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    SUPPLY CHAIN MANAGEMENT PROJECT

    Role of I.T. In Supply Chain Management

    Submitted in partial fulfillment of the requirements of

    Post Graduate Programme

    By

    Priya Anand(PG20101207)

    PGP 2010-12

    IILM Institute for Higher Education

    New Delhi

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    ACKNOWLEDGEMENT

    It is almost inevitable to incur indebtedness to all who generously

    helped by sharing their invaluable time and rich experience with

    me, without which this project would have never been

    accomplished.

    No task can be achieved alone, particularly while attempting to

    finish a project of such a magnitude. Hence, I would like to

    acknowledge my faculty who facilitated and supported me and

    made this project a reality.

    I would like to thankMrs.Rajkumari Mittal , faculty, IILM, for

    her support, encouragement and guidance throughout the project

    without which this project wouldnt have been possible.

    I would also thank our Institution without whom this project would

    have been a distant reality.

    Thank you all for supporting me in making this project a reality.

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    INTRODUCTION :

    Supply chain is a process umbrella under which products are created and

    delivered to customers. From a structural viewpoint it refers to the complex

    network of relationships that organizations maintain with trading partners to

    source, manufacture and deliver products.

    A supply chain consists of all parties involved, directly or indirectly, in

    fulfilling a customer request. The supply chain includes not only the

    manufacturer and suppliers, but also transporters, warehouses, retailers, and

    even customers themselves. Within each organization, such as a

    manufacturer, the supply chain includes all functions involved in receiving

    and filling a customer request. These functions include, but are not limitedto, new product development, marketing, operations, distribution finance,

    and customer service. The organizational process of making the product and

    selling it stands between the supply markets and the customer markets.

    Information is crucial to the performance of supply chain because it

    provides the basis on which supply chain managers make decisions.

    Without information a manager cannot know what customers want, how

    much inventory in stock, and when more products should be produced or

    shipped. Without information, a manager can only make decisions blindly.Information Technology is slowly affecting the distribution channels

    through which consumers and businesses have traditionally bought and sold

    goods and services. The online channel provides sellers with the ability to

    reach a global audience and operate with minimal infrastructure, reduced

    overheads, and greater economies of scale, while providing consumers with

    a broad selection and unparalleled convenience. As a result, a growing

    number of consumers do business transactions on the Web, such as buying

    products, trading securities, paying bills and purchasing airline tickets.Essentially, e-commerce is all about the transactional business process of

    selling and buying via the Internet. E-Supply Chain refers in particular to

    the management of supply chain, using the Internet technologies.

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    Communication is in real time and data can be integrated with back officesystems, reducing paperwork. Using the Web to eliminate papertransactions can generate substantial savings of cost and time. It facilitatesthe removal of purchase orders, delivery confirmations bills of material andinvoices. The switch away from paper can also speed up response andimprove communications with those in different time zones or who workoutside normal office hours, such as a customer's night shift supervisor.Another significant potential benefit is a reduction in the errors associatedwith activities such as re-keying data, receiving orders by telephone callsand handwritten faxes.

    Electronic commerce, supply chain management has the characteristics like

    an ability to source raw material or finished goods from anywhere in the

    world; a centralized, global business and management strategy with flawless

    local execution; on-line, real time distributed information processing to the

    desktop, providing total supply chain information visibility; the ability to

    manage information not only within a company but across industries and

    enterprises; the seamless integration of all supply chain processes and

    measurements, including third party logistics, information systems, cost

    accounting standards, and measurement systems; the development and

    implementation of accounting models such as activity based costing that

    link cost to performance are used as tools for cost reduction; and

    reconfiguration of the supply chain organization into high performance tests

    going from the shop floor to senior management.

    E-Logistics enables organizations to see the big picture by capturing andsifting through data for procurement and fulfillment. Ultimately,management of the entire supply chain is e-enabled, and logistics-generateddata can feedback into strategic and tactical decisions made by other parts ofthe organization. The Internet ultimately provides access to true rather than

    forecasted supply and demand information. E-Logistics also permits a closerintegration of a company's internal business systems with collaborativeinformation from partners and Web-based functions and information. Inessence, e-Logistics represents the foundation for improved business

    processes, allowing for real-time visibility, seamless channel linkage andcollaborative solutions in the supply chain.

    .

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    SUPPLY CHAIN MANAGEMENT

    SCM deals with the management of materials and information resources

    across a network of organizations that are involved in the design andproduction process. It recognizes the inter-connections between materialsand information resources within and across organizational boundaries andseeks systematic improvements in the way these resources are structured andcontrolled.

    The following are five basic components of SCM:

    1. Plan This is the strategic portion of SCM. You need a strategy for

    managing all the resources that go towards meeting customer demandfor your product or service. A big piece of planning is developing aset of metrics to monitor the supply chain so that it is efficient, costsless and delivers high quality and value to customers.

    2. Source Choose the suppliers that will deliver the goods and servicesyou need to create your product. Develop a set of pricing, delivery and

    payment processes with suppliers and create metrics for monitoringand improving the relationships. Also put together processes formanaging the inventory of goods and services you receive from

    suppliers, including receiving shipments, verifying them, transferringthem to your manufacturing facilities and authorizing supplierpayments.

    3. Make This is the manufacturing step. Schedule the activitiesnecessary for production, testing, packaging and preparation fordelivery.

    4. Deliver This is the part that many insiders refer to as logistics.Coordinate the receipt of orders from customers, develop a network ofwarehouses, pick carriers to get products to customers and set up aninvoicing system to receive payments.

