Source: E-mail dt. 4 September 2011
Supply Chain Management - Pre-requisite for Successful Integration
R. Balajivignesh MBA., M.Phil., M.A., (Ad & PR.,)
Lecturer, SNT Global Academy of Management Studies and Technology
Coimbatore – 641 105
S. Olichandra Devy (M.B.A., M.Phil., NET.)
Lecturer, SVS Institute of Management Studies
Coimbatore – 642 109
Supply Chain Management (
Supply chain business process integration involves collaborative work between buyers and suppliers, joint product development, common systems and shared information. Operating an integrated supply chain requires continuous information flows, which in turn assist to achieve the best product flows.
A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials transformation of these materials into intermediate and finished products and the distribution of these finished products to customers.
2. Integration Process Through Information Technology
Information technology has enabled channel partners to trade goods, share information and integrate their processes, thereby reshaping the inter-organizational dynamics and resulting in more efficient channels. Electronic integration of data and the automation of business practices has driven costs down and built sales by better satisfying consumer needs. The role of technology was to link the supply chain by using industry standards Electronic Data Interchange (EDI) to communicate key business documents. Purchase orders, invoices, advanced shipment notification, and financial payment are just a few examples the electronic transmission of EDI.
2.1 E-Supply Chain Management:
E-business offers a great potential of enhanced supply chain efficiencies. E- business helps the organizations to perform the following transaction with the help of net.
Today, companies are using the internet to conduct a wide variety of supply chain transactions. For example, Amzon.com helps people to select books of their choice. Dell displays all its product information over the internet. Companies like eBay allow people to auction products over the internet. Most companies involved in e-business allow customers to pay over the internet using their credit cards.
An E-business allows a supply chain to gain profit through effective utilization of the following cost reduction opportunities.
(i) Allows manufacturers to reduce handling costs because of fewer supply chain stages.
(ii) Allows firms to manufacture customized products.
(iii) The Internet will save the cost and time for delivery.
(iv) Reduce facility costs by centralizing all inventories and decreasing the number of facilities required.
(v) Maintaining a reasonable buffer of unfilled orders reduces the peak load for order fulfillment and thus reduces resources requirement and cost.
(vi) The ability to reduce safety inventory without hurting product availability can significantly increase supply chain profitability.
2.2 Use of Internet in
Internet technology has reduced the cost and complexity of exchanging information and paradigm shift in the way we think about doing business. It helped information exchange open to all retailers, wholesalers and suppliers regardless of size. It enhanced end-to-end supply chain visibility, lower supply chain costs and inventory levels, access to new markets, global and local sourcing, reduced transaction costs.
2.3 Enterprise Resource Planning (ERP) in
Resource Planning (ERP) systems and supply chain systems has helped large
companies to reduce inventories, shorten cycle time, lower costs and improve
Radio Frequency Identification (RFID) is an analog-to-digital conversion technology that uses radio frequency waves to transfer data between a moveable item and a reader to identify, track or locate that item. It is a technology, which uses an electronic transmitter to tag the items, and products, which have some unique identification and customer information. It helps in knowing exactly the position of goods at any point of time and can also develop process capture and act on their information. The data generated by RFID is huge and valuable. This information which is a real time enabler helps the executives at all levels of organization to make business decision.
2.4 Relationship between the Links
Supply Chain is a network of different types of links. Strength of the Chain lies in the relationship between the links. Companies are now realizing the relevance and role of these links in success of the businesses. In other words suppliers are partners of the business, and organizations need not to be convinced that in today’s scale driven, technology intensive global economy, partnerships are the supply chain’s lifeblood. Organizations business success is increasingly relying on their suppliers. Suppliers play an important role in deciding the cost of production, therefore firms are seeking avenues to reduce cost, improve quality, and develop new processes and products faster than their rivals’ vendor can.
3. Partnering Channel Relationships
Building strong supplier partnerships requires a lot of hard work and commitment by both buyers and sellers. Several key ingredients for developing successful partnerships are as follows:
4. Collaborative Planning and Scheduling
The gradual refinement of collaborative approach is a five level process which takes place as follows:
Level 1 focused on internal improvement
Level 2 starts to break down internal walls and works on corporate integration
Level 3 businesses start to take an external view with the selected business partners
Level 4 brings trading partners and suppliers into discussions about how to reach customers
Level 5 is a move toward truly automated connection between businesses.
The scheduling part is the more
sensitive area where most care and importance should be given. The scheduling is more or less like an
education program that helps
5. Supply Chain Leadership
Let us start the topic with some examples of how giants concentrate on their supply chain
Coco Cola recently started a retail school that will run on wheels to focus on training owners of small retail shops regarding stocking and movement of their soft drink products.
Dell Computers in 1994, was struggling second-tier PC maker. Then Dell began to implement a new business model. It converted its operations to build-to-order process, eliminated its inventories through a just-in-time system and sold its products directly to consumers. Dell developed a supply chain mastery that went far beyond the simple pursuit of efficiency and asses productivity.
Baxter hospital-supply company, in the mid 1980s, mastered its supply chain by developing a powerful new type of partnership with its hospital customers. The company developed a new strategy for managing its customers’ inventories within their hospital facilities.
Procter and Gamble the company first partnered with Wal-Mart, through this system, P&G replenishes Wal-Mart’s facilities without purchase orders based on the retailer’s product movement data.
5.1 Moving Toward Supply Chain Mastery
The supply chain masters who seize first mover advantage will create strong market share gains and lasting strategic benefits that competition simply cannot match.
6. Vendor Managed Inventory
A means of optimizing Supply Chain performance in which the manufacturer is responsible for maintaining the distributors inventory levels. The manufacturer has access to the distributors inventory data and is responsible for generating purchase orders.
The manufacturer receives electronic data (usually EDI or via the internet) that tells him the distributors sales and stock levels. The manufacturer can view every item that the distributor carriers as well as true point of sale data. The manufacturer is responsible for creating and maintaining the inventory plan. Under VMI, the manufacturer generates the order, not the distributor. The benefits of VMI are numerous for both Manufacturer and Distributor. The benefits are as follows:
6.1 Dual Benefits:
6.2 Distributors Benefits:
6.3 Manufacturers Benefits:
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