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Lesson#42
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Supply Chain Management
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Supply Chain Management
Introduction
The business in the globalization age is more about enhanced
efficiencies, increased productivity
resulting in lower costs of production, quick and effective
decision making increased outreach
and customer/client satisfaction and sharing knowledge across
institutions. This enables a
business to become a more effective player in the free and
extremely competitive global market.
Globalization encompasses the concept of moving beyond the
geographical boundaries of a
country and using technological advances to maximum advantage
for the business. The internet
and Web technologies have brought new dimensions to doing and
managing business. ECommerce
we have talked about. Obviously every business has some inherent
risks. So does ECommerce.
For example, privacy, legality, taxation are issues that pose a
challenge for a good Ebusiness
environment although measures both legislative and operational
have been taken and
continue to be devised. As far as Management Information Systems
for businesses are
concerned these too have undergone a major change particularly
with the availability of
Internet. Gone are the days of the stand alone systems which
looked at each aspect of the
business separately. Today we are talking of end to end
solutions for businesses. In other words
business imperatives have driven us to re-define the scope of
the coverage/ extant of
management information systems. The Buzzword for some time now
is “ ENTERPRISE
RESOURCE PLANNING.” (ERP).
The stand alone systems scope required a singular approach to
each aspect of the business.
Why? Perhaps at that time the security issues could not be
handled in any other way. Perhaps it
was much cheaper to employ people to consolidate and produce MIS
for all aspects, time taken
being of little or no consequence. Perhaps this is what
technology allowed us. Packaged or
customized software was now available. We move on and find
ourselves with an enhanced
scope which requires all aspects of the business to be
integrated. This meant that
issues/transactions of each department which had always impacted
other departments had to be
integrated in such fashion that the resulting MIS was complete
in all respects. Thus was laid the
foundation of the Customized Integrated software development and
packages. The use of the
web and internet expanded the scope further requiring on line
transfer of data and real time
functionalities.
This lead to a further increase in the scope where we started
demanding an analysis of the data
as an integral part of the software used by a business
regardless of its size. It also created a new
demand for bringing the entire supply chain into the perspective
as well as the Consumer. The
result of the enhancement of scope lead to the Customized
integrated software approach
becoming an Enterprise Resource Management Software of which MIS
was an integral part.
Since then we have re-defined the scope to include Planning,
Supply Chain and Customers
resulting in what is today referred to as the ERP. Certain
software developers around the world
then decided to produce generic versions of ERP for various
industries which could be installed
straight off without having to spend time on the development
process of a customized
integrated software. Obviously the generic versions required
that your business systems and
processes must be aligned exactly in accordance with its design.
This gave rise to the concept of
BPR. The versions were too expensive to be modified and it was
deemed that it would be
cheaper to re-align the business processes.
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BPR was not simply of redesigning certain input forms but
involved changed practices of
working. It involved change in human thought and approaches to
their routine, mundane tasks.
This raised issues of Change Management. Since the ERP generic
models need to be
implemented this work is also required to be undertaken and
involves training of the staff and
transfer/conversion of data in the legacy system. Thus it is not
a simple straight forward
proposition but involves detailed and phased approach towards
successful implementation at
considerable cost. The ERP approach, essentially meant for a
highly computerized Society,
assumes that for it to be used from one end of the business to
the other everyone is connected
and uses computers. Therein lies a major challenge to make such
a system a success in a
developing country, like Pakistan, and raises questions in terms
of financial viability and
suitability. Perhaps it is time to go back and look at the
integrated approach.
42.1 Integrating systems
Let’s take a look what an integrated information system looks
like.
As seen in the above picture all systems are interfaced with one
another, the input in one system
automatically updating the data in the other relevant system. We
thus observe simultaneous
Data sharing between various systems and simultaneous execution
of different business
processes. For Example, a confirmed sales order received by the
sales department from the
customer will once entered into the sales system automatically
provide data input to
stores/packing/ shipping and possibly the production systems.
Thus ensuring that all relevant
departments are notified of ready for necessary action
simultaneously.
42.2 Methods of integration
Information systems can be integrated in the following ways.
• Connect Existing modules/system
Integrated
Information
system
Marketing
Information
System
Manufacturing
Information
System
Financial
Information
System
Human Resource
Information System
Information
Resource
Information System
Suppliers Customers
Users
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• Use Supply Chain Management (SCM)
Software
• Use ERP Software
Connect Existing Modules/system
The basic concept is to maximize the use of existing systems and
minimize the changes in them.
Good integration allows the addition of new applications to
existing ones and the connection of
systems to intranets and the internet. This approach extends the
life of applications and saves
tremendous amounts of money. However, connecting existing system
may be difficult and
expensive in many cases. Old systems were built and developed
over a number of years
encompassing technologies and platforms of various
specifications.
42.3 Using SCM Software
Supply chain management (SCM) is the process of planning,
implementing, and controlling the
operations of the supply chain with the purpose to satisfy
customer requirements as efficiently
as possible. Supply chain management spans all movement and
storage of raw materials, workin-
process inventory, and finished goods from point-of-origin to
point-of-consumption. In
literal terms, supply chain refers to the flow of materials from
their sources (suppliers) to the
company and then inside the company for processing. Today the
concept is much broader,
including flow of materials, information, payments, and services
from suppliers to factories and
warehouses to end customers. This reduces uncertainty and risks
in the supply chain thereby
positively affecting inventory levels, cycle time, business
processes.
42.4 Components of Supply Chain
The concept of supply chain can be divided into three major
parts.
• Upstream supply chain segment –
includes the organization’s first-tier suppliers
(manufacturers and assemblers). The major activities are
purchasing and shipping.
• Internal supply chain segment –
includes all the processes to transform inputs to outputs.
• Downstream supply chain segment –
includes distributing, delivering to customer and final
consumption of the product.
Example
For a car manufacturer industry the above three segments can be
shown as follows.
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42.5 Types of Supply Chains
Supply chain may exist in various forms depending on the need of
the business:
1. Made to Store – Focuses on tracking customer demand in real
time, so that the production
process can restock the finished goods inventory.
2. Continuous Replenishment – focuses on constant replacement of
inventory by working
closely with suppliers. Applicable to environments with stable
demand patterns.
3. Built to order – Focuses on careful management of component
inventories and delivery of
needed supplies along the supply chain. A solution to this
potential inventory problem is to
utilize many common components across several production lines
and in several locations.
Challenges to supply chains
There are usually two major sources of challenges to supply
chains.
1. The uncertainties faced
a. Demand forecast
b. Competition
c. Weather conditions
d. Technological development
2. The need to coordinate several activities
a. Business partners are misunderstood
b. Departments are not well connected |
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