Supply Chain Management and Technology 1

The Role of Technology in Supply Chain Management

by Henry Osborne
Supply chain management (SCM) is the
management of a network of interconnected
businesses involved in the provision of product and
service packages required by the end customers in
a supply chain. Supply chains include a companys
entire manufacturing and distribution process.
They involve every step of the production from
planning to manufacturing to handling defective
goods. The overall goal is to keep the process
running smoothly at all times and to keep all of the
components (i .e. vendors, warehouses, etc.)
connected.
Supply chain management is comprised of
five (5) basic components: planning, sourcing,
manufacturing, delivery, and returns. The planning
component is the strategic portion of SCM.
Companies need a strategy for managing all the
resources that go toward meeting customer
demand for their product or service. A big piece of
SCM planning is developing a set of metrics to
monitor the supply chain so that it is efficient, costs
less and delivers high quality and value to
customers. Next, companies must choose suppliers
to deliver the goods and services they need to
create their product. Therefore, supply chain
managers must develop a set of pricing, delivery
and payment processes with suppliers and create
metrics for monitoring and improving the
relationships. SCM managers can then put together
processes for managing their goods and services
inventory, including receiving and verifying
shipments, transferring them to the manufacturing
facilities and authorizing supplier payments.
During the manufacturing component
Supply chain managers schedule the activities
necessary for production, testing, packaging and
preparation for delivery. This is the most metricintensive portion of the supply chain one where
companies are able to measure quality levels,
production output and worker productivity.
Delivery, which is the fourth component, is the part
that many SCM insiders refer to as logistics, where
companies coordinate the receipt of orders from

customers, develop a network of warehouses, pick

carriers to get products to customers and set up an
invoicing system to receive payments. The returns
component can be a problematic part of the supply
chain for many companies. Supply chain planners
have to create a responsive and flexible network for
receiving defective and excess products back from
their customers and supporting customers who
have problems with delivered products.
Supply chain management has been around
at least as long as the assembly line, but until
recently, the concept of a chief supply officer has
been foreign. Now that role is seen as a highly
strategic one that is increasingly valuable from both
a customer service and a business perspective. As
the role has evolved its become a critical one, as
managing a supply chain is complex, fraught with
risk, subject to complex regulations, fines,
competition, international shipping restrictions,
and more (Ghorban, 2011).
Technology has crept into SCM step by step,
beginning with electronic invoicing, computerized
shipping and tracking and automated notifications
that were advanced by companies like FedEx and
UPS. Initially intended for business-to-business
interactions, it took time before that level of
tracking and accountability was provided to
consumers. But even in those early days it was
clear that the ability to notify everyone along the
chain was important.
Developments in technology enable
organizations to make information readily available
in their premises. These technologies are helpful to
coordinate supply chain management activities and
their increasing rates have contributed to the
decreased cost of information. Supply chain
managers need to understand that information
technology is more than just computers but
extends to the systems that allow for the collection
of data and the dissemination of information.
Findings from research conducted by Hsin
Chen and Anastasia Papazafeiropoulou identified

Supply Chain Management and Technology 2

the following benefits of adopting ICT to support
supply chain:

Standardized production, including improved

quality control, shorter production time, and
greater efficiency.
Simplified supply chain process, including
control over suppliers, improved process cycle
time, close cooperation relationships, improved
supply chain efficiency, raw materials on time
for suppliers.
Process automation, including reduced errors,
capability to obtain and exchange real time
information.
Improved purchasing process, including
reduced arrangement and handling times,
shortened response time for purchasing,
improved order process speed, reduced labor
costs.
Reduced stocking including reduced risk,
reduced stock capital costs, reduced unused
raw material stock.
Improved payment process including faster
payment operation, lower interest rate, lower
credit risk.
Improved distribution process, including
delivering on time, reduced delivery enquiring
time, improved distribution management.
Improved global competitiveness including
global order opportunities.

IT in SCM enables great opportunities,

ranging from direct operational benefits to the
creation of strategic advantage. It changes industry
structures and even the rules of competition. IT is
key in supporting companies creating strategic
advantage by enabling centralized strategicplanning with day-to-day centralized operations. In
fact supply chain became more market-oriented
because of IT usage.
To achieve functional integration within the
supply chain, information technology that manages
product flow, information flow and cash flow from
end to end is indispensable. Some of the important
supply chain information systems are forecasting
systems and extranets. Some applications of SC
information systems are Quick response (QR),

