SUPPLY CHAIN AND INFORMATION MANAGEMENT

SYSTEMS

IMPORTANCE OF INFORMATION MANAGEMENT

The development of radically new information and communication technologies driven by internet have enabled companies to deploy revolutionary methods of building levels of competitive advantage.With the advent of e-commerce, new business models can be architected leveraging supply chains to create new regions of strategic advantage and market place value.Responsiveness to customer demand, and overall customer satisfaction, cannot be achieved without proper management of both the goods movement and information flow throughout the supply chain.

The Importance of Information

The Importance of Information

WhyInformation

IsNeeded

Dynamic MarketingEnvironment

StrategicPlanning

Customer Needs

Competition

BUISNESS MANAGEMENTSYSTEMS

(MR, DRP, ERP, PDM, EIP AND CPFR)

MR - MARKET RESEARCHMarket research is the process of systematically gathering, recording and analyzing data and information about customers, competitors and the market.

Its uses include to help create a business plan, launch a new product or service, fine tune existing products and services, and expand into new markets.

Market research can be used to determine which portion of the population will purchase a product/service, based on variables like age, gender, location and income level.

QUESTIONS THAT CAN BE ANSWERED THROUGH MARKET

RESEARCHWhat is happening in the market? What are the trends? Who are the competitors?

How do consumers talk about the products in the market?

Which needs are important? Are the needs being met by current products?

TYPES OF MARKET RESEARCH

Primary market research involves testing such as focus groups, surveys, field tests, interviews or observation, conducted or tailored specifically to that product.

In secondary research, the company uses information compiled from other sources that appears applicable to a new or existing product.

STUDIES CARRIED UNDER MARKET RESEARCH

Study of market trendsCustomer analysisCompetitor analysisRisk analysisProduct researchAdvertising research

The Marketing Research Process

The Marketing Research Process

Defining the Problem and the Research ObjectivesDefining the Problem and the Research Objectives

Developing the Research PlanDeveloping the Research Plan

Implementing the Research PlanImplementing the Research Plan

Interpreting and Reporting the FindingsInterpreting and Reporting the Findings

Marketing Research Process

Step 1. Defining the Problem & Research Objectives

Marketing Research Process

Step 1. Defining the Problem & Research Objectives

ExploratoryResearch

DescriptiveResearch

CausalResearch •Test hypotheses about cause-

and-effect relationships.

•Test hypotheses about cause- and-effect relationships.

•Gathers preliminary information that will help define the problem

and suggest hypotheses.

•Gathers preliminary information that will help define the problem

and suggest hypotheses.

•Describes things such as consumers’ attitudes and demographics

or market potential for a product.

•Describes things such as consumers’ attitudes and demographics

or market potential for a product.

Secondary Primary

Marketing Research ProcessStep 2. Develop the Research

Plan

Marketing Research ProcessStep 2. Develop the Research

PlanDetermine the Specific Information Needed Determine the Specific Information Needed

Information collected for the specific purpose at hand.

Information collected for the specific purpose at hand.

Both Must Be:RelevantAccurateCurrentImpartial

Both Must Be:RelevantAccurateCurrentImpartial

Information that has been previously collected.

Information that has been previously collected.

Experimental ResearchExperimental Research

Primary Data Collection Process

Step 1. Research Approaches

Primary Data Collection Process

Step 1. Research ApproachesObservational ResearchObservational Research

Gathering data by observing people,actions and situations

(Exploratory)

Gathering data by observing people,actions and situations

(Exploratory)

Survey ResearchSurvey Research

Asking individuals aboutattitudes, preferences or

buying behaviors (Descriptive)

Asking individuals aboutattitudes, preferences or

buying behaviors (Descriptive)

Using groups of people to determine cause-and-effect

relationships(Causal)

Using groups of people to determine cause-and-effect

relationships(Causal)

Primary Data Collection Process

Step 2. Contact Methods

Primary Data Collection Process

Step 2. Contact Methods

Mail Telephone Personal Online

Flexibility Poor Good Excellent Good

Quantity ofData Collected

Good Fair Excellent Good

Control ofInterviewer

Excellent Fair Poor Fair

Control ofSample

Fair Excellent Fair Poor

Speed of DataCollection

Poor Excellent Good Excellent

Response Rate Fair Good Good Good

Cost Good Fair Poor Excellent

Contact Methods

Primary Data Collection Process

Step 3. Developing a Sampling Plan

Primary Data Collection Process

Step 3. Developing a Sampling Plan

Who is to be surveyed?