    5. Return The problem part of the supply chain. Create a network forreceiving defective and excess products back from customers andsupporting customers who have problems with delivered products.

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    The Supply Chain Management issues concern activities

    of the firm at various levels of decision making, ranging

    from operational level to strategic level via tactical level.

    The tactical level:

    Decision making at this level is concerned with purchasing and productionfunctions, inventory policies and transportation strategies. These decisionswill be usually updated on an annual basis. SCM is an operationsmanagement technique that seeks to integrate and optimize the capabilitiesof internal business functions and to direct them to new opportunities forCost reduction and increased channel throughout by working with thematching functions from the Supply Chain partners, customers and

    suppliers. Tactical SCM can be divided in into these activities: suppliersmanagement and inventory optimization, product and service processing,customer management and customer order management, channel supportactivities for facilitate financial transactions, marketing information flows,electronic information transfer, integrated logistics .

    The strategic level :

    The decision making at this level is made with long term objectives and withlong lasting effects. These include decisions regarding location of various

    facilities, including the manufacturing plant, distribution warehouses and thestructure of the distribution channel. SCM transforms the linear, sequentialSC into a networked SC focused on functional and strategic interoperabilitythrough collaborative partnerships for the correlation of SC processes. TheSC process correlation creates unique sources of value by unifyingresources, competencies, capacities of the entire network. These tactical andstrategic approaches are focused on the evolution of business network,resulting in innovations, new processes and technologies, increasedreliability and speed and mass customization economies.

    The operational level:

    Decision making at operational level will concern day to day management ofactivities such as scheduling, routing and vehicle loading etc.

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    Supply Chain Process Integration

    Supply chain management involves the efficient integration of suppliers,factories, warehouses and stores. The challenge in integrating the supply

    chain is to coordinate activities throughout the supply chain so that it canimprove the performance of businesses: lower costs, increase service level,reduce the bullwhip effect, a better use of resources and effective response tochanges in the marketplace. Many companies have recently realized, thesechallenges are met not only through the coordination of production,transportation and inventory decisions, but ,more generally, by integratingthe front end of the supply chain (customer demand) to the back end of thesupply chain (production and manufacturing part of the supply chain).

    The accessibility of information plays a crucial role in the supply chainintegration. In some cases, the supply chain must be designed to have thisinformation available. In other cases, the supply chain strategy should bedesigned to take advantage of information already available. And, in manycases an expensive network should be developed to compensate for the lackof information. The positive value of information sharing in supply chainmanagement is well appreciated by leading companies, and this has led tovarious industry initiatives to support companies to develop a framework forcollaboration for common benefit. One such initiative is the industry isCollaborative Planning Forecasting and Replenishment systems (CPFR).

    This is a software system which assists retailers and manufacturers to shareinformation about past sales data and future price and promotion initiatives.This is a relatively new development, but is gaining popularity in theindustry.

    In the highly organized network economy, the supply chain system consistsof some independent subsystems. These subsystems may be in differentfunctional areas of a company or a business partner outside the direct sphereof influence of the Company. The concentration of management is based on

    the integration of all processes that affect the service and the cost structureof the company, and information is the key for that integration. Thefundamental problem is to discover a common goal that would make thisintegration easily acceptable, simply because diverse sub-systems havedifferent operating economics.

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    What is needed is a holistic view of the supply chain, and a mechanism bywhich the integration process can be a win-win situation for all participants.It is important to do this work as the optimization of the supply chain canresult in apparent sub-optimization of one or more individual elements of thechain.

    The New Way of managing supply chain

    Procurement Production Distribution

    E-commerce enabledSCM Solution

    Electronic

    Procurement

    Productio

    n

    Optimizati

    on

    Distribution,

    sales & service

    coordination

    Extranet-basedintegration withsuppliers

    Advanceddecision systemfor materialsourcing &

    purchasing

    ERPPerformanceenhancementusing datawarehousingdecisionsupport & webtechnology

    Collaborativedemand planning

    Internet-enableddistributionoptimization

    Web-basedcustomer service

    S

    uppliers

    C

    ustomers

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    Information and Technology: Application of SCM

    In the development and maintenance of supply chains information systems,software and hardware must be addressed. Hardware includes computers

    input / output devices and storage media. Software comprises the entiresystem and application program which is used for processing transactions,management control, decision making and strategic planning used. Latestdevelopments in supply chain management software are:

    1. Base rate, carrier select & match pay developed by Distribution

    Sciences Inc., which is very helpful in order to calculate freight costs,

    compare transportation mode rates, analyze costs and service

    effectiveness of the carrier.

    2. A new software programme was developed by Ross Systems Inc.

    known as supply chain planning which is used for demand

    forecasting, replenishment and scheduling of activities.

    3. P & G Distributing Company and Saber Technologies decision led to

    a software system called Transportation Network Optimization for

    reforming the bidding and award process.

    4. Logistics planning solution was recently introduced to provide a

    programme which is capable of managing the entire supply chain.

    Electronic Commerce:

    It is the term used to describe the wide range of tools and techniques whichis used to conduct business in a paperless environment. Electroniccommerce thus comprises of electronic data interchange, e-mail, electronicfunds transfers, electronic publishing, image processing, electronic bulletin

    boards, shared databases, and magnetic / optical data recording. The

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    companies are able to automate the process of transition of documentselectronically between suppliers and customers.

