Supply Chane Management

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Term Report

Management Information Systems

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Supply Chain Management Systems .

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Submitted to: Mr. Mohammed Faisal

By: Syed Asad Mehmood (MEN-2200475)

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Preface This Term Report provide me a great opportunity to learn and discuss the key components of a Supply Chain Management information system (SCMIS), its interaction with each other within SC and MIS, and their contribution to improve efficiency and coordination of firm. In this report, I also try 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 perspectives of information functionality and principles. Report will then continue on SCMSIS applications on the transaction systems, management control, decision analysis and strategic planning application. We will complement the discussion with SCMIS supporting technologies and applications. The conclusion will try to extract the major points in this report.

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

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Syed Asad Mehmood (MEN-2200475) MBA-Evening Program

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What is Supply Chain Management Set of linkages between suppliers of materials and services Overview Set of linkages between suppliers of materials and services that span the transformation of raw materials in products or services and delivers them to a firm’s customers is known as supply chain. Consultant Keith Oliver, of strategy consulting firm Booz Allen Hamilton in 1982, coined the term supply chain management. The dictionary meaning of Supply-Chain-Management is: Supply: To provide something that is wanted or needed, often in large quantities and over a long period. Chain: (a length of) rings which are connected together and used for fastening, pulling, supporting, or limiting freedom. Management: The control and organization of something The basic purpose of supply-chain management is to control inventory by managing the flows of materials. Inventory is stock of material used to satisfy customer demand or support the production of goods or services. Inventory exists in three aggregate categories. Raw Materials: Needed for the production of goods Work- in- Process: Consists of Items needed for the final product in manufacturing Finished Goods: Final product or Items ready for sale. An important part of this process is provision of the information needed for planning and managing the supply chain. This information comes from internal and external sources and is disseminated to decision makers through ERP (Enterprises Resource Planning) systems, which often contain supply-chain management systems as a module. The supply chain for a firm can be very complicated, because many companies have hundreds suppliers, and hundreds distributors, in which there can be so many layers, therefore, value of supply chain management system become apparent when the complexity of the supply chain is recognized. Successful Supply-chain management requires a high degree of functional and organizational integration. Such integration does not happen overnight, it required tremendous amount of time, efforts, and money also. The Integral supply chain provides a framework for the operating decisions in a firm. SCM provides interfaces between the internal supply chain and the customers and suppliers.

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Evolution of Supply Chain Management Firms willing to undergo the rigors of developing the integrated supply chains progress through series of phases, as shown in Figure 1.1. Phase 1: Independent Supply-chain entities

Phase 2: Internal Integration

Phase 3: Supply Chain Integration

Suppliers

Purchasing

Production

Distributio n

Customers

Suppliers

Purchasing

Production

Distributio n

Customers

Internal Supply Chain Material management department

Suppliers

Internal Supply Chain

Customers

Integrated Supply Chain Developing Integrated Supply Chain – Fig 1.1

During the past decades, globalization, outsourcing and information technology have enabled many organizations such as Dell and Hewlett Packard, to successfully operate solid collaborative supply networks 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, the choice of internal management control structure is known to impact local firm performance.

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In the 21s

In the 21st century, there have been few but very vital initiative trends in manufacturing business environment 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, following the 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 members of the supply chain network, that’s make supply chains an essential part of e-business.

Supply Chain System’s Business Process Integrations and the role of Internet Internet played a revolutionary role in integration of 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 chain management system.

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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 its customer’s operations, such as current inventory positions, future demands and production schedules, or expected orders for the firm’s product, suppliers’ location, price offered, enables firm to react effectively and efficiently. The revolution of Internet has dramatically changed the way companies serve their customers and deal with suppliers; it is the actual reason which revolutionized the integration of supply chain. In following 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 the external supply chains, which are not under the direct control of firm. The firm must change its focus from a product or service orientation to customer orientation, so that both benefit from improved flows material and services..

Order-placement process It involves the activities required to register the need for a product or service and to confirm the acceptance 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 the customer and the firm. It provides following advantages for a firm: Cost Reduction: It reduces the cost by allowing greater participation by the customer. Revenue Flow Increase: Can allow customer to use faster way of payments, like Credit 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 new catalogs; they can easily change prices on the web as the need arises.

Order-fulfillment process The activities required to deliver a product or service to a customer. Here, we have separated the order-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 enables order-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.

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Inventory Placement: Firm can make a fundamental supply-chain decision, where should distribution centers be added to position inventory closer to the customer? Postponement: Firm can avoid customization to the last possible moment, so that manufacturing process spends more of its time on standardized components and assemblies, which are less costly to produce.