Who is to be surveyed?

How many should besurveyed?

How many should besurveyed?

How should thesample be chosen?

How should thesample be chosen?

Probability orNon-probability

sampling?

Probability orNon-probability

sampling?

Sample -representative segment of the

population

Primary Data Collection Process

Step 4. Research Instruments

Primary Data Collection Process

Step 4. Research Instruments

Mechanical Devices

• People Meters• Grocery Scanners• Galvanometer• Tachistoscope

Mechanical Devices

• People Meters• Grocery Scanners• Galvanometer• Tachistoscope

Questionnaire

• What to ask?• Form of each

question?• Wording?• Ordering?

Questionnaire

• What to ask?• Form of each

question?• Wording?• Ordering?

Research InstrumentsResearch Instruments

Marketing Research ProcessStep 3. Implementing the

Research Plan

Marketing Research ProcessStep 3. Implementing the

Research PlanCollection

of Data

Collection of

Data

Processing of

Data

Processing of

Data

Analyzing the

Data

Analyzing the

Data

Research Plan

Research Plan

Marketing Research ProcessStep 4. Interpreting and

ReportingFindings

Marketing Research ProcessStep 4. Interpreting and

ReportingFindings

Interpret the FindingsInterpret the Findings

Draw ConclusionsDraw Conclusions

Report to ManagementReport to Management

DRP - DISTRIBUTION RESOURCE PLANNING

Distribution Resource Planning (DRP) is a method used in business administration for planning orders within a supply chain.

DRP enables the user to set certain inventory control parameters (like a safety stock) and calculate the time-phased inventory requirements.

VARIABLES USED BY DISTRIBUTION RESOURCE PLANNING

the on-hand inventory at the end of a period. the backordered demand at the end of a period. the required quantity of product needed at the beginning of a period. the constrained quantity of product available at the beginning of a period. the recommended order quantity at the beginning of a period.

INFORMATION REQUIRED BY DRP

the demand in a future period.

the scheduled receipts at the beginning of a period.

the safety stock requirement for a period. the on-hand inventory at the beginning of a

period.

ERP - What is it?ERP is a generic term used to describe a comprehensive information system designed to integrate all the business processes found in an enterprise.Efficiency and productivity are improved through the integration of information and the removal of duplicate information and processes.

ERP - ENTERPRISE RESOURCE PLANNING

The term ERP originally implied systems designed to plan the use of enterprise-wide resources. Enterprise Resource Planning (ERP) systems integrate (or attempt to integrate) all data and processes of an organization into a unified system. A typical ERP system will use multiple components of computer software and hardware to achieve the integration. A key ingredient of most ERP systems is the use of a unified database to store data for the various system modules.

The Current Scenario Islands of Information Difficult to get timely & accurate

information Heterogeneous Hardware & Software

platforms & practices Poor connectivity between different

organizational locations Sticking with obsolete technology Resist to change Lack of proven man-power to develop

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Why ERP?

For Management – to know what is happening in the company

One solution for better Management For cycle time reduction To achieve cost control & low working capital To marry latest technologies To shun the geographical gaps To satisfy the customers with high expectations To be Competitive & for survival

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Evolution of ERP

1960’s - Systems Just for Inventory Control

1970’s - MRP – Material Requirement Planning (Inventory with material planning & procurement)

1980’s - MRP II – Manufacturing Resources Planning (Extended MRP to shop floor & distribution Mgnt.)

Mid 1990’s - ERP – Enterprise Resource Planning (Covering all the activities of an Enterprise)

2000 onwards – ERP II – Collaborative Commerce (Extending ERP to external business entities)E

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ERP – Expectations

Integrating all the functions

Integrating the systems running in all the locations

Transparency of information using a single data source across the organization

Software must be responsive Modular Flexible Easy to add functionalities Provide growth path

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ERP – Options

OPTION 1 – MAKE [Using Internal resources]

Developing a custom-built ERP package, specific to therequirements of the organization, with the help of thein-house IT department

OPTION 2 - BUY

Going for Tailor-made ERP packages available in the market likeSAP, Oracle applications, Baan, PeopleSoft etc.

