2. Definition – SCM*
2.1. Evolution of SCM*
3. Objectives of SCM*
4. Supply chain Excellence*
4.1. SCM Performance Measurement*
4.2. Critical factors for success of SCM*
4.3. Major Benefit of SCM*
4.3.1. Complexity of SCM in different business Environments*
5. Vendors of SCM software packages in the present market & Future Market Forecast*
6. ERP with Embedded SCM*
7. MODEL BUILDING : The Real Challenge in SCM Optimisation*
8. ADVANCED TECHNOLOGIES USED IN SUPPLY-CHAIN MANAGEMENT*
9. SEARCH & OPTIMISATION TECHNIQUES USED IN SCM*
9.1.1. Spread Sheets :*
9.1.2. Linear Programming :*
9.2. ARTIFICIAL INTELLIGENCE :*
9.2.1. Expert Systems :*
9.2.2. Natural Language Systems :*
9.2.3. Neural Networks :*
9.2.4. Constraint Programming*
9.2.5. Simulated Annealing Algorithm*
9.2.6. Hill-Climbing Algorithm :*
10. TECHNOLOGIES USED FOR AUTOMATED DATA CAPTURE AND CONTROL*
10.1.1. Bar-Code Systems :*
10.1.2. RFID : Radio-Frequency Identification Devices :*
10.1.3. Proximity Switches :*
11. ADVANCE TECHNOLOGIES FOR INFORMATION EXCHANGE*
11.1.1. E-Commerce :*
11.1.2. EDI (Electronic Data Interchange) :*
11.1.3. Video Conferencing :*
12. VENDOR FOR SUPPLY-CHAIN MANAGEMENT SOLUTIONS AND THEIR PRODUCT*
12.1.1. Fygir, (Holland)*
12.1.2. SAP AG*
12.1.3. JD Edward*
12.1.5. i2 Technologies*
12.1.6. Numetrix :*
12.1.7. Thru-put Technologies :*
13. Advanced Techniques and Applications built using them*
13.1. PRODUCTS, TECHNOLOGY and BENEFITS*
13.1.1. PRODUCT – Resonance*
13.1.2. PRODUCT – RHYTHM*
13.1.3. Case : Flexible Products*
13.1.4. CASE : J. Sainsbury, UK*
14. WHERE ALL THIS LEADS US TO ?*
15. References :*
Supply Chain Excellence - Advanced Technologies
In the past decade business environment has changed dramatically. Manufacturers today confront new markets, new competition and increasing customer expectations. They must respond to these challenges to stay in business.
The first challenge is the new market opportunity represented by the European Community (EC), North American Free Trade Agreement (NAFTA), Association of Southeast Asian Nations (ASEAN) and the Global Agreement on Trade and Tariffs (GATT). Manufacturing companies can now participate in larger markets than they could in the past. To take advantage of these new opportunities, manufacturers must be able to serve the needs of these new customers and maintain a local presence in the markets that they serve.
The second challenge is new competition. New competitors increasingly appear in local markets. New technologies replace older products at an ever-faster pace. With a worldwide marketplace, customers can now "shop the world" for the best services and products.
Finally, manufacturers today are challenged by customer expectations. Customers take it for granted that they can have many options, speedy deliveries and excellent service. To meet increased customer expectations, manufacturers are striving to reduce product development and delivery lead-times, and reduce the time it takes to respond to a customer’s needs.
In the today’s changing business environment, major focus of the manufacturing organizations is to significantly reduce lead-times and increase flexibility. This objective is achieved through supply chain management, by integrating material management throughout the supply chain from raw material suppliers to customer delivery.
Supply chain management refers to the activity of managing the flow of materials and products from source (supplier) to user (end customer) and includes the total flow of materials, from acquisition of raw material to delivery of finished products to the ultimate users.
(source: APICS references on SCM )
Supply chain management describes the integrated management of materials from raw material suppliers to the delivery of finished product to a customer. This integration includes suppliers, sub-contractors and closes the loop with the end customer .
( source: White Paper on SCM by BAAN, Netherlands)
In the 1970s manufacturing operations focussed on internal efficiencies. Manufacturers planned production in efficient lot sizes, stocked finished goods, and delivered product to customers when an order was recieved. Except for raw materials, the supply chain was confined within the four walls of the factory.
In the 1980s, manufacturers began to use internal processes as a basis for competitive advantage. Manufacturers concentrated on improving deliveries and product quality. Just-in-time (JIT) production execution systems were implemented to improve performance. JIT put supplier relationships and scheduling in the spotlight, and improvements in these were required to make a JIT system work. The supplier was now tightly integrated into the supply chain.