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

Supplier Interface (Up Stream) Vendor Management Supply 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 inventory for use in profiling and negotiation

Procurement process Strategic plans are developed with suppliers to support the manufacturing flow management process and development of new products. In firms where operations extend globally, sourcing should be managed 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 to obtaining products and materials from outside suppliers. This requires performing resource planning, supply sourcing, negotiation, order placement, inbound transportation, storage, handling, and quality assurance. Also, includes the responsibility to coordinate with suppliers in scheduling, supply continuity, hedging, and research to new sources or programs.

Enterprise Level Interface (Internal) Product development and commercialization Here, customers and suppliers must be united into the product development process, thus to reduce time to market. As product life cycles shorten, the appropriate products must be developed and successfully launched in ever shorter time-schedules to remain competitive. According to Lambert and Cooper (2000), managers of the product development and commercialization process must: Coordinate with customer relationship management to identify customerarticulated 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.

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Manufacturing flow management process The 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 must accommodate mass customization. Orders are processes operating on a just-in-time (JIT) basis in minimum lot sizes. Also, changes in the manufacturing flow process lead to shorter cycle times, meaning improved responsiveness and efficiency of demand to customers. Activities related to planning, scheduling and supporting manufacturing operations, such as work-in-process storage, handling, transportation, and time phasing of components, inventory at manufacturing sites and maximum flexibility in the coordination of geographic and final assemblies postponement of physical distribution operations

Outsourcing/Partnerships This 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 company will increasingly focus on those activities in the value chain where it has a distinctive advantage and everything 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 specialists or logistics partners. Also, to manage and control this network of partners and suppliers requires a blend of both central and local involvement. Hence, strategic decisions need to be taken centrally with the monitoring and control of supplier performance and day-to-day liaison with logistics partners being best managed at a local level.

Performance Measurement Experts found a strong relationship from the largest arcs of supplier and customer integration to market share and profitability. By taking advantage of supplier capabilities and emphasizing, a longterm supply chain perspective in customer relationships can be both correlated with firm performance. As logistics competency becomes a more critical factor in creating and maintaining competitive 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 performance measurement realized improvements in overall productivity. According to experts internal measures are generally collected and analyzed by the firm including Cost Customer Service Productivity Measures Asset Measurement Quality

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Supply Chain Management Flows Supply 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 any customer returns or service needs. The information flow involves transmitting orders and updating the status of delivery. The financial flow consists of credit terms, payment schedules, and consignment and title ownership arrangements.

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. Execution applications track the physical status of goods, the management of materials, and financial information involving all parties.

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Some SCM applications are based on open data models that support the sharing of data both inside and outside the enterprise (this is called the extended enterprise, and includes key suppliers, manufacturers, and end customers of a specific company). This shared data may reside in diverse database systems, or data warehouses, at several different sites and ccompanies.

The Finance Flow By sharing this data "upstream" (with a company's suppliers) and "downstream" (with a company's clients), SCM applications have the potential to improve the time-to-market of products, reduce costs, and allow all parties in the supply chain to better manage current resources and plan for future needs. Increasing numbers of companies are turning to Web sites and Web-based applications as part of the SCM solution. A number of major Web sites offer e-procurement marketplaces where manufacturers can trade and even make auction bids with suppliers.

Supply Chain Management Information 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, management control, decision analysis, and strategic planning application. We will complement the discussion with 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 system This level is the heart of SCIS, which initiates and records individual logistics activities. Transaction includes order entry, inventory assignment, order selection, shipping, pricing, and invoicing and customer inquiry. Transaction system is characterized by formalized rules, large volume transactions and 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.

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Management Control - Management Information system This second level focuses on performance measurement and reporting to provide feedback. It is also important that SCIS be able to identify exceptions as they are being processed. Management control exception 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 requirements and anticipated receipts. Management control system includes the reporting module of inventory information system.

Decision Analysis - Decision Support system This third level includes decision applications to assist managers in identifying, evaluating, and comparing logistic strategic and tactical alternatives. Typical analysis includes vehicle routing and scheduling, inventory management, facility location, cost-benefit analysis of operational tradeoffs and 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 future tactical 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 SCIS emphasis shifts from efficiency towards effectiveness (i.e. identifying profitable vs. unprofitable accounts). Decision analysis system may include (obviously) decision support system (DSS), enterprise resource planning (ERP), artificial intelligence application, and simulation/modeling system.