OPTION 3 – MAKE [using External resources]

Developing a custom-built ERP package, specific to therequirements of the organization, with the help of a software solution provider

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EXAMPLE: MODULES IN AN ERP

Manufacturing - Engineering, Bills of Material, Scheduling, Capacity, Workflow Management, Quality Control, Cost Management, Manufacturing Process, Manufacturing Projects, Manufacturing Flow

Supply Chain - Inventory, Order Entry, Purchasing, Product Configurator, Supply Chain Planning, Supplier Scheduling, Inspection of goods, Claim Processing, Commission Calculation

Financials - General Ledger, Cash Management, Accounts Payable, Accounts Receivable, Fixed Assets

Customer Relationship Management (CRM) - Sales and Marketing, Commissions, Service, Customer Contact and Call Center support

Human Resources - Human Resources, Payroll, Training, Time & Attendance, Rostering, Benefits

Data Warehouse Management - Self-Service interfaces for Customers, Suppliers, and Employees

Decision Support System.

ERP: Operations Integration

OPERATIONS

MARKETING FINANCE

ADVANTAGES design engineering (how to best make the product). order tracking from acceptance through fulfillment. the revenue cycle from invoice through cash receipt. managing interdependencies of complex Bill of

Materials tracking the 3-way match between Purchase orders

(what was ordered), Inventory receipts (what arrived), and Costing (what the vendor invoiced).

the Accounting for all of these tasks, tracking the Revenue, Cost and Profit on a granular level.

DISADVANTAGES Personnel turnover; companies can employ new

managers lacking education in the company's ERP system, proposing changes in business practices that are out of synchronization with the best utilization of the company's selected ERP.

Customization of the ERP software is limited. Some customization may involve changing of the ERP software structure which is usually not allowed.

Re-engineering of business processes to fit the "industry standard" prescribed by the ERP system may lead to a loss of competitive advantage.

ERP systems can be very expensive to install often ranging from 30,000 US Dollars to 500,000,000 US Dollars for multinational companies.

ERP vendors can charge sums of money for annual license renewal that is unrelated to the size of the company using the ERP or its profitability.

ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and business process of some companies—this is cited as one of the main causes of their failure.

Systems can be difficult to use. Systems are too restrictive and do not allow

much flexibility in implementation and usage.

Resistance in sharing sensitive internal information between departments can reduce the effectiveness of the software.

Some large organizations may have multiple departments with separate, independent resources, missions, chains-of-command, etc, and consolidation into a single enterprise may yield limited benefits.

There are frequent compatibility problems with the various legacy systems of the partners.

The system may be over-engineered relative to the actual needs of the customer.

PDM - PRODUCT DATA MANAGEMENT/ PRODUCT LIFECYCLE

MANAGEMENT

Product Data Management (PDM) is a category of computer software used to control data related to products.

PDM creates and manages relations between sets of data that define a product, and store those relationships in a database.

Product Data Management is focused on capturing and maintaining information on products and/or services through its development and useful life.

PDM MODULE INCLUDES

Part Number Part Description Supplier/Vendor Vendor Part Number and Description Unit of Measure Cost/Price Schematic or CAD Drawing Material Data Sheets

PDM ADVANTAGES

Track and manage all changes to product related data

Accelerate return on investment with easy setup; Spend less time organizing and tracking design

data; Improve productivity through reuse of product

design data; Enhance collaboration.

FIELDS OF USE

NPD—New Product Development: Design, manufacture and R&D of new products e.g. consumer appliances, automotive, automotive components, aerospace and defence.

CPD—Customised Product Development: Design and manufacturing of customised products as per customer requirement e.g. heavy engineering.

EPC: Engineering, procurement and construction industries e.g. infrastructure projects.

EIP – ENTERPRISE INFORMATION PORTAL

An enterprise information portal (EIP) is a software package that gives an enterprise a relatively easy and systematic way to create a Web site that will serve as a single gateway to a company's information and knowledge base for employees and possibly for customers, business partners, and the general public as well.