    Electronic Data Interchange:

    Electronic Data Interchange (EDI) refers to computer-to-computer exchangeof business documents in a standardized format. EDI describes, both, theability and the practice of transmitting information between twoorganizations electronically rather than the traditional form of mail, courier,and fax.The benefits of EDI are:

    Quick information processing

    Better customer service

    Reduced paper work

    Increased productivity

    Cost efficiency

    Competitive advantage

    Improved billing

    By using EDI, supply chain partners can get rid of the distortions andexaggerations in supply and demand information through improvedtechnologies which facilitate real-time sharing of the actual demand andsupply information.

    Bar coding and Scanner:

    Bar code scanners are most prevalent and visible in the check-out counter ofthe super market. This code specifies the name of the product and themanufacturer. Other applications include the tracking of moving objectssuch as components in personal computer assembly operations, automobilesin assembly plants.

    Data Warehouse:

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    Data warehouse is a consolidated database which is maintained separatelyfrom an organizations production system database. Many organizationshave multiple databases. A data warehouse is organized around informationsubject matter rather than specific business processes. Data held in datawarehouses are time-dependent where historical data can also be aggregated.

    The Strategic Advantage

    Rapid Deployment and Scalability - The e-SCM suite of applications is based on an "open" Internet Application Architecture that providesenterprise-wide scalability and rapid deployment to numerous end-users.

    Real-time Processing - E-SCM creates an open, integrated system thataddresses the complex e-business and supply chain management needs andrequirements by allowing the exchange of "real-time" information to "take

    place with employees and their trading partners (customers, suppliers,distributors, manufacturers) regarding product configuration, order status,

    pricing, and inventory availability. Such functions improve order accuracyand provide 100 per cent order fulfillment through accurate inventoryinformation. This "real-time" data enables users to make informed ordering,

    purchasing and inventory decisions, and thereby enhances the quality andscope of customer service.

    Return on Investment - In addition to increasing productivity and reducingoverall operating expenses, e-SCM maximizes selling opportunities bycapturing valuable customer information-buying patterns, frequency ofvisits, preferences, order history-and then uses this information for up-

    selling, cross-selling and promotional opportunities. E-SCM provides thetool sets to achieve new business by reaching out to customers that younever could before.

    E-supply Chain Components

    The components of e-supply chain are -

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    Advanced Scheduling and Manufacturing Planning Programme - Thisautomated programme provides detailed coordination of all manufacturingand supply efforts based on individual customer orders. Scheduling is basedon real-time analysis of changing constraints throughout the process, fromequipment malfunctioning to supply interruptions. Scheduling creates jobschedules for managing the manufacturing process well as logistics.

    Demand Forecasting Programme - This module supports a range ofstatistical tools and business forecasting techniques. It constantly takes intoaccount changing market scenarios and economic factors while makingdecisions.

    Transportation Logistics Programme - This programme facilitatesresource allocation and execution to ensure that materials and finished goodsare delivered at the right time and at the right place, according to the

    planning schedule, at minimal cost. It considers such variables astransportation mode and availability of each mode such as airlines, trains,and trucks.

    Distribution Planning Programme - This is integrated with demandforecasting, manufacturing schedules and transportation logistics to reachthe customer.

    Developing E-Supply Chain Strategy:

    SCM systems will be extensively modified in terms of strategy, process, andsystem. E-Supply Chain Management has redefined and will continue toredefine how companies will compete for customers. While the internetoffers some exciting opportunities to improve Supply Chain Managementeffectiveness by lowering costs and increasing the speed of order-to-delivery, it is by no means the first step on the right path to having highlycompetitive e-Supply Chain capabilities. Just throwing more software at the

    problem is not the answer to the core issues of Supply Chain Management.Although software is needed, it is very necessary to define the process ofinformation flow that will activate material flow at the right time.

    Spending time in the upfront strategy development to improve order-to-delivery cycle and supply chain management will pay big dividends. Thehard part is the prerequisite tasks of discovering and thinking through supply

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    chain opportunities and then developing a strategy and plan for an e-supplychain roadmap, the direction taken may not take the company to its desireddestination. The biggest loss of missing the target can never be regained. Itis essential to do it right the first time.

    Procurement Process and the supply chain

    The subject of B2B e-commerce can be complex because there are so manyways the internet can be used to support the exchange of goods and

    payments among organizations. Ultimately, B2B e-commerce is aboutchanging the procurement process of thousands of firms across the world.One way enter this area of internet-based B2B commerce is to examine theexisting procurement process. Firms purchase goods from a set of suppliers,and they in turn purchase their inputs from a set of suppliers. This set offirms is linked through a series of transactions referred to as the supplychain. The supply chain includes not just the firms themselves, but also the

    relationships among them and the processes that connect them.There are seven separate steps in the procurement process. The first threesteps involve the decision of who to buy from and what to pay: searching forsuppliers of specific products, qualifying both the seller and the productsthey sell, and negotiating prices, credit terms, escrow requirements, qualityand scheduling of delivery. Once a supplier is identified, purchase orders areissued, the buyer is sent an invoice, the goods are shipped, and the buyersends a payment. Each of these steps in the procurement process iscomposed of many separate sub-activities. Each of these activities must be

    recorded in the information systems of the seller, buyer, and shipper.

    Two distinctions are important for understanding how B2B improve theprocurement process. First, firms make purchases of two kinds of goodsfrom suppliers direct goods and indirect goods. Direct goods are goodsintegrally involved in the production process; for instance when inautomobile manufacturer purchases sheet steel for auto body production.