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

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SCIS Application Architecture

Core Transactions Operations Application Modules Operations include the transaction activities necessary to manage and process orders, operate distribution facilities, schedule transportation, and integrate procurement resources. This process is completed for both customer and enterprise replenishment orders. Customer orders reflect demands placed by enterprise customers. Replenishment order control finished good movement between manufacturing 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 product will be shipped accordingly. But if the product is not available, a schedule for production has to be made, which later may trigger procurement process. Not those other modules, which sometimes considered external to SCIS such as MRP (Manufacturing Requirement Plan) module, will definitely be affected by the SCIS.

Management Control Module In order to monitor the transaction layer applications, reports to the supervisors are generated. Some of the application in this level differs for interaction required. Some application will report instantly for every new order entered, and always require manual intervention for approval. Such systems do not illustrate the exception-based criteria discussed earlier, since all replenishment orders require explicit approval. Applications that are more sophisticated automatically place replenishment orders and monitor their progress through the replenishment cycle. The sophisticated applications illustrate a 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 well such as inventory level, turn over and productivity level. In some implementation, the control system application 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 Module Planning, decision-making and coordination include the activities necessary to schedule procurement, production, and logistic resource allocation throughout the enterprise. Specific decision includes managerial objectives, determination of logistics, manufacturing, and procurement requirement.

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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 accurately represent the ‘real world’ and be managerially useful. For example, for some reason the demand of a certain 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 alternative strategies. 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 Applications The 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 in one quick and easy to read reference. EIS data is displayed graphically, and the information or the graph 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 the information 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 current trends.

SCIS Supporting Technologies and Application

Internet The Internet enhances the communications capabilities both within organization and between the organizations. Using the Internet is simply another step in the long path to seamlessly connecting every 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 advance allows 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, but the threshold cost of entry into the Web is relatively inexpensive and can be rapidly implemented and access is nearly universal. Access to technology via application service providers (ASP) makes sophisticated supply chain software more accessible to small as well as large companies. The threshold cost of adopting modern technology is lowered encouraging adoption of technology and again, there is easier access to technology to smaller business, increasing their competitiveness with larger competitors. EDI is currently being used for all of the most common business transactions such as purchase

Electronic Data Interchange EDI is currently being used for all of the most common business transactions such as purchase orders, invoices, quotes, bills of lading, electronic fund transfer (EFT), status report, and receiving advice. It is also used for some very specific transactions such as residential mortgage insurance applications, healthcare claim payments, and material safety data sheets. EDI has replaced many traditional modes of transmission of documents, such as mail, telephone, and even faxes.

Bar Coding Everyday 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 the stock and it will trigger the ordering tick. These bar codes will help a lot in logistic and supply. Bar

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

Freight Information and Tracking System The idea of ‘extending the conveyor belt’, is that the extensive use of logistics information system will 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 some destination. This is why there is a need to have an efficient and effective freight transportation system to ‘extend the conveyor belt’. To accomplish this objective, the freight information and tracking system is very important.

Manufacturing Resource Planning (MRP I) In some SCIS scenario, the computer based Manufacturing Resource Planning (MRP) I is used to integrate both production and inventory control system. The objective is to minimize inventories while maintaining adequate materials for the production process. MRP I systems offer many advantages over traditional systems, including: improved business results, improved manufacturing performance results, better manufacturing control, more accurate and timely information, less inventory and less material obsolescence, etc. But MRP I does have a number of drawbacks. It does not 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 increased ordering costs and higher transportation bills. And in one word, each unit costs higher, because the firm is unlikely to get a large volume discounts. That’s why, it is very important to make use such efficient & effective freight transport system.

Enterprise Resource Planning (ERP / MRP II) Enterprise Resource Planning (ERP) software products are designed to be the vehicle for companies to control, monitor and coordinate the activities in all of their locations. This application sits somewhere between the Executive Information System (EIS) and the lower specific Decision Support 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 operations management, 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 in which 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 its increasing 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 to allow all supply chain members to coordinate their activities and adjust their production levels Firms offering SCM software: o

i2 Technologies RHYTHM

o

Manugistics

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Enterprise Resource Planning (ERP) software solutions, designed to integrate manufacturing, finance, distribution, and other internal business functions into one information system Major ERP vendors include o