Portal Characteristics

Presenting information to the user that the user requires in a standard format with a standard interface.Secure delivery of information while making the complexities of security, as well as access to disparate information sources, transparent to the user.Transmitting information.Support for user interactivity.

EIP – ENTERPRISE INFORMATION PORTAL

An enterprise portal, is a framework for integrating information, people and processes across organizational boundaries.

It provides a single point of entry, often in the form of a web-based user interface, and is designed to aggregate information through application-specific portlets.

Enterprise Information Portals enable users to jump from business intelligence systems to ERP applications to sales reports, all without leaving their browsers.

Enterprise Information Portal goals:

Establish a competitive advantage

Increase ROI

Improve business processes

Increase employee productivity

Enable collaboration between employees,

suppliers, and customers

Provide universal access to corporate

resources

Maintain a consistent view of corporate data

and information

ELEMENTS OF EIP

Access/search: Access/search allows a user to get all the information needed (but no more) in the desired context. For example, a loan officer does not need marketing information to approve a loan. An EIP makes sure the loan officer gets only the information needed. Categorization: An EIP categorizes all information so that it is delivered to the user within the context needed (think of the subject structure on Yahoo) Collaboration: An EIP allows individuals to collaborate regardless of geographical location. Personalization: The information provided to individuals using an EIP is personalized to that person’s role, preferences, and habits.

Expertise and profiling: Expertise and profiling is essential for the collaboration element of an EIP. Individuals within an enterprise are profiled according to their experience and competencies. If an individual needs to collaborate with others, he can choose those that are qualified for the project. Application integration: This allows individuals to deliver, access, and share information regardless of applications used. Security: This provides information to users based on security clearance. The user logs on and is given access only to information that the user is authorized to access.

User Management and Security

Single sign-on and authentication.Automatically identifying users and their roles.Secure database access.Connecting to other systems.

Single Sign-On and Authentication

To logon to a computer users must be authenticatedby the Active Directory.

The user’s credentials are then passedtransparently to the portal and through to other back office systems.

User IdentificationWhen a user enters the portal the only informationknown about them is their username

Portal database Active Directory

A linked data source was created between the SQL Server and the Active Directory.This link facilitates retrieving information about the user the first time they access the portal, and also keeps the user’s active directory information up to date.

User Identification

Active Directory

The user information in the Active Directory is maintained according to corporate standards.The information retrieved from the Active Directory is analyzed and then used to deliver the appropriate content to the user’s customized home page.

User Information

Secure Database Access

The web server communicates with the portal database through a set of stored procedures.This strategy allows for a separation between database access and the user interface.Users are granted access to certain stored procedures, but are not granted any access to the underlying data in the database except through the stored procedures.

Secure Database Access

Users can only access data through stored procedures.The stored procedure enforces which data is returnedto the user.

Users cannot directly access the database or theUnderlying tables directly.

Connecting to other systems

The web server can either create a secure connection to obtain resources from another system;

Or, the user’s credentials can be passed through to the remote database or system if the system supports this type of authentication.

CPFR – COLLABORATIVE PLANNING, FORECASTING AND REPLENISHMENT

Collaborative Planning, Forecasting and Replenishment (CPFR) is a business practice that combines the intelligence of multiple trading partners in the planning and fulfillment of customer demand.

Links sales and marketing best practices to supply chain planning and execution processes

Objective is to increase availability to the customer while reducing inventory, transportation and logistics costs

FEATURES OF CPFR

CPFR is a concept that aims to enhance supply chain integration by supporting and assisting joint practices. CPFR seeks cooperative management of inventory through joint visibility and replenishment of products throughout the supply chain. Information shared between manufacturers and retailers aids in planning and satisfying customer demands through a supportive system of shared information. Efficiency is created through the decrease expenditures for merchandising, inventory, logistics, and transportation across all trading partners.

A Brief History

CPFR evolved from Efficient Consumer Response (ECR).

ECR: Improve supply chain performance through better coordination of marketing,

production, and replenishment activities.

