IT - Enabled Supply Chain Management

Submitted By: Ravi Prakash Gupta

I. INTRODUCTION Business, the world over, is struggling to sustain competitiveness in a rapidly globalizing economy. The world is fast being transformed into a single entity. As far as business is concerned, boundaries are melting away. Economic happenings in one part of the globe are creating powerful ripples and even aftershocks across the rest of the world. Cost-competitiveness has become the buzzword in the industry. Globalization in twenty-first century presented great scope and access to the worldwide market for the corporates but at the same time it shoved ample challenges to respond to more aware and demanding customer. The challenge lies in creating economic value through vibrant organization, innovations and the application of strategic tools. In such a challenging environment, supply chain management has become the most powerful cost reduction tool in the armoury of business. Effective supply chain management and creation of value by managing its key factors will help an organization develop distinctive competence and create a competitive edge. Interest in SCM has increased steadily worldwide since the 1980s when companies began to see the benefits of collaborative relationships. The supply chain concept is still nascent in India. However, the need for the same, at this stage, is more than ever before because of the challenges unleashed on the competitiveness of the Indian Industry by deregulation and globalization. II. SUPPLY CHAIN MANAGEMENT A Supply is understood as the quantity of goods available for use or the actual (or planned) replenishment of a product (or component). A Supply Chain is defined as a set of three or more companies (of a company, an immediate supplier and an immediate customer) directly linked by one or more of the upstream and downstream flows of products, services, finances and information from a source to a customer.

Figure 1 A Typical Supply Chain Management Ellram and Cooper (1993) view SCM as "an integrating philosophy to manage the total flow of a distribution channel from supplier to ultimate customer. SCM is the systematic, strategic coordination of the traditional business functions within a particular company and across business within the supply chain, for the purposes of improving the long term performance of the individual companies and the supply chain as a whole.

SCM is a philosophy for conducting business, a strategy to gain competitive advantage through the coordination of all processes starting from the procurement of material form Mother Earth to providing the final product to the final consumer and efficient managing the information systems necessary to monitor all of these activities. It links all the partners, which include the intra-organizational members, and the interorganizational members including suppliers, manufacturers, distributors, wholesalers, retailers, third party logistics providers and service providers into a seamless process. Today SCM is no longer a support function but it is in fact regarded as one of the key functions which would definitely give the organization a competitive edge in the market. The importance of SCM has evolved over the years. One of the reasons could be the fact that large corporations have started operations globally with multilocational plants with several warehouses and the emergence of multinational companies. Another important factor is the emergence of new technologies, especially Information Technology. III. CHANGING ROLE OF INFORMATION TECHNOLOGY Information Technology is an organized collection of computer hardware, software, data, telecommunications, database management, other technologies and personnel designed to capture, store, update, manipulate, analyze and immediately display information about worldwide business activities. It is a tool for providing past, present and projected information on internal operations and external activities. Over the years, technology has progressed rapidly on the information and communication front providing cheap but powerful computing power. Information Technology has evolved from just a support function to an essential tool of decision making process. The developments in IT have resulted in many possible alternative solutions for managing the supply chain effectively. The evolution of IT in business can be explained in four stages as follows: Stage I Initially, IT was used to automate routine functions which involved replacing clerical systems. Applications such as payroll, order entry, general ledger, accounts receivables etc. were automated. Such automation resulted in clerical and administrative savings. Stage II During this stage, the applications of IT become more sophisticated and the focus was on effective use of assets and control of overall expenses to enhance profitability. Applications that were developed concentrated on creating systems for online cash management, sales analysis, resource scheduling, inventory management etc. Stage III At this stage, the price for computing started reducing drastically with advances in technology. The applications developed created new opportunities for enhancing revenues instead of merely saving costs. These applications ran on extensive communication networks and made use of information storage and retrieval techniques. Examples of such applications include financial consolidation, credit card authorization and payment systems, JIT inventory management, Enterprise Resource Planning (ERP). Stage IV

