Information Technology and Supply Chain Management

“Education in Pursuit of
Supply Chain Leadership” dp&c Chapter 15
Chapter 15
Information Technology
and Supply Chain
Management
15-1 dp&c Chapter 15
Learning Objectives
• Exploring the foundations of information technology

• Understanding technology architecture basics
• Reviewing information system foundations
• Exploring the foundations of supply chain management
business technologies
• Detailing enterprise resources planning (ERP) systems
• Detailing supply chain management (SCM) systems
• Defining Internet business
• Discussing the impact of Internet business on the supply
chain
• Exploring issues in SCM technology implementation
Chapter 15
Information Technology and Supply Chain
Management
Foundations
Inventory of
Information
Management Basics
Technology

Defining Information Technology
The technology of computers, telecommunications,

and other devices that integrate data, equipment,
personnel, and problem-solving methods in planning
and controlling business activities. Information
technology provides the means for collecting, storing,
encoding, processing, analyzing, transmitting,
receiving, and printing text, audio, or video
information

Promise of Information Technology
Today's enterprise must consider computerized

technologies not only as a tool to accelerate the
speed and productivity of business functions, but
also as a key driver that enhances the opportunity
for supply chains to continually activate new
relationships and operating structures that change
the way they compete in the marketplace

Technology and Concepts of Knowledge
The success of automation resides in the ability of
designers to incorporate the human knowledge
Automate
necessary to perform a given productive task directly
into the machine
The use of technologies to enable people to collect,

process, select, and sort data that can be used to create
Informate new forms of knowledge, provide unique insights, and
engineer disruptive innovation
The use of technology when people network their tasks,

ideas, and aspirations to produce a form of collective,
Network opt-in/opt-out fusion of opened-ended knowing and
experiencing

Chapter 15
Management
Technology
Inventory
Architecture
Management Basics
Basics

Information System Definition
Interrelated computer hardware and

software along with people and
processes designed for the collection,
processing, and dissemination of
information for planning, decision
making, and control.

SCM Technical Architecture
Networking Information
toolsets strategy
Enterprise Database Information Enterprise

Application Information
Technology manage- structure Business
software governance
Architecture ment deployment Architecture
Integration
System Information
Config- Infra-
uration structure
Inter- Inter-
Inter-
enterprise enterprise
enterprise
process Business vision
model Architecture
Inter-
enterprise
business
model

Enterprise Technology Architecture – Detail
The repository of all data that has been collected
Database during database management and transactional
processing
Defined as two or more computerized devices linked

together over a geographical area. Networking
Networking
permits users to access and exchange the same data
through software connecting them to the network
Application A general term used to describe the various kinds of

programs that are used to enter, maintain, display,
Software
and access information resident in databases.
The actual configuration of hardware, database

System management software, and application software. In
Configuration detail, describes what functionality users have chosen
to run the business

Networking Integration Architecture
ABC Company
Chicago
Customer
Network
Internet Network
Los Angles
Network
Cloud
Computing
Database
Software
Applications

Enterprise Business Architecture – Detail
Information Establishes the principles guiding the organization’s
Strategy efforts to create and exploit their information system
Definition databases and software application functionality
Describes the nature, completeness, and accuracy of

Information system information, where it is located, how long it is
Governance kept, and how business accesses and uses it for
decision-making
Identifies the technology necessary to establish the
Information database management systems, application software,
Infrastructure networking toolsets, and the actual configuration of
these components into a technology solution
Information A roadmap defining how the various technology

Structure applications and toolsets will be configured,
Deployment maintained, and improved over time

Inter-Enterprise Business Architecture - Details
Creation of an operational system of cross-channel
business as well as a mechanism to leverage the
Inter-enterprise
entire business ecosystem to discover breakthrough
vision
propositions made possible by sharing a common
information platforms.
The business model provides a high-level description

Inter-enterprise
of the technology integration points connecting each
business model
business in the supply chain network
the process model provides a description of the

Inter-enterprise
external processes that govern the daily performance
process model
of supply chain functions

Chapter 15
Management
Information
Inventory
SystemBasics
Management
Foundations

Five Basic Functions of Information Systems
Enterprise Strategic
Information Planning
System
Decision
Enterprise Management
Analysis/
Database Control
Simulation
Transaction
Management

Principles of System Management
Accountability. Responsibility for the quality and integrity of that
data resides squarely with the people who use the system
Transparency. Transparency means that the mechanics of how

the system works is simple, understandable, and apparent to the
user
Accessibility. Computer systems remove the difficulties
surrounding data retrieval by containing programs that provide
for quick access and update of critical information that span
company departments or even databases belonging to channel
trading partners
Data integrity. The usefulness of information technology is

directly dependent upon the accuracy and timeliness of its
databases.

