Information Technology and Supply chain management
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1 Information Technology and Supply chain management Rajendra M Sonar, Ph.D. Associate Professor of Information Systems/Technology Shailesh J Mehta School of Management, Indian Institute of Technology, Powai Mumbai rm_sonar@iitb.ac.in
2 Business Processes and Information Systems
3 Enterprise Systems
4 Supply chain models
5 Traditional Retail Supply-chain
6 The Bullwhip Effect
7 Dell Value chain
8 The benefits of disintermediation to the consumer
9 Dell s performance over time
10
11
12 Dell Model
13
14 Intranets and extranets for supply chain management
15 The future internet-driven supply chain
16 Example Book Supply chain The flow of accurate data and its use in business transactions brings far greater efficiency to the book industry s physical supply chain. Carrier BINDERY Carrier PUBLISHER Carrier RETAILER Carrier DISTRIBUTOR Carrier CONSUMER
17 EDI: Grow Sales & Reduce Costs Throughout the book industry, suppliers and customers are looking to grow sales and reduce costs. How can they work together to cut time out of the Order to Delivery cycle? How can they improve processes and cut costs? How can they make better buying/printing decisions? BINDERY PUBLISHER DISTRIBUTOR RETAILER Standardized data and electronic transactions are critical components in creating opportunities for improvement in the supply chain.
18 Electronic Data Interchange Electronic Data Interchange (EDI) provides standards for communicating data and conducting business transactions in an efficient and expedient fashion. The most common EDI transactions utilized in the supply chain include: Transaction Purchase Order Purchase Order Acknowledgement Advance Ship Notice Invoice Remittance Advice Point of Sales Data Freight Invoice Carrier Manifest Shipment Status Description Electronic order from customer to supplier Supplier provides availability/status information on every line item on the customer s PO Supplier provides customer with information detailing title(s) and quantities of shipment, tying this information to a scannable container identifier. This can be at the carton, pallet and/or trailer level. Electronic invoice from supplier to customer Details distribution/application of funds for a payment made by the transmitting party Customer provides sell-through data to supplier Carrier provides to party responsible for freight cost Shipper provides detail of shipment to carrier, e.g., Bill of Lading with line haul carriers; package information to UPS. Carrier provides shipper with status of physical status
19 Benefits of EDI EDI delivers a range of significant benefits to trading partners. Reduced Cycle Time Improved Accuracy / Fewer Errors Enhanced Customer Service & Satisfaction Better Inventory Management Improved Business Relationships among Trading Partners Increased Sales Reduced Paper Work and Costs
20 Consistent & Accurate Data Consistent, accurate data and standards for its use are the foundation for even greater efficiencies in the not-so-distant future. General retailing and manufacturing are already investigating and embracing new technologies and processes to move their supply chains forward. RFID Radio Frequency Identification Bar Codes GPS/GIS Real time data transactions In our never-ending quest for a better way, we must consider the potential for such tools and technologies in the book industry.
21 RFIDs Source:
22 RFID application in SCM Source:
23 Source:
24 Case Studies: RFID speeds up wills Life Style Business With the RFID tags, entire cartons can be scanned. Gone are the days, when boxes had to be opened by legions of workers, today, boxes are simply pushed through the RFID tunnel. It now takes seconds to inventory garments (about one boxes worth) from between five and eight minutes. Currently, on any given day, each worker can handle between 2,000 and 3,000 garments from by 300 to 400 an incredible efficiency jump, which translates to savings of about Rs 15 lakh a year. Rs 15 lakh will get the bean counters whistling, but Bansal is focused on another, more important benefit. I am not looking at this as a labor saving activity. If we can save time in the warehouse that means every garment is getting about seven days earlier to the store. And that makes more business sense to me, says Bansal. Since the implementation, the extra time every garment spends in the store is affecting the company s bottomline positively. With some garments getting as much as extra 10 to 15- day window, ITC Lifestyle Retailing has seen a 1 to 2 percent uptick in sales. Another advantage is a huge reduction in the return of non-saleable goods from the showroom. Plus it has opened the door for future-looking applications like trial room experience, smart shelves, contact-less payment, etcetera. The project has already been rolled out across two major warehouses in Delhi and Bangalore and across all Wills Lifestyle Retail stores in the National Capital Region. In its second phase, RFID will taken to other stores across the country. RFID could be coming to a store near you.
