Computer based Supply Chain Management

(SCM) and Information Systems Integration

Outline• Introduction• Supply Chain Components• Types of Supply Chain• Problems along Supply chain• System Integration• Integrated Value Chain• How information system facilitative Supply chain• Enterprise Resource Planning (ERP)• E-commerce and Supply Chain• Supply Chain Intelligence• Case• Summary

Supply Chain Management (SCM)

•Close linkage and coordination of activities involved in buying, making, and moving a product

•Integrates supplier, manufacturer, distributor, and customer logistics time

•Reduces time, redundant effort, and inventory costs

Supply Chain Management (SCM)

•Network of organizations and business processes

•Helps in procurement of materials, transformation of raw materials into intermediate and finished products

• Helps in distribution of the finished products to customers

Supply Chain Management (SCM)

Supply Chain Components Supply chain may involves three segments

• Upstream SC segment: includes organization’s first tier suppliers and their suppliers.

• Internal SC segment: includes all the processes used by an organization in transforming the inputs into outputs, from the time materials enter the organization to the time finished product goes to distribution outside the organization

Supply Chain Components

• Downstream SC segment: includes all the processes involved in distributing and delivering the products to final customers.

• Includes reverse logistics - returned items flow in the reverse direction from the buyer back to the seller.

Supply Chain Management (SCM)

Supply chain planning system: Enables firm to generate forecasts for a product and to develop sourcing and a manufacturing plan for the product

Supply chain execution system: Manages flow of products through distribution centers and warehouses

Types of Supply Chains

• Integrated make to stock - model focuses on tracking the customer demand in real time.

- Integration is achieved through an information system that is fully integrated.

- information is integrated further down the supply chain to the procurement function.

Types of Supply Chains

Continuous replenishment

- Constantly replenish the inventory by working closely with suppliers and intermediaries.

–Very tight integration is required between the order fulfillment process and the production process.– Real time information about demand changes is required.

Types of Supply Chains

• Built to order - Dell computer is best known for this model.- Assembly of customer’s order starts

immediately on the receipt of the order.- Careful management of component

inventories is required.- For this, many common components across

several production lines is maintained

Global Supply Chains

• Supply chains that involve customers and suppliers in other countries.

• Usually longer than the domestic ones and can be complex.

• Why companies go global?- lower prices of materials, services and labor- availability of products/ technology- high quality of products in global market

Problems along the Supply Chain

• Uncertainties and the need to coordinate several activities, internal units, and business partners.

• Demand forecast causes uncertainties.- May be influenced by many factors such as competition, prices, weather conditions,

technological developments, etc.

• Coordination problems may occur if company’s departments are not well connected; messages to business partners are misunderstood; parties are misinformed.

Problems along the Supply Chain

• Bullwhip Effect: Information about the demand for the product gets distorted as it passes from one entity to next.• This effect initially observed for Procter & Gamble in connection with its disposable diapers product (Pampers)•Though the actual sales in stores was fairly stable, orders from wholesalers and distributors were unexpectedly high.

Problems along the Supply Chain

Phantom stock outs:

• Such a problem occurs when the customers are told that the product they want is not available (though the product is available/ misplaced)

System Integration

Tangible benefits

• Inventory reduction

• Personnel reduction

• Productivity improvement

• IT cost reduction

• Procurement cost reduction

• Revenue/profit increase

System Integration

Intangible benefits

• Information visibility

• New/improved processes

• Customer responsiveness

• Flexibility

• Standardization

Integrated Value Chain• Value chain describes the primary activities along with supporting activities.

• Value system- when value chain is extended to include suppliers, customers etc.

• Process by which multiple enterprises within a shared market channel collaboratively plan, implement and manage flow of goods, services and information along their entire joint chain.

Integrated Value Chain

Supply chain transformed into IVC when

• Extends the chain from sub suppliers to customers

• Integrate back office operations with those of front office.

•Becomes highly customer centric

• Seeks to optimize value addition by information services.

How Information Systems Facilitate Supply Chain Management

•Decide when, what to produce, store, move• Rapidly communicate orders • Communicate orders, track order status• Check inventory availability, monitor levels•Track shipments • Plan production based on actual demand • Rapidly communicate product design change• Provide product specifications• Share information about defect rates, returns

Enterprise Resource Planning (ERP)

• Process of managing all resources and their use in the entire enterprise in a coordinated manner.• Objective is to integrate all departments and functions across a company onto a single information system that can serve all of the enterprise needs.• implementation of ERP done through the commercial software available from SAP, Oracle, PeapleSoft.

