Role of IT in Supply Chain

Milind Sakhardande
 Role of IT in Supply Chain
• Information is the driver that serves as the “glue” to create a
coordinated supply chain
• Information must have the following characteristics to be useful:
– Accurate
– Accessible in a timely manner
– Information must be of the right kind
• Information provides the basis for supply chain management
decisions
– Inventory
– Transportation
– Facility
 Characteristics of Useful Supply Chain
Information
• Accurate
• Accessible in a timely manner
• The right kind
• Provides supply chain visibility

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 Use of Information in a Supply Chain

• Information used at all phases of decision

making: strategic, planning, operational
• Examples:
– Strategic: location decisions
– Operational: what products will be produced
during today’s production run

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 Use of Information in a Supply Chain

• Inventory: demand patterns, carrying costs,

stock out costs, ordering costs
• Transportation: costs, customer locations,
shipment sizes, trade-offs
• Facility: location, capacity, scheduling,
demand, exchange rates, taxes, etc.

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 Role of Information Technology
in a Supply Chain
• Information technology (IT)
– Hardware and software used throughout the
supply chain to gather and analyze information
– Captures and delivers information needed to
make good decisions
• Effective use of IT in the supply chain can
have a significant impact on supply chain
performance

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Use of Information across SC
 The Supply Chain IT Framework
• The Supply Chain Macro Processes
– Customer Relationship Management (CRM)
– Internal Supply Chain Management (ISCM)
– Supplier Relationship Management (SRM)
– Transaction Management Foundation
• Focus on the Macro Processes

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 Macro Processes in a Supply Chain

Supplier Internal Customer

Relationship Supply Chain Relationship
Management Management Management
(SRM) (ISCM) (CRM)

Transaction Management Foundation (TFM)

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 Customer Relationship Management

• The processes that take place between an

enterprise and its customers downstream in
the supply chain
• Key processes:
– Marketing
– Selling
– Order management
– Call/Service center

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 Internal Supply Chain Management
• Includes all processes involved in planning for and
fulfilling a customer order
• ISCM processes:
– Strategic Planning
– Demand Planning
– Supply Planning
– Fulfillment
– Field Service
• There must be strong integration between the
ISCM and CRM macro processes
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Supplier Relationship Management
• Those processes focused on the interaction
between the enterprise and suppliers that are
upstream in the supply chain
• Key processes:
– Design Collaboration
– Source
– Negotiate
– Buy
– Supply Collaboration
• There is a natural fit between ISCM and SRM
processes
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 The Transaction Management
Foundation
• Enterprise software systems (ERP)
• Earlier systems focused on automation of simple
transactions and the creation of an integrated
method of storing and viewing data across the
enterprise
• Real value of the TMF exists only if decision
making is improved
• The extent to which the TMF enables integration
across the three macro processes determines its
value

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 Typical IT solutions
• Major developments in IT
– Electronic Data Interchange (EDI)
– Intranet/Extranet
– Data warehousing/Data mining/Data marts
– E – commerce/ E – procurement
– Bar coding technology
– Smart cards
– Radio Frequency IDentification (RFID)
 Electronic Data Interchange (EDI)
• Involves 3 basic processes
– Directing data and gathering data from different
application programs
– Converting data from proprietary formats (as used
by application programs) to standard formats (as
transmitted by communication network) and
reversing this process at the other end
– Actual transmission of data between trading
partners over a communication network
 EDI
• Benefits of EDI
– Greater effectiveness/efficiency
– Gives competitive advantage (via differentiation)
– Helps to keep customers happy
– Leads to extension of buying/selling centers
– Increased accuracy
– Optimized inventory
– Improved decision making
– Reduced transaction costs and time
EDI and business cycle
Working of an EDI
 Intranet/Extranet
• Intranet
– means of distributing information
– Allows real time feedback to flow from
manufacturing to design to engineering groups
– Internal web of the organisation
– Share data through messaging by publishing it
electronically over the network for access to all
– Enclosed within firewall
 Intranet/Extranet
• Extranet
– Excess of intranet extended to external users
(channel partners/clients/customers/suppliers)
– Different members have different access powers
and unique identification
 Benefits of Intranet/Extranet
– Facilitates 2 way communication between shop-
floor and other departments
– Allows distribution of many categories of
information
– Ensures common process for multiple functions
– Enhances overall performance
Data Mining

• Explosion of data stored leads to explosion of

need for analysis of data
• Increased desire to mine the data
• Results include:
• Associations or correlations (beer purchasers buy
peanuts a certain percentage of time)
• Sequences or one event leading to other event (a rug
purchase followed by purchase of curtains)
The Data Mining Process
 Bar coding
• Set of bars and spaces between bars with
varying widths
• Bar code scanners to read the codes
• Keyless data entry (encoding and decoding
done automatically)
 Smart Cards
• Plastic card that looks like a credit card
containing embedded computer chip
• Chip can either be microprocessor with
internal memory or memory chip with non
programmable logic.
• For some chips connection is through direct
contact, while some chips use remotely
contactless electro magnetic interphase
The Smart fleet scheme

• Launched by BPCL to built loyalty amongst fleet

owners
• Truck driver can swipe card to fill fuel (drivers
have abandoned vehicles and fled with diesel
money in the past)
• Enables fleet owner to track the tuck based on
fuel filled at a particular station just making a call
to BPCL call centre
• Drivers cant waste time on delivery as they are
tracked
 Radio Frequency Identification(RFID)
• Basically a form of labeling where electronic labels or
tags are programmed with unique information and
attached to objects that need to be identified or
tracked such as pallets, vehicles, automated guided
vehicles etc.
• A tag and the reader : 2 parts
• Tag is a transceiver that is activated by reader which
transmits a signal using radio waves
• The tag then transmits encoded data to the reader
• Reader then logs the signal via a computer
• In short, RFID uses radio frequencies to transmit data
between a portable device and a managing computer
RFID Capabilities
RFID Capabilities (cont.)
The Future of IT in the Supply Chain
• At the highest level, the three SCM macro
processes will continue to drive the evolution of
enterprise software
• Software focused on the macro processes will
become a larger share of the total enterprise
software market and the firms producing this
software will become more successful
• Functionality, the ability to integrate across macro
processes, and the strength of their ecosystems,
will be keys to success

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 Supply Chain Information Technology
in Practice
• Select an IT system that addresses the
company’s key success factors
• Take incremental steps and measure value
• Align the level of sophistication with the need
for sophistication
• Use IT systems to support decision making,
not to make decisions
• Think about the future

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Important References:
• Chopra, S., & Meindl, P. (2013). Supply Chain Management:
Strategy, Planning, and Operation. (5th ed.) Pearson Education.
• Mohanty R.P., & Deshmukh S.G., 2005. Supply Chain Management
(Theories & Practices), Dreamtech Press, p.376.
• https://www.ruddersoft.com/blog/how-rfid-works/10
• https://www.slideshare.net/royalzinc/presentation-on-smart-
fleetcard
• https://www.asp.com.au/can-standard-bar-code-scanner-read-qr-
codes/
• https://en.wikipedia.org/wiki/Barcode
• https://www.collab-hub.com/difference-between-intranet-and-
extranet/
• https://data-flair.training/blogs/data-mining-and-data-science/
• https://towardsdatascience.com/data-mining-tools-
f701645e0f4c?gi=def14d94c1cc
• https://data-flair.training/blogs/data-mining-process/