Baan

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J.D. Edwards

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Oracle

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PeopleSoft

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SAP

Core Benefits of Supply Chain Management Supply chain management can be a tremendous asset for companies because it can reduce costs, improve the profit margin, and offer a better return on investments. Reduction in per transaction cost In SCM based procurement, time, and resources needed for the search for suppliers can be drastically reduced. Firms can improve their prospects of acquiring a sufficient quantity of goods or services in case of demand surge. In the sales of products and services, firms can at all times have one extra outlet with a huge number of potential buyers. Faster and accurate communication within a supply chain has positive effects on inventory management as well. Although? Just-in-time? Procurement has already been in place with the introduction of EDI, expansion of the network without significant further investment enables firms to cut every corner of inventory handling costs. The rapid flow of information without interruption enables firms to renegotiate terms or adjust to design changes before incurring irrecoverable costs for transacting partners. Therefore, the damage caused by failure to adapt to environmental changes can be ameliorated in a relatively expedient manner.

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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 and transportation 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 holding inventories as upstream in the supply chain as possible. Pull systems are more responsive to actual customer demand and result in the movement of smaller quantities more frequently. Quick response in retailing, efficient consumer response in grocery, stockless inventory in health care, JIT in manufacturing 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 this visibility of moving or standing inventory, various participants in the supply chain can plan and synchronize their processes better. This requires logistics service providers to have the capability to trace and track shipments under their control and making this information readily accessible internally and to customer or supply chain collaborates. The availability of up to date information about demand leads to better forecast accuracy and a clearer understanding about downstream demand. This leads to fewer rush orders which require costly expediting by premium transportation and 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 meet the need. Knowing that there is inventory in transit and whether it would arrive in time to be used can reduce the safety stock held in a specific location, reduce unnecessary inventory ordered and reduce expediting of product. Manufacturers gain significant operational benefits from information sharing and collaborative forecasting. Knowledge of actual sales and better forecasts of actual consumer sales enables the manufacturer to reduce the "bullwhip" effect, level their production of finished goods and plan their

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transportation requirements more accurately. This allows the shipper to pursue leveling strategies that produce a continuous flow of transport rather than surges.

Challenges of Supply Chain Management Systems Companies must closely address the challenges of SCM before implementations. Technology resistance stakeholders There is a lack of special skills and technical training, especially among smaller firms or firms that encounter resistance from the workforce who lacks computer skills. Some companies do not trust their employees' abilities to use SCM appropriately. With companies rushing to try to implement the latest and greatest technology in order to get onestep ahead of the competition, many are finding that selling the employees and others involved in the change on the project is more difficult than actually putting the software in place. This has been especially true in regards to supply chain software; particularly, the part that helps streamlines and track procurement more effectively. The bottom line is that companies who expect instant miracles from supply chain software are not only disappointed but they set the stage for technology resistance in their employees and possibly their vendors. Businesses need to have realistic expectations of their anticipated cost-savings, and they need to implement the supply chain software slowly instead of immediately trying to save money on their most important purchases. With these suggestions, companies are more likely to find success with their new software Another big issue is the technology required to bring supply chains onto the Internet. While some companies have been at the forefront of adapting integrated, Internet-based supply chains, others have been reluctant to take the next step. As a result, it can be difficult to get all vendors and suppliers on board. There are many good reasons why vendors may shy away from the new technology. After all, the installation of the necessary hardware is costly and time-consuming.

Poor or Lack of Planning Overall, supply chain planning is a critical component of any business's supply chain management. Without accurate planning abilities, businesses end up cutting into their revenue unnecessarily and possibly putting vendors and distributors into difficult situations that may strain the supply chain relationships in the end. Only by communicating with customers directly and in real-time can businesses have a solid, reliable foundation on which to base their supply chain planning forecasts. Likewise, they need to use technology to free up revenue from the supply chain by reducing their order-to-cash cycle time.

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Supplier and Customer Selection and Relations As the term implies, supply chains are actually made up of a number of links that are connected to make 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 chains leave 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 first of these links, software, is often the one most frequently ignored by businesses since it all begins with a great deal of careful planning. Because supply chains are complex and are important to the overall success of a company's operations, businesses must make sure that they know what resources are 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 data the system or software is using.

Cost Involved To take advantage of so many benefits of supply chain systems, companies must be willing to foot the costly bill that goes with implementing the technology. The combined costs of the software, the hardware, 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 the effects 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 negatively considers the increasing cost of depreciation of assets and customer service staff and supporting equipment due to optimal utilization.