Principles of System Management (cont.)
Valid process simulation. If an information system is to provide
useful information, the transactional and maintenance programs
in the system must work the way the business actually works. In
effect, a business application is a representation, a simulation of
the actual physical action performed during process execution
Flexibility. An effective information system provides users with

the capability to perform transactions or manipulate data to meet
the needs of both the business and customers and suppliers
Control. A fundamental benefit of an information system is the

ability to control business processes. Applications should
provide users with reporting and exception messaging designed
to alert them as early as possible to actual or pending out of
control processes

Objectives of Supply Chain Technologies
Increasing supply chain velocity, agility, and scalability. By providing
integrative and networking capabilities, supply chains participants
can rapidly form collaborative partnerships to engage in managing
new product development, exploit new market opportunities,
accelerate product delivery to targeted customers, and leverage the
core competencies of channel partners to quickly scale production
and distribution resources
Provide global visibility of real-time channel information. Combining
technologies like the Internet and cloud computing with supply
chain software applications provide supply chains with visibility to
channel events and the ability to rapidly make informed decisions
Tame the supply chain bullwhip effect. Access to real-time channel
inventory information enables channel planners to see unnecessary
build-ups of channel inventories and to simulate inventory
movement to diminish the effects of poor channel forecasting by
channel participants

Objectives of Supply Chain Technologies
Replace supply chain inventory with information. The use of
networking technologies providing the entire channel with real-time
data allowing planners to respond rapidly to actual shifts in demand
without stockpiling inventories
Move from push to pull. The ability of networked databases enables

companies resident at all channel points that touch the customer to
stream demand and substitute push channel replenishment with
pull systems that empower planners to rapidly respond to actual
shifts in demand
Facilitate the formation of new supply chain partnerships and

deepen existing partner relationships. The ability to link inter-
channel strategies and tactics through information integration and
the use of networking for real-time information sharing enables
companies to form and grow supply chain relationships

Chapter 15
Management
Supply Chain
Inventory
Management
Management Basics
Technologies -
Foundations

Core SCM Technologies
Quotes
PM maintenance Order processing
Forecasting
Equipment statistics Statistics & perform.
Diagnostics mgmt. Service & rental MRP
RFQ
Configuration Inventory
PO processing Cost Commissions Scheduling
Supplier mgmt. Taxes Pricing Capacity mgmt.
Sourcing & pricing WIP mgmt. Inspection
Negotiations PO delivery Data collection
SCM Core Production statistics
Supplier performance Project management
Technologies
Cash flow management Architecture Item master data
Cost accounting BOMs Routings
GL Work centers Costs
Tax mgmt. AR Technical data
Budgeting AP Payroll
Distribution documentation
Reporting Skills Mgmt. replenishment
ECO
Personnel Warehouse Mgmt.
Development Transportation Mgmt.
Recruitment Statistics

Advanced SCM Technologies
Advanced SCM
Computer Added Technologies Labor
management
Design (CAD) system (LMS)
Plant
Maintenance Core Modules e-Commerce
Transportation Customer Demand
management Assets
Management management
system (TMS) Business
Procurement System Production Warehouse
Quality management
management Finance Product system (WMS)
(QM) Human Data Business
Resources Logistics analytics
ABC costing
Field service
Environmental Lean
MES Advanced applications
tracking
planning
Data mining systems S&OP EDI
(APS)

Networking SCM Technologies
Networking SCM
Global trade Technologies
management (GTM) Enterprise application
integration (EAI)
Cloud computing
B2B and B2C commerce
Supply chain
management (SCM) Web-based, open,
SCM Core and component-based
Supply chain event Advanced environment
management (SCEM) Technologies
Internet e-exchanges
Supplier relationship
management (SRM) Customer relationship
Demand sensing Control management (CRM)
towers Collaborative
Collaboration planning, forecasting,
and social and replenishment
networking Mobile
devices (CPFR)