E-commerce and SCM

• E-procurement• Internal SCM activities ranging from entering orders of materials, stream lining production, recording sales, tracking shipments etc.• Online selling on downstream activities• Large companies like Cisco, IBM etc. sell on their web site. Buyers review electronic catalogue of these company’s website.• Electronic auctions can shorten the cycle time and save on logistics and administrative expenses.

Supply Chain Intelligence

• Inclusion of business intelligence in supply chain software solutions.

• Enable strategic decision making by analyzing the data along the entire supply chain.

Case#1: Warner-Lambert• Major product is Listerine antiseptic mouthwash (now a division of Pfizer)• Material for making Listerine comes from eucalyptus trees in Australia and are shipped to W-L manufacturing plant at New Jersey.• Problem is to forecast overall demand in order to determine how much listerine to produce.• Wrong forecast can lead to high inventories or shortages.

Case#1: Warner-Lambert• For this, W-L forecasts demand using Manugistics Inc’s Demand Planning Information System.• Manugistics- vendor of IT software for SCM.• System analyzes manufacturing, distribution, and sales data against expected demand and business climate information.• Helps W-L to decide how much Listerine to make and distribute, how much raw ingredient needed and when.

Supply Chain Problems and their IT solutions

Problems • Slow delivery of paper

documents.• Linear sequence of

processing too slow.

• Lack of information.• Poor coordination and

cooperation.• Delays in shipments

Solutions• Electronic documents e.g.

EDI• Parallel processing, using

workflow S/W.• Internet/Intranet etc.• Groupware products, other

collaboration tools• Use of robots in

warehouses, use warehouse management software.

Summary• Supply chains connect suppliers to manufacturing company, departments inside the company and to its customers.

• Difficult to mange the supply chain due to uncertainties in demand and supply and the need to coordinate several business partner's activities.

Summary• EC can provide new solutions to problems along the supply chain by automating the processes and integrating company’s major business activities.

• ERP software is designed to improve standard business transactions and is equipped with decision support capabilities and web interfaces.

Artificial Intelligence

Outline• Introduction

• Attributes of Intelligent Behavior

• Domains of Artificial Intelligence

- Cognitive Science

- Robotics

- Natural interfaces

• Case

• Summary

Knowledge • A field of science and technology based

on disciplines such as computer science, biology,psychology,linguistics, mathematics, and engineering

• Goal is to develop computers that can simulate the ability to think, as well as see, hear, walk, talk, and feel

Knowledg• A field of science and technology based

on disciplines such as computer science, biology,psychology,linguistics, mathematics, and engineering

• Goal is to develop computers that can simulate the ability to think, as well as see, hear, walk, talk, and feel

Artificial Intelligence (AI)• A field of science and technology based

on disciplines such as computer science, biology,psychology,linguistics, mathematics, and engineering

• Goal is to develop computers that can simulate the ability to think, as well as see, hear, walk, talk, and feel

Attributes of Intelligent Behavior• Think and reason• Use reason to solve problems• Learn or understand from experience• Acquire and apply knowledge• Exhibit creativity and imagination• Deal with complex or perplexing situations• Respond quickly and successfully to new

situations• Recognize the relative importance of elements

in a situation• Handle ambiguous, incomplete, or erroneous

information

Domains of Artificial Intelligence

Cognitive Science

• Focuses on researching how the human brain works and how humans think and learn.

• Applications in this area of AI includes:- Expert systems- Fuzzy logic- Neural networks

Robotics

• Robot machines with computer intelligence and computer controlled, humanlike physical capabilities.

• Powers of sight or visual perception, touch, physical ability etc.

Natural Interfaces

• Includes natural language, speech recognition, and the development of multi-sensory devices that use a variety of body movements to operate computers.

• Emerging area of virtual reality

Expert Systems

• A knowledge-based information system that uses its knowledge about a specific, complex application to act as an expert consultant to end users

Expert System Components

Knowledge Base – facts about specific subject area and heuristics that express the reasoning procedures of an expert

Software Resources – inference engine and other programs refining knowledge and communicating with users

Expert System Components

• Involves interactive computer based session.

