead of stacking up inventory, information flows help maintaining just adequate inventory Strategic Relationship: Traditional Strategic Component Supplier Relationship: 26

The manufacturing companies and suppliers have to communicate regularly whether there are obstacles in demand forecast and production. It will be dangerous if the company doesn’t inform the changes in demand the supplier will not able to serve the company effectively E-Enabled Strategic Component Supplier Relationship: The company can be in constant contact with the supplier regarding product specification, changes in design, inventory, pricing, demand forecast and production schedules, but at much lower cost than the traditional communication methods. INTEGRATION OF SCM WITH LEGACY APPLICATION Any changes in the company are updated so that the activities are synchronized. Thus the supply chain achieves complete integration of partner and suppliers and enables the company to more receptive to changes in customer preferences and to manufacture and to manufacture and deliver the product on time. Types of Inter-Enterprise Integration For high performance and efficiency, a tightly-coupled chain needs to be designed. Inter-enterprise integration is possible through three types of supply chain responsive, enterprising, and intelligent. Responsive supply chains enable quick response to customer requirement. This is also called available-to-promise (ATP). Enterprising supply chain aim to bring about changes in the supply chain in response to changes in customer demand as quickly as possible. Intelligent supply keep fine-turning the weak links (to make them strong) in the supply chain on the basis of changing market condition to gain competitive advantage over other RFID: RFID Technology and the underlying standards are readily available and mature enough to support production-level pilots. RFID will have substantial and positive impact on supply-chain performance. RFID will improve operating margins, speed the flow of inventory and improve supply-chain service levels. RFID-enabled supply chains will outperform their competitors with regard to operating cost and excellence of execution.

Bibliography 27

BOOKS: • • • • • •

Sunil Chopra and Peter Meindel. Supply Chain Management: Strategy, Planning, and Operation, Prentice Hall of India, 2002. Sridhar Tayur, Ram Ganeshan, Michael Magazine (editors). Quantitative Models for Supply Chain Management. Kluwer Academic Publishers, 1999. Effective SCM: Concepts and Cases by Londhe B R. Essentials of Supply Chain Management, 2nd Edition by Michael Hugos. Lean Logistics: The Nuts And Bolts of Delivering Materials and Goods by Michel Baudin. World Class Production and Inventory Management, 2nd Edition by Darryl V. Landvater.

WEBSITES: • • • • • • •

lcm.csa.iisc.ernet.in/scm/supply_chain_intro.html www.scmlowdown.com www.studentwebstuff.com/mis www.esnips.com www.businessinsights.biz www.sap.com www.cis.gsu.edu

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