Supply Chain Control Tower Architecture
SCM Control
Tower
Centralized
information
gathering and
monitoring
Middleware software/system integration platform
Supply Chain Universe

SCM/ERP/SRM/ GTM/SCM/ERP/
SCM/ERP/SRM/ ERP/Web-based
SCEM/CPFR/ CRM/SCEM/CPFR/
CPFR/e-exchanges make collaboration
GTM/B2B B2C/Mobile devices
Plan Source Make Deliver

SCM Technology Maturity Model
SCM networking tools used to integrate supply chain Level 5
supplier and customers and enable collaborative
Collaborative
supply chain links
enterprise
Level 4
SCM cross-functionally organized around
a common strategy. Networking tools Enterprise
enable internal supply chain integration
strategy
Level 3
Integrated SCM is cross-functional using
enterprise common data base and
Level 2 companywide process rules
Semi-integrated SCM used to integrate major process data
enterprise streams within departmental functions
Level 1
Data
management Core SCM applications perform transaction
functions. Minimal to no cross-functional
system integration

Chapter 15
Management
Standard SCM
Inventory
BusinessBasics
Management
Systems

ERP Architectural Elements
By using special industry-focused libraries and module
Flexible and application flag settings, users can configure a
unique solution that meets their exact needs
A world-class ERP system has an open architecture
Modular and permitting any module to be interactive with any other
Open module without impairing system integrity, system
functions, and performance
The ERP system should support as wide a variety of

Comprehensive organizational functions as is possible and support a wide
range of industry verticals
The ERP system possesses functionality that allows

companies to escape beyond the four walls of the
Networked
enterprise by possessing Internet networking and
integrating them with supply chain partners

Basic ERP Functions Diagram
Enterprise Functions Region 1
Business Enterprise Objectives

Forecasting/ Planning
Product Planning Markets, Price,
Campaigns, Family
Sales & Operations Capacities,
Accounts Order Planning
Receivable Management Production Rates
Region 2
General Channel Master Scheduling Demand Management,
Ledger Management (MPS/DRP) Rough Cut Capacity,
DRP
BOMs Material Requirements Material, Component
Inventory Status Planning (MRP) Requirements
Workcenters/ Capacity Requirements Detail Capacity

Routings Planning (CRP) Requirements
Region 3
Cost Shop Floor

Load Scheduling
Accounting Management
Quality
Product Quality
Management
Accounts Purchasing Quality, Pricing,

Payable Management Receiving, Suppliers
Inbound/Outbound Transportation, Rates,

Fixed Logistics Warehousing
Human Assets Fixed and Human
Resources Resources, Payroll

Distribution Enterprise System Diagram
Enterprise Functions Business
Enterprise Objectives
Planning
Forecasting/ Marketing/Sales Products, Markets,

Product Planning Planning Price, Campaigns
Bill of Channel Supply Chain Structure

Distribution Planning
Warehouse, Labor,
General Asset Logistics Resource
Transportation,
Ledger Planning Planning
Inventory Capacities
Accounts Order Demand Customer Service

Receivable Management Management
DRP, ROP, Storage

Cost Inventory
Costs, Channel
Accounting Planning
Distribution
Transportation/ Logistics Transportation, Rates,

Warehousing Execution Warehousing
Kitting, Labeling, Bulk

Processing Value-Added
Breaking, Processing
Costs Processing
Costs
Accounts Purchasing Quality, Pricing,

Payable Management Receiving, Suppliers
Human Human Resources,

Resources Payroll

Evaluating Technology Solutions
Assess information intensity. Companies must evaluate the existing
and potential information intensity of their products and operations
processes. The objective is to determine the breadth of the
information required both to run the supply chain and manage
product and service processes
Industry impact. Technology can dramatically alter a firm's
bargaining power with suppliers, ability to offer new products and
substitute products, and capability to fight off new as well as
existing competitors
Search for ways technology increases competitive advantage. By
targeting activities that represent a large proportion of supply chain
costs, are critical to marketplace differentiation, or compose critical
links within the supply channel, technology assists companies to
identify new avenues for sustainable competitive advantage