25 Like a stone in a pond, the benefits of the RFID implementation are sending ripples that will be felt years from today. Because the company can ship inventory in and out of its warehouses faster, it can make do with less warehouse space, creating savings in real estate. Bansal estimates that over a period of three years the implementation will save the company about Rs 10 lakh in real estate costs Sanjeev Khanna, who is in charge of logistics, says, The operational benefits that we re deriving post the RFID implementation can be summed-up in two important words: efficiency and accuracy. And at the store, the RFID implementation has created time for service executives. Timeconsuming jobs like taking physical stock counts and back room management are now non-existent. This gives a store s staff more time to converse with customers about products and promotions, which in turn increase customer satisfaction, says Bansal. Plus it has opened the door for future-looking applications like trial room experience, smart shelves, contact-less payment, etcetera. The project has already been rolled out across two major warehouses in Delhi and Bangalore and across all Wills Lifestyle Retail stores in the National Capital Region. In its second phase, RFID will taken to other stores across the country. RFID could be coming to a store near you.
26 Case Study: Coca-Cola's Secret Formula The organization decided to fix the problem and brought in Project COLA (Countrywide Outbound Logistics Automation). COLA is developed around the ERP system and is designed to cover all functions including manufacturing, sales, distribution, finance and logistics. We have to validate and summarize sales data of 4,000 to 5,000 distributors every 15 days. It was a very heavy, manual task, says Shukla (CIO, Hindustan Coca Cola). To work around this, they now have settlements every fortnight, which automatically documents the performance of each distributor and rewards them on that basis. If ten schemes apply to a distributor, he or she gets those ten schemes with item, value and limit, printed at the end of the fortnight. The whole process is now streamlined. The system now generates settlement of claims.
27 The advantage? The number of distributors making incorrect claims for discounts (because accounting was a problem) has decreased from 30,000 to 6,000. Which means Coca-Cola isn t rewarding distributors unnecessarily. Money is no longer wasted. This has generated a reduction of discounts of between 1.5 percent to 1.75 percent. With $ 700 million (Rs 2,800 crore), a reduction of 1 percent pays off our IT budgets for the next three years, he says. Then there are other benefits. Coca-Cola used to generate about a 10 lakh invoices every year. Each of these had to be validated against orders for dispatch, a cumbersome process. Post-COLA, only the exit from, say, a plant and the entry to, say, a godown has to be validated by sending data via RFID readers. Shukla likens it to a bank statement: deposit and withdrawal slips only need to be checked at the month's end. That means savings on 10 lakh documents a year and ensuring accurate payments and records.
28 Predicting and beating market demand with supplies is also an important contribution it is key to a larger market share. COLA helps hugely with that. Shukla exemplifies: You have 3,000 distributors who need 50 active SKUs replenished every week. How do you decide who gets how much? We developed a Web-based app, which is based on last inventory, secondary sales, what was replenished, etcetera. If you get this right, you can predict demand, therefore longer-term production and how to load production. The uniqueness of the product has added another dimension to cluttered data sheets. Managing how much credit the company could extend to distributors entailed maintaining records of the number of bottles that a distributor bought and crucially how many came back unsold. This complicated situation has been largely eased by COLA and collecting downstream data is much easier. The process of deciding credit is now much more transparent with much less scope for data mismanagement or data entry errors.
29 Sources Dell Computer: Using E-commerce To Support the Virtual Company Authors: Kenneth Kraemer and Jason Dedrick Center for Research on Information Technology and Organizations University of California, Irvine Various CIO Case Studies MIS Book by Laudon and Laudon Various web sites
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