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    Indirect goods are all other goods not directly involved in the productionprocess, such office supplies and maintenance products. Often these goodsare called MRO goods products for maintenance, repair, and operations.Second, firms use two different methods for purchasing goods contact andspot purchasing. Contract purchasing involves long term written agreementsto purchase specific goods, with agreed upon terms and quality, for anextended period of time. Spot purchasing involves the purchase of goods

    based on immediate need in larger marketplaces that involve manysuppliers. According to surveys, about 80% of inter firm trade involvescontract purchasing of direct goods, and 20% involves spot purchasing ofindirect goods. Although the procurement process involves the purchasing ofgoods, it is extraordinarily information intense, involving the movement ofinformation among many existing corporate systems.

    Smart Chains, Smarter Gains

    An efficient supply chain management can bring down the prices ofcommodities by as high as 40 per cent. This is not with the help of a budgetsop, but by reducing average inventory levels, lowering transport costs,lowering warehousing costs-among others. Children will be excited onhaving Maggi at Rs 6 against the prevalent price of Rs 10. Industry estimates

    show that a company spends between 17 per cent and 50 per cent of theprice for just moving the goods from their manufacturing plant to shopshelves. This includes the margin of the retailer and of the distributors. Mostof it is taken up by logistics and holding inventory and these costs can becontrolled, optimized and reduced, thus reducing price or increasing profit.

    Now if we can practically apply this model on a Rs 50,000 crore FMCGcompany with thousands of wholesalers and retailers, the result will be mind

    boggling. This will not on; give the company a cost benefit but also will alsoresult in improved customer service levels, improved competitiveness and anoverall gain in profitability for the organization.

    Managing logistics is a nightmare for all company executives in the salesand purchase departments. Handling logistics not only adds cost to the

    business but also increases the number of business processes and involveslot of resources. The logistics chain starts from the supplier end, andcontinues to the customer end involving members in surface, air, sea express

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    couriers, brokers, customs, excise, etc. This is for the sales part. Later it willalso include similar contacts for the after sales support, repair andmaintenance. Many of the companies cannot take up this load and outsourcethese activities to experts, and many companies manage this efficiently andmake huge profits. Some top FMCG companies like Nestle, P&G have tiedup with logistics companies like TCIL, Concor in an initiative called anEfficient Customer Response (ECR), with a one-point mission to clean-upIndia's supply chain.

    The Pay Off

    Every company aims at reducing costs and cycle time and increasingrevenue. E-supply chain supports these objectives. Companies find thatenterprise integration leads to a new level of relationship, be it with itscustomers or suppliers. Customers can quite literally check the status of theirorders, and suppliers can gain access to inventory levels to find out whetherthey need to replenish stock, all through the internet. The benefits of reducedcycle time provide measurable competitive advantage in terms of both costand performance. The faster we move a critical data the internet, thequickest we can react and deliver the end product to the customer. This leadsto enhanced customer satisfaction and promotes revenue growth.

    Major Trends in E-SCM

    When one considers the challenge of meeting the demands of busy, time-starved, dissatisfied consumers in an environment of hostile competition,low margins and countless sales outlets selling similar products, it becomesclear that changing the entire business model is the only plausible strategy.E-business applications must cut the time customers wait for service.Customers, now penalize companies that infringe on their time throughdelays, mistakes, or inconveniences. If companies do not expedite processes,customers will go to someone who does it faster. If one company does notmake it easy for the customer to do business, another will.

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    Radio frequency identification [RFID]

    Radio Frequency Identification is one of the fastest growing and mostadvantageous technologies which is being adopted by businesses today.Adoption of this automatic data-collection (ADC) technology has beenrecently accelerated by the establishment of important standards, retailersand government mandates, improved technology performance and fallingimplementation costs. RFID offers great value for many industries andapplications. However, misperceptions about what RFID is and what it maydo pose difficulties which discourage some organizations from using thistechnology to reap benefits.

    Collaborative Planning, Forecasting and

    Replenishment (CPFR)

    Collaborative Planning, Forecasting and Replenishment (CPFR) is one ofthe fastest growing technologies for both retail and consumer goods firms.CPFR is seen as a new business essential for collaboration. CPFR is acombination of Continuous Replenishment Programs (CRP) and vendor-managed inventory (VMI). CPFR involves working with network membersto forecast demand, develop production plans, develop joint sales andoperational plans, coordinate shipping and warehousing details andelectronically collaborate to generate and update sales forecasts andreplenishments plans.

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    CPFR collaboration requires information technology to build, share andadjust on- line forecasts and plans. The core objective of CRPF is to increasethe accuracy of demand forecasts and replenishment plans to lowerinventories. It requires trust between partners. For it to succeed, partnersmust be willing to share their promotion schedules, POS data, and inventorydata. CPFR is proving to be a Win- Win situation for the partners involvedin meeting the customers demand, reducing inventory, lowering costs andimproving the bottom line.

    Enterprise Resource Planning systems (ERP)

    It integrates the entire companys information system,process and store data, cut across functional areas, businessunits, and product lines to assist managers make businessdecisions. As an IT infrastructure, ERP influences the waycompanies manage their daily operations and facilitates theflow of information among all supply chain processes of afirm.

    The 1990s caught sight of increased globalization. In order

    to improve competitiveness, companies began realize thepotential of information technology to dramatically transformtheir business. Instead of automating old, inefficientprocesses, companies began to reengineer businessprocesses using technology as the enabler. This led to thedevelopment of ERP systems that give complete visibility tothe organization, integrating previously stand-alone systems.ERP became more acceptable during the mid- and late1990s. ERP is not just MRPII with a new name. ERP is the

    next logical sophistication level in an evolutionary series ofcomputer tools for material and supply chain management.ERP systems provide an integrated view of informationacross functions within a company and with the potential togo across companies.