Evaluating Technology Solutions (cont.)
Investigate how technologies spawn new industries. Information
tools spawn new businesses by diversifying existing organizations
Develop a long-term plan that seeks to continuously leverage new

information technologies. Strategists must be diligent in instituting a
formal methodology for the ongoing review of new technologies, the
strategic alignment of business opportunities and new technologies,
the investments necessary to implement new hardware and
software, and the impact technologies will have on supply chain
linkages

Charting Business and Technology Solutions
Integration,
Synchronization
Supply Chain
Supply Chain
Plan
Annual Business
Plan
Monthly S&OP GTM
DRP/MRP Inventory
Weekly Capacity Plan Deployment
Automation Sales/Marketing e-Commerce

Order Performance Social Media
Inventory
Daily Activities Management Metrics Collaboration
Purchasing
Shipping/Receiving CRM/SRM
AP/AR
Data Finance SCEM
Minutes Collection Mobile
Daily Functional Enterprise Integrated
Activities Area Value Chain

SCM Business System Choices
In this option a company decides to build its own suite
Build
of business applications
In this option a company decides to buy a standard

Buy
turn-key system from a recognized software developer
In this option the core business modules of a standard

Best-of- system are integrated with one or more “best-of-breed”
Breed modules created by one or more software companies
specializing in the business area
In this option a company chooses to rent business
Rent applications via a hosting software-as-a-service (SaaS)
provider
In this option a service provider manage all of a

Outsource
company’s information technology needs

Major Criteria for System Search
Functionality: the array of resident applications and the level of fit to
company business processes
Ease of use: the speed by which users overcome the functional
learning curve and the transparency of the applications relative to
company processes
Performance: the processing speeds by which data is entered,

processed, maintained, and retrieved
Scalability: the ability of the user to enable or disable software

modules during implementation, and as the company’s demands on
the software expand or change
Interoperability: the easy by which the software is interfaced,

integrated, or networked to other software systems

Major Criteria for System Search (cont.)
Extensibility: the easy by which modifications or software
enhancements are made to the base software system
Stability/reliability: the software’s basic data integrity and freedom

from bugs or invalid calculations
Security: capability of restricting access to users, groups of users,

or outside the organization supply chain partners and customers
Support: the quality of implementation assistance, on-going

consulting, application documentation, and training
Vendor viability: financial strength of the vendor organization to

provide periodic system enhancements and on-going support and
services

Chapter 15
Management
Advent of SCM
Inventory
InternetBasics
Management
Technologies

Categories of Internet Technologies
Business-to-
Applies to any business that utilizes the Internet
consumer
to sell products or services directly to consumers
(B2C)
Business-to- Applies to any company that utilizes the Internet

business (B2B) to sell products and services to other companies
Consumer-to-
Applies to Internet sites that enable customers to
consumer
buy from each other
(C2C)
Consumer-to- Applies to any consumer that utilizes the

business (C2B) Internet to sell products or services directly to a
business
Phases of Internet Business Evolution
Global
knowledge/compet Phase 5
-encies exchanges,
interoperative
value chains
B2B model,
Critical e-Business Enablers
CRM, ERP Phase 4

integration, e-Collaborative
Commerce
value chain
Transactions, Internet
customer On-Line
Phase 3 Business
interaction,
personalization e-Marketplaces
Internet
On-Line
Marketing, product
Phase 2 Buying
catalogs – static
Storefront
content Internet
Marketing
Orders, invoices, Phase 1
ASNs, billing,
documentation One-to-one
networking
EDI Internet e-Commerce e-Business e-Collaboration
Marketing
Connectivity Technology

Benefits of Internet Business
Increased market supply and demand visibility enabling more
customer choice, potentially better fit of products to buyers, and a
larger market for sellers
Price benefits from increased competition through auctions and e-
markets to increase price competition and dramatically lower
procurement costs
Increased operational efficiencies through improved procurement,
order processing, and selling processes
Improved partner and customer segmentation that transforms
customer marketing objectives provides appropriate levels of
services to customers with alternative value propositions
Improved supply chain collaboration that buyers and sellers to work
together collaboratively for product design, planning, and
marketplace introduction; marketing campaigns and promotions;
and life-cycle management programs
Benefits of Internet Business (cont.)
Synchronized supply chains where visibility into operating
information across the value chain allows companies to drive
efficiencies across the entire value chain
Efficient payment transfer that greatly facilitates transaction final

settlement
Impact on cost for reduction of enterprise infrastructure, inventory,

facilities, and transportation costs

Impact of Internet on Supply Chain –
Customers Service-Driven Elements
Enables customers to choose from a much wider array of
Product variety
products than is possible in a ‘bricks and mortar’ store
Enables businesses to broadcast customer demand