Innovative enterprises began using IT during the same time to create systems for improving decision making process. It extended the reach of management control beyond the conventional boundaries of the organization. IV. ROLE OF IT IN SUPPLY CHAIN MANAGEMENT SCM is essentially an information-driven function. Time and responsiveness play a vital role in SCM and information technology has an important role to play toward this goal. The most critical task in any information-driven function is processing of large chunks of data and maintaining a large database. In the past, these records were maintained manually. Today, any global company cannot survive without thinking of integrating its supply chain. Another milestone has been the recent development of the Internet. All these developments are bringing the world closer and closer. SCM is a function that calls for extensive coordination with both external and internal environment. IT has a substantial role to play in customer servicing. Cargo management companies like DHL, FedEx etc are using this medium extensively for better customer servicing and information flow. If a customer wants to know the status of his shipment, all he needs to do is to log on to the website and enter his airway bill number. Immediately, within seconds he gets the status. Many companies feel that their current information management systems do not provide adequate support for their supply chain initiatives. Consequently there is an ever-increasing need for fully integrated supply chain information management solutions which incorporate all the functionality of network strategy/ supply configuration, demand planning, transportation management and warehouse management. V. IT- BASED TOOLS FOR SUPPLY CHAIN MANAGEMENT A number of IT-based SCM tools are now available to provide intelligent decision support and execution management. They can be transaction processing systems focused on day to-day operations; operational planning systems or strategic planning tools used to redesign the supply chain infrastructure. Some of the major developments in IT which are transforming the supply chain today are as follows:1. Electronic Data Interchange (EDI) Electronic Data Interchange (EDI) is the inter-organizational exchange of business documentation in a structured machine-processable form. It consists of standardized electronic message formats for common business documents such as request for quotations, purchase orders, invoices and other standard business correspondence documents. These electronic transactions sets enable the computer in one company to communicate with the computer in another organization without actually producing paper documents. All human efforts required to sort and transport the document are eliminated. A fully integrated EDI solution adds speed and efficiency to business processes enabling the organization to maximize resources, minimize waste and increase customer satisfaction. The key benefits of EDI are: * EDI helps in reducing transaction costs across the supply chain of an organization through a reduction in labour and material costs, communication costs and administrative costs. * With no data re-entry, EDI ensures grater accuracy of information while reducing the likelihood of costly errors. * Reduced inventory and its associated costs is one of the biggest advantages of EDI.

* Critical information is available instantly, enabling quicker response to changes in the marketplace. * EDI increases business opportunities by making it easier for customer to do business with the company. 2. Enterprise Resource Planning (ERP) ERP is a philosophy where one tries to integrate the value chain of the organization to reduce the wastage or slack of the entire process of delivering the end product right from the sourcing of raw materials. ERP is a comprehensive planning and control framework that has evolved over a thirty year time. It finds its genesis in materials requirement planning (MRP), manufacturing requirement planning (MRP II), relational Database management systems (RDBMS) and 4th generation computer languages (4GL). It also is influenced by just in time (JIT) and computer integrated manufacturing (CIM) and takes advantage of latest IT developments such as client-server computing and Internet. The key benefits of ERP are: * ERP links all the activities in the organization with customer orders and thus the customer becomes the key focus of all departments. * An ERP system regulates the flow of goods from a number of manufacturing sites to the stocking points. It captures and consolidates related data from the retailer that can be used to change the production schedule quickly. * ERP as a tool can enhance overall performance by reduction of costs, increased per capita productivity and improved quality of goods and services. 3. Internet commerce Internet is transforming the entire nature of supply chains by eliminating middlemen, making commerce more democratic and creating a frictionless economy. Internet commerce is changing the manner in which the entire supply chain is managed today. It is reducing entry barriers for the new entrants and the costs of operations for the existing ones at the same time and also offering the customers a wider choice for selection. 4. Bar Coding A bar code is a grouping of parallel bars (usually blocks) of varying widths separated by light spaces (usually white) of varying width. Scanner is used to read the bars and spaces and it uses software to interpret their meaning. In the supply chain, the accurate, rapid identification of products and use of this information in controlling the entire process have been key factors. The following are the benefits of bar code technology in supply chain:* Speed data entry * Enhances data accuracy * Reduces materials handling labour * Verifies orders at receiving and shipping * Improves customer service 5. Communication Technology

Information and Communication Technology (ICT) also significantly enhances the supply chain performance through faster and widespread communication. Applications of radio frequency, satellite communications and image processing technologies have overcome the problems caused by product movement and geographic decentralization. Improved customer service is provided in the form of more timely definition of tasks, quicker transport tracing, and faster transfer of sales and inventory information. The availability of shared information has led to increase efficiency and effectiveness across the supply chain. VI. CONCLUSION In today's competitive global environment, the onus is now on supply chain management. Companies whose SCM is competitive will gain in the long run. The advances in information technology have transformed the supply chain elements and enabled organizations to make significant improvements in productivity and competitiveness. The IT- enabled options available today for supply chain facilitate real time information flow through networking and electronic data transfer, faster response time and improved decision making, through timely availability of relevant information.