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    In Late 90s and the beginning of 21st century, electroniccommunications as opposed to paper transactions allow fora decrease in amount of lead-time required to replenishinventory. Cutting lead-time minimizes the risk of

    uncertainty in demand and decreases the probability of overor under-stocking inventory. The 90s marked the wide use ofthe Internet. This provided great opportunity for companiesto integrate E-commerce into their business models. Theprimary emphasis during that period was business-to-customer (B2C). Today, the emphasis expands to includebusiness-to-business or B2B. Back-end system integration,especially supply chain management provides greatervisibility and more strategic capability for companies toimprove profitability and competitiveness.

    A supply chain consists of all stages involved, either directlyor indirectly, in fulfilling a customer request. A supply chainincludes manufacturer, supplier, transporters, warehouses,retailer, third-party logistics provider, and customer. Theobjective of supply chain management is to maximize

    Enterprise Resource Planning (ERP) tools:

    Many companies now see the ERP system (eg Baan, SAP, People soft, etc.)as the heart of their IT infrastructure. ERP systems have become enterprise-wide transaction processing tools that capture the data and trim downmanual activities and tasks related to the processing of financial, inventoryand customer order information. ERP system attain a high degree ofintegration through the use of a single data model, develop a commonunderstanding of what the shared data constitutes and establishing a set ofrules for accessing the data.

    DSS (Decision Support Systems)

    Supply Chain Management problems are not fixed and need not only thecomputer knowledge but human knowledge too in order to manage the

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    Warehouse Location, fixed costs, variable costs,inventory turnover, transportation coststo retailers

    Retailer Location, demand for product annually

    Product Volume, weight, holding costs

    2. Analysis tools- Once data has been collected, there are tools used toanalyze the data. Tools that can be used to do so are as follows-

    Query- decision makers ask questions about the data

    Statistical analysis - this is used to determine the trends andpatterns

    Data mining- these look for these hidden patterns, trends andrelationships in the data.

    Online Analytical Processing (OLAP) tools - it allows the userto find the way through the hierarchies and dimensions by drillingdown. Statistical tools are used to analyze data. This also has

    presentation tools to present the data after it has been analyzed.

    Calculator-These carry out specific calculations, such asaccounting costs.

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    Simulation it creates a model of the process. The randomelements are calculated using a probability distribution and everytime a random event occurs. The computer uses this to determinewhat would happen in this particular situation. As the model runs,statistical data is collected and analyzed and then statisticalmethods help determine the average results and variability of thisresult.

    Artificial intelligence - these are databases of the rules that arecollected from experts, which can be used for specific problems oronline intelligent agents. These intelligent agents can becharacterized by the number of activities assigned to them, thelevel of interaction with other intelligent agents and the level of

    knowledge implanted in it.

    Mathematical models and algorithms - Algorithms come in twoforms that are exact algorithms and heuristics. Exact algorithmsare the best mathematical solution, and are long run especially ifthe problem being solved is complex. Heuristics give goo, but notthe optimal solutions. They offer a good solution quickly, incontrast to exact algorithms.

    Factors to be consider when determining which

    analytical tools to use are

    Nature of the problem being solved.

    The required accuracy of the solution.

    Problem complexity.

    The number and type of quantifiable output

    measures.

    DSS required lead times for speed-the faster

    speed is necessary.

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    The number of targets assigned according to

    the decision maker expectations

    The following table shows analytical instruments and the

    problems that they solve best:

    Problem Tools

    Marketing Query, statistics, data mining

    Routing Heuristics, exact algorithms

    Production scheduling Simulation, heuristics dispatch rules

    Logistics networkconfiguration

    Simulation, heuristics, exact algorithms

    Mode selection Heuristics, exact algorithms

    3. Presentation tools-these show the results of data analysis. Data

    visualization techniques are used to make user understand the output

    data. There are several formats used to present data to the user as:

    Reports, charts, tables, animations, special graphics formats, andGeographic Information Systems (GIS).

    Implementation of ERP and DSS

    Implementation of a system that supports supply chain integration requiresboth infrastructure and DSS. A company needs to decide which system itwill install first. ERP takes longer and are more expensive to implement.

    Supply Chain Systems Inc. has developed a methodology, which should befollowed when implementing ERP:

    1. Top management should participate in the whole project. The scope ofthe project should fit with the available resources and time required.Functional managers should be responsible for their respective parts of the

    project.

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    2. Senior management should define supply chain policies that will specifyhow the business will operate; these set the parameters for ERP.

    3. A discipline process for resource planning should be defined.

    4. A process should be implemented that will generate feasible productionschedules. The operational planning process must be mapped and finitecapacity scheduling models (for production and inventory plans)developed

    5. The processes and maps should be used to determine what managementreports are required.

    6. Data elements should be identified that will be used in planning models.A plan for building a data warehouse and interfaces to the legacy systemis needed.

    7. Define the ERP parts and determine when each can be implemented,with the help of an implementation team.

    8. An implementation schedule is developed and critical success factorproblems should be raised to appropriate senior management so that theyare solved immediately.

    9. A Gap Analysis is conducted between system capability andfunctionality. As functionality begins to appear more critical it should be

    implemented.

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    The Future of Infor mation Technology in the

    Supply Chain:

    At the highest level the three SCM macro processes will continue to drivethe evolution of enterprise software. To this end, we expect to see softwarefocused on the macro processes become a larger and larger share of the totalenterprise software landscape and software firms that focus on the macro

    processes to be much more successful than those that focus elsewhere. Forfirms targeting a macro process, we see functionality, the ability to integrateacross macro processes, and the strength of their ecosystems as the keys tosuccess.