Starting from the 1990s, manufacturers are specializing their operations to gain competitive advantage, through process specialization. Increasingly, manufacturers seek to operate a JIT environment where almost every process can be produced by another supplier as a direct purchase or as a sub-contract.
Today, there are many highly specialised suppliers of manufacturing processes that once were combined in a single manufacturing site. These specialized processes are very reliable and cost effective. With the emergence of the global market place, the final manufacturer of a product must be able to plan production, and manage deliveries to the end customers throughout the world—a tightly integrated supply chain.
The major objectives of supply chain management are :
Get the right product to the right place at the right time.
Keep inventory as low as possible.
Offer superior customer service .
Reduce cycle times :
Supply Chain Management can involve operations that deal with how customer orders are processed through the system and ultimately filled, as well as how raw material are acquired and delivered for the following process.
The present days dynamic business environment involves a greater uncertainty of demand, shorter product life cycles. Hence the concept of extended supply chain involving suppliers, manufacturers, distributors, retailers, customers as an integrated economic and operating system is increasingly popular. Excellence in Supply chain requires an integrated approach with reference to customers, competitors, costs, and also connections with other activities across the entire extended supply chain.
To assess the performance of the supply chain system the following dimensions are considered (according to APICS)
Cost - The full cost of processing of moving materials from source to point of use.
Service -Including issues such as delivery reliability, in-stock performance and lead time.
Velocity- The time it takes to move products through the logistics pipeline. This performance dimension is directly correlated to total pipeline inventory levels and flexibility of the pipeline to respond to changes in the market.
Successful integrated supply chain management is extremely complex, since each constituent of supply chain will have varied business process flow. Hence some general guidelines have been evolved with respect to SCM so that an organisation can build a foundation for long-term competitive advantage. They are namely:
Begin with customer –To align your operations to meet your customer’s requirements.
Manage the logistics assets across the supply chain, not just within the enterprise. Projects that address the location of distribution facilities, pipeline inventory the transportation operations should include both down channel and up channel partners.
Organize customer management so that it provides one face to the customer for information and customer service, which means aligning suppliers fulfillment processes with your customers buying processes.
Integrate sales and operations planning as the basis for more responsive supply chain, which means real- time demand and forecast information both within the enterprise and across the supply chain.
Leverage manufacturing and sourcing for flexible and efficient operations .
Focus on strategic alliances and relationship management across channel partners.
Develop customer driven performance measures. The complete supply chain solution requires developing measures and performance criteria that track the economic performance of the extended supply chain.
(source : APICS reference material)
Another important issue that can affect the supply chain is new product introduction, product replacement, and product changes. The supply chain needs to be analysed to determine the timing for product replacement or changes. The supply chain needs are also to be evaluated for the potential obsolete inventory because of new product introduction or change.
When a change or new product introduction is initiated, then the supply chain needs to be informed of the changes. New or additional information(data) needs to be populated across the different entities (manufacturing sites, purchasing organizations, sales organizations) within the supply chain.
The great benefit of supply chain management is that when all the channel members – including suppliers, manufacturers, distributors, and customers behave as if they are part of the same company, they can enhance performance significantly across the board.
The complexity of supply chain management varies depending on the type of manufacturing operation. The simplest supply chain is that of a re-seller. A single–plant manufacturing operation adds more "links" in the chain. A multi-plant manufacturing operation adds further levels of complexity.
The issues raised here are common across many industries; the issues that are addressed are more important than any references to specific industry.
A manufacturer that re-sells a product has a very simple supply chain: the customer is at one end.inventory in the middle, and the supplier is at the opposite end. Poor supplier planning and a lack of coordination with customer demands can result in excess and obsolete inventory. The re-seller business usually relies on rapid delivery of product. Customer dissatisfaction can occur if product is not available or shipments are late; this will eventually result in lost business.
Single Plant Manufacturer
The next level in managing the supply chain is a single-plant manufacturer. This type of company adds manufacturing management to customer delivery and supplier management. Supplier relationships are usually more complex, as well. Sub-contractors and multiple suppliers may be included within the supply chain; i.e., the product may move from one supplier directly to another supplier .
In the past many of the individual processes involved in manufacturing a particular product were performed by a single company. Today, several companies participate in the delivery of the finished product. Hence with process specialization, one company is the final assembler and manages the activities of various external suppliers.
Managing even a straight forward supply chain can be challenging. Not only are business relationships between the customers and suppliers very important to it, computer aided planning and management tools can also assist in managing the supply chain .