Prior to ECRRelationships often adversarial.Little or no joint planningLack of information sharing results in “unpredictable” ordering patterns, excessive inventories, service failures,…    

In 1987, P&G and Wal-Mart pioneered in Continuous Replenishment Process (CRP)

Information sharing Joint demand forecasting Coordinated shipments.

CPFR extends ECR’s business processes to include:

Information systems for capturing and transferring POS, inventory, and other demand & supply information between trading partnersFormalized sales forecasting and order forecasting processes Formalized exception handling processesFeedback systems to monitor and improve supply chain performance

Why CPFR?

· Reduce variance between your Supply and your customers Demand through jointly derived plans.

· Increase Revenue.

· Competitive Advantage: Win with your partner mentality - “My chain is better than your chain”.

· More accurate collaborative plans equates to more accurate/automatic execution transactions.

CPFR Benefits: Demand1. Enhanced Relationship

Implicitly, CPFR strengthens an existing relationship and substantially accelerates the growth of a new one. Buyer and seller work hand-in-hand from inception through fruition on business plan, base, and promotional forecasts. Continual CPFR meetings strengthen this relationship.

2. Greater SalesThe close collaboration needed for CPFR implementation drives the planning for an improved business plan between buyer and seller. The strategic business advantage directly translates to increased category sales.

3. Improved Technology ROIThrough the CPFR process, technology investments for internal integration can be enabled with higher quality forecast information.Your company will benefit by driving internal processes with common, high-quality data.

4. Improved Overall ROIAs other processes improve, the return on investment from CPFR can be substantial.

5. Increased Customer SatisfactionWith fewer out-of-stocks resulting from better planning information, higher store service levels will prevail, offering greater consumer satisfaction.

CPFR Benefits: Supply1. Improved Order Forecast Accuracy

CPFR enables a time-phased order forecast that provides additional information, greater lead time for production planning, and improved forecast accuracy vs. either stand-alone VMI/CRP or other industry tools.

2. Inventory ReductionsCPFR helps reduce forecast uncertainty and process inefficiencies. How much inventory does your company hold to “cover up” for forecasting errors or a trading partner’s inability to have the product available in a timely manner?With CPFR, product can be produced to actual order instead of storing inventory based on forecast.

3. Category ManagementBefore beginning CPFR, both parties inspect shelf positioning and exposure for targeted SKUs to ensure adequate days of supply, and proper exposure to the consumer. This scrutiny will result in improved shelf positioning and facings through sound category management.

4. Improved Product OfferingBefore CPFR implementation, the buyer and seller collaborate on a mutual product scheme that includes SKU evaluation and additional product opportunities.

CPFR ACTIVITIES

Strategy & PlanningStrategy & Planning Establish the ground rules for the collaborative relationship. Determine product mix and placement, and develop event plans for the period.

Demand & Supply ManagementDemand & Supply Management Project consumer (point-of-sale) demand, as well as order and shipment requirements over the planning horizon.

ExecutionExecution Place orders, prepare and deliver shipments, receive and stock products on retail shelves, record sales transactions and make payments.

Analysis Analysis Monitor planning and execution activities for exception conditions. Aggregate results, and calculate key performance metrics. Share insights and adjust plans for continuously improved results.

The CPFR Process

1. Front-End Agreement

2. Joint Business Plan

3. Create Sales Forecast4. Identify exceptions5. Resolve exceptions

6. Create Order Forecast7. Identify exceptions8. Resolve exceptions

9. Generate Order

Once

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Wk,

Mo

Wk,

Mo

Collaborative Planning

Collaborative Forecasting

Collaborative Replenishment

Seller

Buyer

Sales Forecast

Order Forecast

RE-ENGINEERING THE SUPPLY CHAIN

MEANING OF BPR

The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed.

- Hammer and Champy, 1993

OBJECTIVES OF BPR

Streamlining management processes and formalising communications,Eliminating unproductive activities in the operational processes,Improving decision making capability,Improving collaborative creation of work products such as documentation, specifications, designs, etc.,Strengthening synergy in the team member’s approach to problem solving and taking cognizance of important changes.