    There is one final note worth mentioning with regard to the future of newsoftware players in this area. One might conclude from our analysis that itwill be very difficult for a new company to break into the ranks of successfulenterprise software companies, given the lead in- functionality, integration,and ecosystems that existing firms already have. However, that there are two

    potential paths for a company to enter the market. The first is throughsuperior functionality, whether it be specific functionality needed by a

    particular industry or an application with vastly improved ease of use. In thisarea, we see start-ups adding value to enterprise software, although it is a

    very difficult path to take given the advantages the ERP players hold today.

    The other path consists of providing an integrated product that increases thelink-ages between the macro processes. Certainly, it will be difficult for astart-up to garner the resources to build an integrated product across CRM,ISCM, and SRM. However, a large software company with tremendousresources and a history of pulling disparate products into an integrated

    package could take this path. The one obvious company here is Microsoft.Microsoft has certainly noticed the growth and size of the enterprisesoftware market and has begun to make a significant effort to enter this

    space. It has made two acquisitions of over $lB and is showing more signsthat this will be a focus in the future. Even with these acquisitions, Microsoftis not yet a significant player in supply chain software and has targeted onlysmall companies as its customers, leaving the large customers and the largerevenues to the existing players. Given Microsoft's tried-and-true strategy ofgoing in on the low end and expanding upward, however, it is certainly acompany to watch for on the enterprise software landscape.

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    Technology

    Many issues about technology that are faced by a company:

    Technology Solutions:

    Largely, multinational companies come across that supply chain operationsthroughout the world are managed not on one application or a set ofapplications, but every location and country either would have implementedlegacy systems or stand-alone systems to manage its individual locallogistics activities. Once implemented, it is difficult to isolate theseapplications and move them to a common platform without which common

    processes and standards cannot be stimulated across locations.

    Secondly, it is essential to customize software solution according to localsite and country-specific requirements. A single solution does not fit all.While the solution may be in a country with larger volumes and the size ofthe supply chain network and factories, the same software may not besuitable to be implemented in a small country with a single location.

    Cost of technology absorption:

    If a project is to introduce a system in all countries of the supply chain

    network for bringing about seamless integration and common processes, it isin vain to account for the cost of technology and capabilities of all countriesand locations to absorb the cost. The cost of IT operation is very huge. Alarger city and country may be able to pay for the IT costs, but if the samecost is expected to be from another country having a lesser volume, it cannotsuck up the cost, unless the global project management is able to suck up thecosts into project costs or get corporate management to absorb the costs andtake it off from the user countrys budget. Implementation of IT requires theIT team to travel to all of the sites to execute the setup. Train the people and

    stabilize the sites to go live. The cost of implementation can run very high.Also, all countries may not be able to bear the costs of such animplementation.

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    Availability of IT infrastructure:

    Technology infrastructure availability is not the same between countries andwithin the country too. Internet connectivity and bandwidth may not be thesame across all sites; this can hamper the application of an Internet-basedtechnology. Normally, if the project is operating on a global level, the localinfrastructure problems in many countries, taking into account the suitabilityof the IT platform for the implementation.

    Internal & External resources capacity:

    Supply chain projects involve multiple sites and cross-functional teams anddepartments within the organization. Moreover, they also have a number ofexternal agencies to manage the logistics. Driving projects through different

    countries requires management to do enormous internal sales. The projectsalso call for external sales with the service provider. Local land managementand the service provider country management may or may not have the sameinterest and commitment to the project as the global project leadershipwould have. These are soft challenges being faced by project managers, to

    be able to sell the idea and the get commitment from all involved. Theavailability of quality resources both internally and externally in all locationsis essential for the implementation of the project and is often a challenge,which can hold up implementations and training.

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    CASE STUDY ANALYSIS

    In order to understand the application of IT in real life, I studied thecase of Hero Honda and HUL. The case analysis is as follows -

    Hero Honda

    Hero Honda has accelerated its server architecture to offer special platformsfor storage, mail, backup, and database management. Hero Honda MotorsLimited is the world's biggest two-wheeler company. And to keep tempowith the incredible growth and preserve the competitive advantage, it has anetwork of over 700 nodes. This includes the HO (Head Office), two

    manufacturing plants and 20 marketing offices nationwide.

    In addition to migrating from a slower to a faster performing network,almost glitch-free network, Hero Honda has also consolidated differentapplications that previously ran on different departmental servers throughthe implementation of SAP. It has also revised its server architecture to offerdedicated platforms for applications, storage, e-mail, backup, and databasemanagement.

    Hero Honda Motors Limited is a joint venture between the Hero Group, theworld's largest bicycle manufacturers and the Honda Motor Company ofJapan. It manufactures India's largest selling motorcycle. Its network isdistributed across 700 nodes and includes two production facilities, one HOand regional offices nationwide.

    Need

    As business needs had developed, the enterprise had to solidify themtechnologically and shift from traditional old applications, servers andconnectivity options to something more structured and reliable.

    The Solution

    The company prepared components and devices in its LANs and WANsnationwide. And it executed a new line of servers to run its databases,applications, and SAP functions .

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    Advantages

    The LANs at different locations are now fully developed and switchefficient. And the WAN has multiple links over dedicated lines withreasonable fallback options. The server configuration is able to run all theenterprise applications smoothly.