• Users enters the problem facts, system searches its knowledge base for facts and rules.

• Users answers the questions as they appear on the screen with system applying appropriate rules .

Expert System Benefits

• Faster and more consistent than an expert

• Can have the knowledge of several experts

• Does not get tired or distracted by overwork or stress

• Helps preserve and reproduce the knowledge of experts

Expert System Limitations

• Limited focus

• Inability to learn

• Maintenance problems

• Developmental costs

Neural Networks

• Computing systems modeled after the brain’s mesh-like network of interconnected processing elements, called neurons

Fuzzy Logic

Method of reasoning that resembles human reasoning since it allows for approximate values and inferences and incomplete or ambiguous data instead of relying only on crisp data

Genetic Algorithms

Software that uses Darwinian, randomizing, and other mathematical functions to simulate an evolutionary process that can yield increasingly better solutions to a problem

Virtual Reality (VR)

Computer-simulated reality that relies on multisensory input/output devices such as a tracking headset with video goggles and stereo earphones, a data glove or jumpsuit with fiber-optic sensors that track your body movements, and a walker that monitors the movement of your feet

Case#1: Wal-Mart

• Huge amounts of data collected and various data mining tools are used.

• Data mining software includes neural nets, expert systems etc.

• Sift instantly through the deluge of information and uncover patterns and relationships.

• The results unable to predict sales of every product at each store with accuracy, translating into huge savings in inventories.

Case#2: HP

• HP has an enterprise group that undertakes analysis of data and projecting.

• Uses AI techniques to mine its database of customers to predict churn rate, loyalty and where to target promotions.

• Also mines its huge store of data from its call centers, including emails from customers, and text typed during voice calls.

Summary

• The goal of artificial intelligence is the development of computer functions normally associated with human physical and mental capabilities.

• Expert systems are knowledge-based information systems that use software and a knowledge base about a specific, complex application area to act as expert consultants to users in many business and technical applications.

Radio Frequency Identification ( RFID)

• RFID is a technology that uses radio-frequency waves to transfer data between a reader and a movable item to identify, track...

• Fast, reliable, and does not require physical sight or contact between reader/scanner and the tagged item.

What Constitutes an RFID System?

• One or more RF tags• Two or more antennas• One or more interrogators• One or more host computers• Appropriate software

Components of an RFID System

•

What is RFID? -- The Tags• Tags can be read-only or read-write.• Tags can be attached to almost anything:

– Pallets or cases of product– Vehicles– Company assets or personnel– Items such as apparel, luggage, laundry– People, livestock, or pets– High value electronics such as computers, TVs, camcorders

Are All Tags The Same?

• Basic Types: Active• Tag transmits radio signal• Battery powered memory, radio & circuitry• High Read Range (300 feet)

Passive• Tag reflects radio signal from reader• Reader powered• Shorter Read Range (4 inches - 15 feet)

What is RFID? -- The Readers

• Also called interrogator, • Reader is a device used to

communicate with RFID tags. • The reader has antennas, which emit

radio waves. • These electromagnetic waves are

picked up by the tag, and the tag sends back signals containing unique information. 

What is RFID? -- The Readers

• Readers (interrogators) can be at a fixed point such as

– Entrance/exit– Point of sale– Warehouse

• Readers can also be mobile -- hand-held or wireless

RFID Operation

RFID Operation

• The reader emits RF carrier signals, and keeps observing the received RF signals for data.

• The presence of a tag modulates the RF field, and is detected by the reader.

RFID Operation

• The passive tag absorbs a small portion of the energy emitted by the reader, and starts sending information when sufficient energy is acquired from the reader.

• The reader demodulates the signals received from the tag antenna, and decodes the same for further processing.

RFID Applications

• Employee Identification and Access Control• Airline baggage Identification• Wafer Identification during manufacturing

process• Livestock Identification• Parts Identification• Identification and Tracking of Vehicles• Supply Chain Automation• Asset Tracking, and others.

RFID Applications

• Retail giant Wal-Mart announced adoption of RFID for advanced supply chain management.

• Germany's Metro Group is also preparing to adopt the RFID for supply chain management.