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Computer based Supply
Chain Management
(SCM) and Information
Systems Integration
• 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
•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
Supply Chain Management
•Network of
transformation of raw materials into intermediate
and finished products
• Helps in distribution of the finished products to
Supply Chain Management
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
Supply Chain Management
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
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
– 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
• 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
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
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
Integrated Value Chain
Supply chain transformed into IVC when
• Extends the chain from sub suppliers to
• 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
• Process of managing all resources and their
use in the entire enterprise in a coordinated
• 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
Supply Chain Intelligence
• Inclusion of business intelligence in supply
chain software solutions.
• Enable strategic decision making by
analyzing the data along the entire supply
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
• Problem is to forecast overall demand in
order to determine how much listerine to
• Wrong forecast can lead to high
inventories or shortages.
Case#1: Warner-Lambert
• For
this, W-L forecasts demand using
Information System.
• Manugistics- vendor of IT software for SCM.
• System
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
• Slow delivery of paper
• Linear sequence of
processing too slow.
• Lack of information.
• Poor coordination and
• Delays in shipments
• Electronic documents e.g.
• Parallel processing, using
workflow S/W.
• Internet/Intranet etc.
• Groupware products, other
collaboration tools
• Use
• Supply
chains connect suppliers to
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.
• 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.
Attributes of Intelligent Behavior
Domains of Artificial Intelligence
- Cognitive Science
- Robotics
- Natural interfaces
A field of science and technology based
on disciplines such as computer science,
mathematics, and engineering
Goal is to develop computers that can
simulate the ability to think, as well as see,
hear, walk, talk, and feel
A field of science and technology based
on disciplines such as computer science,
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,
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
Recognize the relative importance of elements
in a situation
Handle ambiguous, incomplete, or erroneous
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
intelligence and computer controlled,
humanlike physical capabilities.
Powers of sight or visual perception,
touch, physical ability etc.
Natural Interfaces
recognition, and the development of multisensory 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
Users enters the problem facts, system
searches its knowledge base for facts and
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
Helps preserve and reproduce the knowledge of
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)
multisensory input/output devices such as a
tracking headset with video goggles and stereo
earphones, a data glove or jumpsuit with fiberoptic sensors that track your body movements,
and a walker that monitors the movement of your
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
• 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.
The goal of artificial intelligence is the
development of computer functions normally
associated with human physical and mental
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 is a technology that uses radiofrequency waves to transfer data between
a reader and a movable item to identify,
• Fast, reliable, and does not require physical
sight or contact between reader/scanner
and the tagged item.
What Constitutes an RFID
• One or more RF tags
• Two or more antennas
• One or more interrogators
• One or more host computers
• Appropriate software
Components of an RFID
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,
– 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,
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
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
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
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.