    In order to obtain grip over its varied activities, the company felt it necessaryto add new applications such as Oracle and Ingress. These relationaldatabases helped the company to combine data in one place and make itaccessible to an authorized user on the fly. These new entities demanded a

    higher throughput and better scalability. The old LAN had a high failure rateand it was difficult to fix a problem that arose at times, in differentsegments. In addition, his legacy had TDMA-based WAN, which was acommon network, had the propensity to choke as new users were added.

    To solve this problem of bandwidth-intensive applications efficiently via theLAN, Hero Honda, decided to strengthen the existing server infrastructure

    primarily. The company deployed IBM RS/6000 midrange servers (the H70and F50 series) for the working of ingress and Oracle. Lotus Notes was used

    to manage mail and messaging, and it was run on IBM's Netfinity servers. A10/100 Mbps switched network was soon used and fiber was installed in allthe vital areas. The HO-and two plants in Gurgaon and Dharuhera wereconnected with secure leased links and radio links.

    Enterprise Applications

    The next step was to implement an ERP to consolidate various departmentalservers performing various functions such as accounting, inventorymanagement and so on under the same roof. SAP R/3 4.6B was

    implemented to control their operations. The company went with SAP inFebruary 2001. It uses modules such as production planning, materialsmanagement, quality management, and sales & distribution. SISL was theimplementation partner. SAP provided a number of benefits. It presented ahigh degree of data integration and enabled joint master sheets that can beused throughout various functions like operations, validation, accountingand reporting. There have been improvements in the quality, access and use

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    of transaction data. It correctly eliminated multiple entries and there was noneed for manual settlement.Hero Honda has now made better cost control measures. ERP made itfeasible to estimate costs for consumables, tool inventory cost, power plantsand fuel costs, and overheads charge. And it prepared the organization forfuture SCM (Supply Chain Management) and CRM (Customer RelationshipManagement) implementation.

    Server Everywhere

    To build up the server architecture it was determined to bond to a singleserver vendor, IBM. This allows getting a more complete variety of productsand services under one roof and communicates with a single point of contactfor services and complaints. Hero Honda uses separate servers for running

    applications, databases, mail and messaging, network management,development, testing and production. IBM RS/6000 SP servers are used formost SAP applications. The servers have varied hardware and softwareconfigurations to give best possible performance. The RS/6000 is a highlyreliable and scalable system. IBM AIX that is shipped with the boxes also

    performs exceptionally well .. The Web servers can be outsourced.

    The network

    Hero Honda's network connects two manufacturing plants in Gurgaon andDharuhera (Haryana), a HO in New Delhi and 20 marketing offices acrossIndia. A mixture of VSAT links, leased lines, Frame Relay links and dialupsinterconnect these offices.

    The companys LANs at different locations are now fully developed andswitch efficient. They use 10/100 Mbps Ethernet technologies for datatransmission and are connected with Cat 5 cables so that it can support

    bandwidth requirements for the next few years. There are rare cases ofnetwork failures and there have been no major outages in the last three

    years.

    The Gurgaon plant has two Cisco 2610 routers that are connected to an IBM8274 LAN Route Switch. A large body of servers, storage boxes, backupdevices and workstations are connected to the switch. An RS/6000 SP runsSAP applications, an e-server p-Series 620 server runs Tivoli, an H70Enterprise Server runs Oracle, a Netfinity server handles mail, and a

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    G8BlueBox G8.NET (appliance designed to provide end-to-end provideservices over the Internet) works as a mail gateway.The two Cisco 2610 routers connect to the HO in New Delhi and the plant inDharuhera. It connects with the HO through a 2 Mbps leased line with a 128Kbps ISDN dial-up link as a backup. A 64 Kbps ISDN dial-up link is usedas a second backup. The Dharuhera plant connects with the Gurgaon facility

    by a 768 Kbps RF (Radio Frequency) connection. There is also a backup192 Kbps VSAT PAMA (Permanent Assigned multiple access) link byComsat Max made available.

    The HO has a Cisco 1720 router connected to a 3Com 3300 switch. This isagain connected to another 3Com 3300 Switch which supports Netvista and300GL workstations. A number of devices handle backup, e-mail, bridging,firewall, dial-up RAS (Remote Access Server) and e-mail gateway

    functions. The company plans to implement the Human Resources andProduction Management modules of SAP. It also plans to implement CRMand SCM applications to provide a seamless connection and management oftheir dealers and suppliers. Hero Honda is currently connected to the publicnetwork for e-mail management applications. Thus, this step calls for moresecure networks. To view the current security needs they have established a

    basic level of protection through firewalls and point-to-point connections. Acomprehensive security policy will be evaluated on the new securityconcerns that will come after the CRM and SCM initiative. And it willimplement the policy before we connect with the outside world. Althoughthey have allocated a sufficient bandwidth for the WAN connectivitythroughout all critical points, more bandwidth is always useful.Unfortunately, public networks are not very reliable and do not providesufficient bandwidth these days. There are also plans to move from copper tooptical fiber leased lines. This will support the movement towards a fasterand freer network.

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    Hindustan Lever Limited

    Hindustan Unilever (HUL) has a common reputation of being Indiasleading fast moving consumer goods company; it is one of the largest

    promoters of soaps, detergents and household care products in the country.But apart from its strong financial base and vast product portfolio, HUL hasmuch to boast even when it comes to the art of integrating informationtechnology (IT) with its core business.

    This initiative of the company rides on the front-end point software calledRSNet developed by the company. The supply chain initiative calledProject Leap was launched by HUL in 2001.

    RSNet is one of the largest B2B e-commerce initiatives ever undertaken in

    India. The objective is to catalyze HULs growth by ensuring that the rightproduct is available at the right place in right quantities, on a continuousreplenishment basis.