The Global Supply Chain Issues With increased globalization and offshore sourcing, global supply chain management is becoming an important 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 dealt with appropriately. One that companies need to consider is the overall costs. While local labor costs may be significantly lower, companies must also focus on the costs of space, tariffs, and other expenses related to doing business overseas. Additionally, companies need to factor in the exchange rate. Obviously, companies must do their research and consider all of these different elements as part of their global supply management approach.

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The Bullwhip Effect The Bullwhip Effect (or Whiplash Effect) is an observed phenomenon in forecast-driven distribution channels. Because customer demand is rarely perfectly stable, businesses must forecast demand in order to properly position inventory and other resources? Forecasts are based on statistics, and they are rarely perfectly accurate. Because forecast errors are a given, companies often carry an inventory buffer called "safety stock". Moving up the supply chain from end-consumer to raw materials supplier, each supply chain participant has greater observed variation in demand and thus greater need for safety stock. In periods of rising demand, down-stream participants will increase their orders. In periods of falling demand, orders will fall or stop in order to reduce inventory. The effect is that variations are amplified as one move upstream in the supply chain (further from the customer). Bullwhip effect is also attributed to the separate ownership of different stages of the supply chain. Each stage in such a structured supply chain tries to amplify the profit of the respective stages, thereby decreasing the overall profitability of the supply chain.

Conclusion Information is the key to successful supply chain management because “no product flows until information flows”. The inventory manager needs direct access to the organization’s information system to properly administer materials flow into and within the organization. Information technology should be used to improve the management of the supply chain. Accurate and timely information allows a firm to minimize inventories, improve routing and scheduling of transpiration vehicles, and generally improve customer service levels. The types of information needed include demand forecasts for production, names of suppliers and supplier characteristics, pricing data, inventory levels, production schedules, transportation routing and scheduling data and other financial and marketing facts. Companies today know that competition is increasing and buyers have more power than ever so they recognize the need to achieve a greater advantage in the market. The only way to accomplish this is by adding additional value to their product or service. That is where the value chain comes in. In order to examine the value chain and to determine how best to position a company for success in the market, an organization must look at its functional components: the supply chain, and its logistics, procurement, product development, and customer order management specifically. In this way, companies can get an idea of what changes to make in order to add value, increase profits, boost revenue, and decrease costs. Finally, most of today's companies have already made at least one change in order to meet the demands of their customers. Part of the value chain is logistics and that includes the time a customer's order is delivered. Shorter delivery times make customers happier; it is that simple. While almost some organizations three years ago took twenty days or more to deliver their goods, today that number has dropped almost in half. Moreover, the number of companies that are able to deliver their products in less than 5 days has increased from just over a third to almost half. Part of these changes can be attributed to better outsourcing choices and a more collaborative approach to logistics, which is the core attributes of effective supply chain management system. Developing an effective supply chain is not easy task. A company must have the right technology and the support of the best suppliers for it to work. However even once that obstacle has been

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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 force companies to make some tough decisions. Thankfully, understanding what causes or drives these costs 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 to traditional solutions over the long term. Operations research provides excellent procedures for planning at strategic, tactical and operational levels, and supply chain software companies contribute to further adoption of Operation Research procedures. We need to understand and benefit from the lessons 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 a company. 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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References 1.

Operation Management by Larey J. Krawjski 8/Edition

2.

The Impact of Internet-Based Communication Systems on Supply Chain Management: An Application of Transaction Cost Analysis by Sung-Yeon Park,,i Woong Yun Bowling Green State University. Original context on the page: jcmc.indiana.edu/vol10/issue1/park_yun.html

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E Business Impact on Canadian Transportation. Research conducted for the Canada Transportation Act Review. Report prepared by Professor Garland Chow, Centre for Transportation Studies &. The Faculty of Commerce. The University of British Columbia. Prepared for Canada Transportation Act Review Panel (July 2001) Original context on the page: www.reviewcta-examenltc.gc.ca/.../chow.htm

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Supply Chain Management by By Yasemin Aksoy and Ana Derbezy. The Institute for Operations Research and the Management Sciences URL: http://www.lionhrtpub.com

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What is supply chain management? - a definition from Whatis.com searchcio.techtarget.com/sDefinition/0,,sid19_gci214546,00.html

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Supply chain management From Wikipedia, the free encyclopedia

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Supply Chain Information System by Arrianto Mukti Wibowo NATIONAL UNIVERSITY of SINGAPORE. Graduate School of Computing.

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Learning Resources of

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Achieving Real-Time Supply Chain (A ClearOrbit Whitepaper)

10. Best Practice Order Management – Automation with SAP Solutions www.esker.com

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www.epictech.com Integration

Easker Whitepaper

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