Product
continuously through the supply chain, providing visibility
planning
to inventory availability all the way back to the producer
By networking with channel partners, enables introduce of

Shorten time to
new products to the marketplace much faster than a
market
conventional business
Flexible pricing, Changes to company price, promotions, and the product

promotions, portfolio must be matched by a mechanism that rapidly
and products communicates these changes to the supply chain

Operations-Driven Elements
Customer response time. The easy by which customers browse
online catalogs and generate orders through shopping cart
functions places a significant burden on the supply chain
Inventory. A critical element of Internet business is the ability of

firms to offer an extensive portfolio of products
Facilities. The complexity of serving an entire customer base,

often with very small order sizes, will impose a significant
burden on existing operational procedures, staff, and information
technologies
Transportation. Internet businesses will have to dramatically

improve the quality, capacity, and delivery reliability of
transportation both to stocking points and to the marketplace

Operations-Driven Elements (cont.)
Information technology. Effective Internet business requires the
close networking of all members of a supply chain. The Internet
serves as a conduit where critical information such as forecasts,
the customer demand-pull, and visibility to disruptions in product
and/or transportation movement are communicated up-and-
down the supply chain
Returns. Companies engaging in e-commerce will have to

engineer convenient methods for customers to return unwanted
products or to engage repair or warrantee service from some
node in the supply chain

Chapter 15
Management
SCMInventory
Technology
Implementation
Management Basics
Issues

Tangible/Intangible Benefits of Implementing
SCM Technologies
Tangible Benefits of SCM Technologies Intangible Benefits of SCM Technologies
Closer alignment of demand and supply High customer retention
Deeper penetration of the customer
Reduction in operations errors
marketplace
Increased sales volumes Higher customer service
Greater financial returns Improved scheduling
Lower overheads Workforce skills optimization
Reduced cash-to-cash cycle Higher employee satisfaction and efficiency
Lower inventory and carrying costs Better integration of business functions
Lower transportation costs More effective change management
Reduction in purchasing costs Networking of channel skills and competencies
Detailed order tracking Visibility to disruptive events in the supply chain
Comprehensive data reporting Better decision-making capabilities

Components of SCM Project Implementation
Part 4
Continuous review and reinventing
the business solution to meet Continuous
changing requirements
Improvement
Part 3
Initiate SCM technology Business
project and begin system
implementation Technologies
Implementation
Part 2
Selecting SCM Selecting and configuring the
Technology appropriate business solution from
Solutions
Part 1 next and existing software
Align SCM Alignment of SCM business technologies and

Strategies enterprise strategies

Why Technology Solution Changes?
Strategic Objectives
Solve broad enterprise problems regarding profitability, high costs,
competitive positioning, sales and marketing objectives, products
and services, financial capacities, and marketplace realities
occurring on the macro level and cutting across the business
Tactical Objectives
Solutions on this level are focused on increasing functional or
business area performance and productivity. These objectives are
attained either through automating activities or integrating members
in a business area or group of business areas

SCM Technology Strategy Framework
Business Value Proposition Growth Management
SCVA Performance
Value Metrics
Proposition
Resource
Plan
Super Service Profit Drivers
Product/Service Solution
Customization Performance
Design Measurements
Resource Management
Cost
Value Portfolio Human/Partner Resources
Services Collaborative
Quality intensity Fixed Assets
Collaborative Technical
dimension Outsourcing level
Detailed
Value
Portfolio
Scope of Collaboration
Detailed Statement
Of Scope
Strategic Planning Strategic Execution

Technology Solution Options
In-House Development
Pros: system will possess the functionality exactly fitted to the information and
transaction requirements of the business and local IT staffs can easily develop
and retrofit programming code due to their grass-roots familiarity with the
system.
Cons: time consuming; duplicating commercially available functionality; may
miss needed functionality; may miss best-practice functionality.
System Purchase
Pros: immediate availability of applications that are compliant with today’s “best
practices,” state-of-the-art technologies, portability to migrate across hardware
platforms and database management systems, and availability of maintenance,
support, training, enhancements, and documentation.
Cons: possible modification to fit special functions; high cost of purchase,
training, and implementation; learning curve of technical staff and general
employees