    RSNet connects HULs redistribution stockiest through an Internet-based system. It provides linkages with the transaction systems.

    RSNet connects HULs redistribution stockiest (RS) through an

    Internet-based system. It provides linkages with the stockiesttransaction systems, enables monitoring of stocks and secondary sales.It also optimizes their orders and inventories. This has already beenextended to more than 3,500 stockiest, accounting for nearly 80 percent of the turnover.

    Introduction of RSNet has been a mammoth implementation effort forHUL. They had to build bridges with more than 50 different RStransaction platforms. Many RS points had to be computerized.Millions of product codes had to be standardized and robustness

    ensured at each RS point.

    The internal supply chain runs on advanced planning systems ofAdexa. The system manages the companys production, distributionand sourcing requirements on an integrated basis. This has beenimplemented in most parts of the business.

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    The system handles the complex task of deciding which pack must beproduced where, and where it should be dispatched to effectively meetthe orders generated on RSNet.

    The new model helps ascertain the daily stock positions at each pointin the supply chain, projects stock requirements at these points, and

    plans for its replenishment with complete transparency right acrossthe supply chain.

    The frequency of production planning is being compressed, with acapability to plan on a daily basis and even a shift level on anationally optimized basis.

    The last leg of Project Leap in HUL is the Supplier Net. The Supplier Net

    links suppliers into the chain. Suppliers can check inventory levels for rawand packaging materials at factories and their projected requirements. Thesystem ensures call-off of materials from suppliers on a daily replenishment

    basis. This project integrates several IT elements providing a holisticbusiness solution.

    The starting point has been the core enterprise recourse planning or ERP(Mfg/Pro), which HUL has been using for quite sometime now. The new ITcapability added around ERP now includes Web based e-commerce

    solutions for collaborating with supply chain partners, data warehousing andreporting tools for information management, work flow tools for process andsystems integration, high bandwidth wide area network to connect all itslocations, and clustered servers deployed at chosen data centers.

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    Conclusion and recommendations

    A broad range of technologies have been used to exchange businessinformation electronically between organizations but e-commerce will be thenew way - the way business will be done. The web has captured the attentionof merchants, consumers and vendors alike and has caused the scope of e-commerce expand to incorporate Internet commerce.

    IT is key success of a supply chain because it enables management to makedecisions over a broad scope that crosses both functions and companies. Byconsidering a global scope across the entire supply chain, a manager is ableto craft strategies that take into account all factors that affect the supplychain rather than just those factors that affect a particular stage or function

    within the supply chain. Taking the entire chain into account maximizes theprofit of the total supply chain, which then leads to higher profits for eachindividual company within the supply chain.

    The focus is on technology, applications and standards for business-to-business and consumer-to-business e-commerce transactions. E-commerce isthe use of electronic information technologies to conduct businesstransactions among buyers, sellers and other trading partners. E-commercecombines business and electronic infrastructures, allowing traditional

    business transactions to be conducted electronically.

    E-commerce enables supply of goods and services via the communicationscapabilities of private and public computer networks, including the Internet.Internet commerce involves managing and conducting of businesstransaction using the Internet.

    To analyze the individual factors from the company point of view, thetopmost improved factors are Information about inventory levels andTransaction time between the company and its supply chain partners. Theimprovements pertaining to Information technology based supply chainmanagement are in the areas of information and channel partner relationship.So, it find that most improved areas are accurate demand forecastingfollowed by information, cost reduction, response capabilities of theorganization.

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    In the same manner if take individual factors from dealers or distributorspoint of view, most of the improvement have taken place in following areas:Information about inventory levels and change in confidence and trust level.But if we take the clubbed factors, we find that most improved areas areaccurate demand forecasting followed by information, cost reduction,response capabilities of the company have improved considerably, but it isnot significant enough. There is some gap between the company and thedealers perception. The gap between companys and dealer perception arenot significant. The dealers think that improvements in these areas are not sohigh as than what company thinks. Hence organisations can leverage on this

    point more to enhance the supply chain relationship.

    RECOMMENDATIONS

    The focus should be on technology application and standards for businessto business and business to consumer transactions.

    The barriers to e-enabled supply chain have included concern about thesecurity, reliability and poor performance often experienced byconsumers due to Internet congestion, slow modems, and the use of largegraphical files amongst others. So, the organizations should take care of

    these barriers.

    Selling online in not as easy as it seems to be. So pricing, customerservice, logistic, infrastructure investment and marketing are some majorissues.

    The Organization should have a delivery system in and outside thecountry, which ensures timely distribution of goods and services. Thedelivery system should be amongst the primary concerns of theorganization.

    Business to consumer transactions including credit, debit, and smart cardtransactions at the point of sale as well as other payments such aselectronic bill payments and presentation should also be present in the

    portfolio.

    The organizations objective should be to provide a platform forbusiness-to-business communication and business-to-consumer

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    BIBLIOGRAPHY

    Books:

    Simchi-Levi, David, Philip Kaminsky & Edith Simchi-Levi, Designing &Managing the Supply Chain: Concepts, Strategies & Case Studies, 2nd

    edition, Tata MacGraw Hill, 2004

    Websites:

    www.networkmagazineindia.comwww.google.comwww.maganementstudyguides.comwww.oocities.orgwww.ehow.com

    http://www.networkmagazineindia.com/http://www.google.com/http://www.maganementstudyguides.com/http://www.oocities.org/http://www.ehow.com/http://www.networkmagazineindia.com/http://www.google.com/http://www.maganementstudyguides.com/http://www.oocities.org/http://www.ehow.com/