The Multi-site Manufacturing involves a higher level of complexity, having multiple plants with both local as well as centralised purchase functions and regional and local level, depots.
In this environment sales forecast and planning is at at each depot. Sales forecast need to be consolidated at the corporate level for corporate wide planning. Final assembly manufacturing plant uses the corporate forecast to drive MRP. Supply orders are created for inter plant material, production orders, production schedules and also purchase orders.
All manufacturers that buy, sell, and produce today must manage the supply chain; the primary variable is the complexity in terms of length of the supply chain, non linearity of relations.
Traditionally most manufacturers and distributors have applied software tools to finance and accounting processes, and ignored other functions like inventory control, shipping and warehousing over the years. The result is that organizations were unable to respond to rapidly changing market conditions in terms of supply and demand.
Megacorporations were the first to use software in production, transportation, and storage functions known collectively as supply chain.
MRP packages automated the factory floor, but included no tools to help calculate how to analyze capacity and fill orders more quickly. The supply chain software filled a critical gap in the movement of products and goods. In the early 1990s, vendors like Manugistics, Redpepper software and i2 technologies began roving out supply-chain planning software that complemented traditional MRP packages. Distribution costs typically eat up 8% of a company’s sales. Software that manages inventory and forecasts capacity can trim 10% to 12% of distribution costs.
The recent list among supply-chain management software vendors in small and midsize business mirrors a similar trend in the ERP market. The reason is growth potential: While mid-tier business with $250 million to $2 billion in sales account for 75% of manufacturing sites, they purchase fewer than one-third of the products sold in the $ 4.8 billlion ERP market, according to Stamford, Conn. Based Gartner Group. Although the market for supply-chain management is much smaller, IS organisations installed $510 million worth of supply-chain management software in 1996, the Gartnet Group Estimated. Interestingly, plenty of providers of supply chain management software are targeting not only midsize but also small businesses.
i2 Technologies, based in Dallas, is actively wooing the planning needs of companies with sales of $250 million or less with its ‘Rhythm’ software with an entry–level starting price of $200,000 ranging upto $20,000,000.
Atlanta based American software sells its Windows NT-based software to companies with revenues as low as $50 million .
Toronto – based Numetrix, a maker of decision-support tools for optimizing production and distribution planning.
Distinction software of Atlanta is also in the market selling PC-based supply-chain components.
Another software namely Rock Blocks supply-chain software of Rock port Trade systems gives the multinational organisations the ability to manage and track a supply chain across international boundaries. The tool can calculate the cost in dollars of purchasing, shipping, and taxes from different countries, tariffs and trade regulations.
With most of the organisations looking for integrated enterprise applications in todays market , the role of ERP software packages in Supply chain management needs a greater attention.
The focus of ERP is many steps beyond MRP which deals with just materials requirement planning and manufacturing planning. An ERP is typically spread across multiple sites in an organisation and integrates all the functional areas of business management. In this sense ERP software have been dealing with the area of SCM at an elementary level. Then comes cross-system ERP or a distributed ERP system which also integrates the business partners and their internal processes. Such a system is definitely more powerful as one gets whole view of the entire supply chain.
Even though most of the ERP products have integrated supply chain functionality, a commonly expressed view is that the ERP solutions main value is combinining financial control with multi-plant coordination and hence responding to key supply and demand changes may not be very effective.
But the best approach is to provide embedded optimisation and forecasting within ERP it self. This configuration can only offer the best decision support capability to the system. Such facility is offered is offered by a few ERP packages.
Most of the SCM optimisation solutions are considered to be pretty good in performance but to derive real benefit from such an application, it is required to model the supply chain correctly as per the unique business requirements of every enterprise.
Also we have to integrate and cleanse data coming in from multiple sources to ensure that the business model is receiving accurate information and all factors are included in the model that affect the Supply Chain.
So, only if we can build a Supply Chain Model that precisely reflects the nuances of the business, substantive improvements in scheduling and planning the flow of the material throughout the enterprise can be made.
The intricacies involved include relationships among the various factors affecting the Supply Chain. A business Supply Chain model design maximises the benefits of integration of Supply Chain by
Minimising the risk,
Prioritising the work by process of elimination of undesirables/waste,
Providing a clear visualisation o complex situation as opportunities that are not clearly visualised are the opportunities missed.
The people who are close to the data can intuitively see relationships between the market and manufacturing i.e. the supply-chain capability.
For more write-up on this, please refer to the index given at the beginning of this article and in case you want more of info,
Please contact the author through email.
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