Information Technology in a Supply Chain

Buy.

"Buy" software executes the actual procurement of material from suppliers. This includes the creation, management, and approval of purchase orders.

To support effective supply chain decisions, information must have the following characteristics:

1. Information must be accurate 2. Information must be accessible in a timely manner 3. Information must be of the right kind. 4. Information must be shared.

Supply Chain IT in Practice

1. Select an IT system that addresses the company's key success factors. 2. Take incremental steps and measure value. 3. Align the level of sophistication with the need for sophistication. 4. Use IT systems to support decision making, not to make decisions. 5. Think about the future.

The following important trends will affect IT in the supply chain:

1. The growth in cloud and software as a service (SaaS) 2. Increased availability of real-time data 3. Increased use of mobile technology 4. Increased use of social media

Call/service center.

A call/service center is often the primary point of contact between a company and its customers. A call/service center helps customers place orders, suggests products, solves problems, and provides information on order status.

transaction management foundation (TMF),

All operation and analytics related to the macro processes rest on the transaction management foundation (TMF), which includes basic enterprise resource planning (ERP) systems (and its components, such as financials and human resources), infrastructure software, and integration software. TMF software is necessary for the three macro processes to function and to communicate with one another

We use this classification to define the three macro supply chain processes (see Chapter 1) as follows:

Customer relationship management (CRM) Internal supply chain management (ISCM) Supplier relationship management (SRM)

3. Transportation.

Deciding on transportation networks, routings, modes, shipments, and vendors requires information about costs, customer locations, and shipment sizes to make good decisions (see Chapter 14).

Demand planning.

Demand planning consists of forecasting demand and analyzing the impact on demand of demand management tools such as pricing and promotions

1. Facility.

Determining the location, capacity, and schedules of a facility requires information on the trade-offs among efficiency and flexibility, demand, exchange rates, taxes, and so on (see Chapters 4, 5, and 6).

Field service.

Finally, after the product has been delivered to the customer, it eventually must be serviced. Service processes focus on setting inventory levels for spare parts as well as scheduling service calls.

Internal Supply Chain Management

ISCM, as we discussed earlier, is focused on operations internal to the enterprise. ISCM includes all processes involved in planning for and fulfilling a customer order. The various processes included in ISCM are as follows:

4. Sourcing.

Information on product margins, prices, quality, delivery lead times, and so on are all important in making sourcing decisions.

Marketing.

Marketing processes involve decisions regarding which customers to target, how to target customers, what products to offer, how to price products, and how to manage the actual campaigns that target customers.

Negotiate.

Negotiations with suppliers involve many steps, starting with a request for quote (RFQ). The negotiation process may also include the design and execution of auctions. The goal of this process is to negotiate an effective contract that specifies price and delivery parameters for a supplier in a way that best matches the enterprise's needs.

Fulfillment.

Once a plan is in place to supply the demand, it must be executed. The fulfillment process links each order to a specific supply source and means of transportation. The software applications that typically fall into the fulfillment segment are transportation and warehousing management applications.

Supply collaboration.

Once an agreement for supply is established between the enterprise and a supplier, supply chain performance can be improved by collaborating on forecasts, production plans, and inventory levels. The goal of collaboration is to ensure a common plan across the supply chain.

Customer relationship management (CRM).

Processes that focus on downstream interactions between the enterprise and its customers.

Internal supply chain management (ISCM).

Processes that focus on internal operations within the enterprise. Note that the software industry commonly calls this supply chain management (without the word internal), even though the focus is entirely within the enterprise. In our definition, supply chain management includes all three macro processes—CRM, ISCM, and SRM.

Supplier relationship management (SRM).

Processes that focus on upstream interactions between the enterprise and its suppliers.

Supplier Relationship Management

SRM includes those processes focused on the interaction between the enterprise and suppliers that are upstream in the supply chain. There is a natural fit between SRM processes and the ISCM processes, as integrating supplier constraints is crucial when creating internal plans.

2. Inventory.

Setting optimal inventory policies requires information that includes demand patterns, cost of carrying inventory, costs of stocking out, and costs of ordering (see Chapters 11, 12, and 13).

Source.

Sourcing software assists in the qualification of suppliers and helps in supplier selection, contract management, and supplier evaluation. An important objective is to analyze the amount that an enterprise spends with each supplier, often revealing valuable trends or areas for improvement.

Customer Relationship Management

The CRM macro process consists of processes that take place between an enterprise and its customers downstream in the supply chain. The goal of the CRM macro process is to generate customer demand and facilitate transmission and tracking of orders.

Risk Management in IT

The major areas of risk in IT can be divided into two broad categories. The first, and potentially the greater, is the risk involved with installing new IT systems The second category of risk is that the more a firm relies on IT to make decisions and execute processes, the higher is the risk that any sort of IT problem, ranging from software glitches to power outages to viruses, can completely shut down a firm's operations

Order management.

The process of managing customer orders as they flow through an enterprise is important for the customer to track an order and for the enterprise to plan and execute order fulfillment

Sell.

The sell process focuses on making an actual sale to a customer (compared to marketing, in which processes are more focused on planning whom to sell to and what to sell). The sell process includes providing the sales force with the information it needs to make a sale and then execute the actual sale.

Supply planning

The supply planning process takes as an input the demand forecasts produced by demand planning and the resources made available by strategic planning, and then produces an optimal plan to meet this demand.

The Transaction Management Foundation

The transaction management foundation is the historical home of the largest enterprise software players.

Strategic planning.

This process focuses on the network design of the supply chain. Key decisions include location and capacity planning of facilities.

Design collaboration.

This software aims to improve the design of products through collaboration between manufacturers and suppliers. The software facilitates the joint selection (with suppliers) of components that have positive supply chain characteristics such as ease of manufacturability or commonality across several end products

5. Pricing and revenue management.

To set pricing policies, one needs information on demand, both its volume and various customer segments' willingness to pay, and on many supply issues, such as the product margin, lead time, and availability.

IT consists of the

hardware, software, and people throughout a supply chain that gather, analyze, and execute upon information.

Information is crucial to supply chain performance because it

provides the foundation on which supply chain processes execute transactions and managers make decisions.

Information is a key supply chain driver because it

serves as the glue that allows the other supply chain drivers to work together with the goal of creating an integrated, coordinated supply chain.

Information technology consists of

the tools used to gain awareness of information, analyze this information, and execute on it to improve the performance of the supply chain. In this chapter, we explore the importance of information, its uses, and the technologies that enable supply chain managers to use information to make better decisions.