SCM System Implementation Components
Project plan outlines the time lines, project milestones,
Project plan costs, and resources. The project schedule consists of a
and detailed plan of all the phases, steps, and activities
schedule necessary to complete the implementation on time and
within budget
Define the strategic objectives of the new SCM system,
Project provide funding and enterprise resources, execute the
organization project schedule, resolve project impasses, and review
performance measurements
Provides the project organization with a measuring stick
Project
detailing implementation progress. Each milestone
milestones contains a set of activities, beginning and completion
dates, and project roles
Project Assist in assigning, executing, and evaluating the
management success in performing project activities and
skills accomplishing tasks on time and within budget

Fundamental Processes of SCM Projects
The ongoing alignment of enterprise business,
Alignment organizational, and technology strategies
during the course of the implementation
Establishing and developing a strong sense of

User
commitment on the part of users and
commitment
management to the system and nurturing a
and ownership
sense of system ownership
Users utilize the system to create higher

User levels of operational competencies that
competency permit the broadening and deepening of
and mastery enterprise capabilities.

Developing System Mastery and Competence
Current
Skills Set
Self-Learning
Emerging System Formal

Competency Education
IT System
Development
User System Formal
Maturation Education
Continuously
Expanding User
Knowledge and
Innovation

Business System Development Process
Evaluate/Reevaluate Evaluate
New
Business Needs & Expectations Introduce/Operate/ Business
Vision Institutionalize
Vision
& System Implementation
Design/Redesign &
Capabilities
Capabilities
Needs & Expectations Redesign

“Education in Pursuit of
Supply Chain Leadership” dp&c Chapter 15
Chapter 15
End of Session

Information Technology and Supply Chain Management

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“Education in Pursuit of

Supply Chain Leadership” dp&c Chapter 15

• Exploring the foundations of information technology

15-3 dp&c Chapter 15

The technology of computers, telecommunications,

15-4 dp&c Chapter 15

Today's enterprise must consider computerized

15-5 dp&c Chapter 15

The use of technologies to enable people to collect,

The use of technology when people network their tasks,

15-6 dp&c Chapter 15

15-7 dp&c Chapter 15

Interrelated computer hardware and

15-8 dp&c Chapter 15

Enterprise Database Information Enterprise

15-9 dp&c Chapter 15

Defined as two or more computerized devices linked

Application A general term used to describe the various kinds of

The actual configuration of hardware, database

15-10 dp&c Chapter 15

15-11 dp&c Chapter 15

Describes the nature, completeness, and accuracy of

Information A roadmap defining how the various technology

15-12 dp&c Chapter 15

The business model provides a high-level description

the process model provides a description of the

15-13 dp&c Chapter 15

15-14 dp&c Chapter 15

15-15 dp&c Chapter 15

Transparency. Transparency means that the mechanics of how

Data integrity. The usefulness of information technology is

15-16 dp&c Chapter 15

Flexibility. An effective information system provides users with

Control. A fundamental benefit of an information system is the

15-17 dp&c Chapter 15

15-18 dp&c Chapter 15

Move from push to pull. The ability of networked databases enables

Facilitate the formation of new supply chain partnerships and

15-19 dp&c Chapter 15

15-20 dp&c Chapter 15

15-21 dp&c Chapter 15

15-22 dp&c Chapter 15

15-23 dp&c Chapter 15

Middleware software/system integration platform

Supply Chain Universe

Plan Source Make Deliver

15-24 dp&c Chapter 15

15-25 dp&c Chapter 15

15-26 dp&c Chapter 15

The ERP system should support as wide a variety of

The ERP system possesses functionality that allows

15-27 dp&c Chapter 15

Business Enterprise Objectives

Workcenters/ Capacity Requirements Detail Capacity

Cost Shop Floor

Accounts Purchasing Quality, Pricing,

Inbound/Outbound Transportation, Rates,

15-28 dp&c Chapter 15

Forecasting/ Marketing/Sales Products, Markets,

Bill of Channel Supply Chain Structure

Accounts Order Demand Customer Service

DRP, ROP, Storage