BPR - Steps

Step 1 Step 2 Step 3

Understand Simplify/Improve

Automate

Understand the existing systems associated with all the functionalities

Draft & frame the possibilities & ways to simplify or Improve or eliminate the processes

Implement with the help of ERP

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BPR AND SCM

The primary strategies of SCM are intra and inter organizational synergy while the primary aspect of BPR is lean, core process synergy.

Both have the common denominator of customer focus.

SCM and BPR are two complementary philosophies. After full and successful BPR, functional and internal integration, in SCM jargon will be fulfilled.

PARALLELS BETWEEN BPR AND SCM

Area for Area for changechange

BPR terminologyBPR terminology SCM terminologySCM terminology

Process Elimination of wasteSpeed up core processesConcentration on core processes

Reduce non value added activitiesLead time reductionTo do what it does best

People Board level commitmentMulti-skilled & inquisitive workforceAttitudinal changes

SCM champion at board levelMulti-skilled & inquisitive workforceAttitudinal changes

Technology

Technological changesIT-a key to BPRTreat vendors as adversaries

Technological changesIT-a key to SCMPartnership sourcing

Innovation

Customer focusConstant product/process innovation

Streamline processesConstant innovation at the interfacesof the company

Analysis No Analysis by paralysisTake a holistic view

Use aggregate modeling to redesign and take a systems view

NEED OF BPR IN SCM

To transform a business from an inward looking to flexible outward looking business.Giving a wider perspective to the organization, seeking core processes and creating learner structures.To identify the bottlenecks in the systems and areas requiring change which are essential to remain competitive.

REQUIREMENTS FOR BPR IMPLEMENTATION

Create a climate of commitment for its members to a higher purpose.Foster organic partnership through knowledge networking.Install an environment for taking responsible leadership.Encourage and empower the members for developing extra-ordinary breadth of perspectives.Create capacity for change and involve in eventuating total quality and productivity in every endeavour.

Dr Derek Wright SUPPLY/5

PROCESS RE-ENGINEERING SUPPLY CHAINS

MANUFACTURING

RESEARCH & DEVELOPMENT

LOGISTICS

MARKETING

FINANCE

EFFICIENCYFOCUS:

TASKS

FUNCTIONS

ACCOUNTING

MANAGEMENT

EFFICIENCYFOCUS:

TASKS

FUNCTIONS

ACCOUNTING

MANAGEMENT

FUTURECUSTOMERS‘

FOCUS:

PROCESS EFFICIENCY

OPERATIONALAGILITY

CORPORATEINFORMATION

PROCESSMANAGEMENT

CUSTOMERS‘FOCUS:

PROCESS EFFICIENCY

OPERATIONALAGILITY

CORPORATEINFORMATION

PROCESSMANAGEMENT

PAST

SUPPLY CHAIN PERFORMANCE

BPR in the Supply Chain scenario

Harrington’s (1991) steps to streamlining:Bureaucracy eliminationDuplication eliminationValue-added assessmentSimplificationProcess cycle time reductionError proofingUpgradingSimple languageStandardizationSupplier partnersBig picture improvementAutomation and/or mechanization

IMPLEMENTATION OF BPR AND SCM

Process based on adverserelations within processes.Poor information flow.Limited concept of customer

Process identificationProcess simplificationAutomate if possibleFinding the customer

Learn processesBusiness process orientedContinual search for Customer focusedchain

Learn processesBusiness process orientedContinual search for Customer focusedchain

Process identificationProcess simplificationAutomate if possibleFinding the customer

Process based on adverserelations within processes.Poor information flow.Limited concept of customer.

Improvements Possible Implement Changes Improvement Realized

BPR Scenario

SCM Scenario

CONCLUSION

Re-engineering the supply chain shows significant improvements in cost reductions and thereby helps in gaining competitive advantage. BPR continually searches for step changes and strategically phase these ideas in the supply chain.

KEY ISSUES IN SCM

What’s Hot in SCM?

• Web-based procurement tools

• E-Procurement

• Third-party auctions

• Consortiums for buying leverage

• Buyer and seller exchanges

• Outsourcing• Third-party logistics (3PL) providers

• Use of Integrators and Distributors

• Supplier Relationship Management• Strategic Supplier alliances

• Collaborative design

• Supplier managed replenishment

• On-site supplier representatives