Efficient customer response (ECR), vendormanaged inventory (VMI), and Automatic

replenishment (AR).
It is very evident that IT has contributed
immensely towards the improvement of SCM
practices though not yet picture perfect. Not many
firms have been able to develop company-wide
unified information systems. Many a time, glitches
arise during the installation of information systems
such as ERP. If not properly handled, these glitches
might spill over into factory orders and cost firms,
as footwear giant Nike learned much to its
discomfiture. Nike experienced some glitches with
its demand-planning engine, i2, which had the
system ignoring some orders and duplicating
others. The demand planner had also deleted
ordering data six to eight weeks after it was
entered, making it impossible for planners to recall
what they had asked each factory to produce.
However, Nike soon learned from its failure, and
subsequently rebounded.
Though things could go grievously wrong at
times, at others, IT can still be a life-saver for a firm.
There have been instances when IT has pulled a
firm back from the brink of disaster. One very good
example would be that of the Dallas based Aviall
Inc. which was saved from financial catastrophe by
a controversial multi-million dollar IT project which
included developing the firms website
(www.aviall.com). That one investment was
instrumental in turning Aviall from a catalog
business into a full-scale logistics business.
IT infrastructure even helped a firm gain a
key competitive advantage and emerge as the best
supply chain operator of all time. The firm in
question is none other than Wal-Mart. By investing
early and heavily in cutting-edge technology to
identify and track sales on the individual item level,
the retail giant made its IT infrastructure a key
competitive advantage that has since been studied
and copied by companies throughout the world.
Wal-Mart saw the value of sharing data with its
suppliers and moved relevant information online
on its retail link website. While its competition
guarded sales information closely, Wal-Mart

Supply Chain Management and Technology 3

approached its suppliers as if they were partners,
not adversaries. By implementing a collaborative
planning, forecasting and replenishment (CPFR)
program, it began a just-in-time inventory program,
which reduced carrying costs for both the retailer
and its suppliers.
Intermec, a workforce performance
company, identified the top ten (10) technology
trends in mobile, industrial, and supply chain
operations environments for 2008. These trends
and technologies impacting supply chain
operations spanning production, distribution, retail
and remote service include voice and GPS
integration, digital imaging, portable printing, bar
coding advances, radio frequency identification
(RFID), real time location systems (RTLS), and
remote management.

Voice and GPS

Cellular carriers have certified rugged
handheld computers for voice communication,
enabling data collection, data communication and
cell phone functionality to be converged into one
device. Users dont need to worry about keeping
separate cell phones and computers charged and
maintained, nor do they need to switch back and
forth between devices to complete routine tasks.
Converging data and voice onto an integrated piece
of equipment can cut the number of devices
system administrators need to support in half,
which provides sustainable operating cost savings.
Bluetooth is also frequently integrated with these
devices to interface peripherals and further reduce
total cost of ownership by eliminating the costs of
repairing and replacing cables.
Connectivity convergence continues with
the integration of GPS communication into mobile
computers. Together with the falling costs of wide
area wireless coverage (including GPRS, GSM,
CDMA and other technologies) and more generous
data plans, computing innovations like these make
it affordable and practical for many companies to
implement real-time data access systems for their

delivery drivers, sales and service staff, inspectors

and other personnel.

Digital Imaging
Like cellular voice, digital imaging is another
technology consumers are familiar with that has
now found a place in enterprise mobile computing
equipment and applications. Transportation and
distribution companies are using digital cameras
integrated into the mobile computers so their
drivers can capture proof of delivery, store stamped
invoices, and detail conditions that prevent
delivery. Technicians use the technology for proof
of service. Other applications include capturing
shelf displays and monitoring trade promotion
compliance, collecting competitive information,
documentation by inspectors, collecting evidence
for accident reports, and recording damage and
usage conditions for warranty claims.

Portable Printing
Rugged portable printers are routinely used
for output when documentation is required.
Common applications include providing signed
delivery receipts, purchase orders, work orders and
inspection reports. Using mobile printers and
computers together lets sales, service and delivery
personnel give customers the documentation they
desire, while creating an electronic record that
frees the enterprise from having to process
paperwork.
As worldwide adoption of smartphones and
tablets continue to accelerate and intersect with
proliferation applications and mobile cloud
computing solutions, the ability to print-on-the-go
from any location remains one of the most desired
capabilities of users of these devices (Noreikis,
2011). Mobile printers remain one of the fastestgrowing segments of the entire printing industry.
Traditional applications are in field service and
distribution, but adoption is growing quickly in
warehouses and factories for forklift-based printing
for picking, putaway, shipment labeling and other

Supply Chain Management and Technology 4

activities. Mobile printing provides proven labor
savings in industrial environments by saving
workers from having to make an unproductive trip
to a central location to pick up labels, pick tickets,
manifests and other output.

Bar Codes
Two-dimensional bar codes have long been
a proven and popular technology for operations
where it is desirable to present a lot of information
in a limited space. However, 2D has remained a
niche technology, in large part because symbols can
be difficult to read in many usage environments. As
reading ability improved, so did the adoption and
value of 2D barcoding. The recent emergence of
auto-focus imaging technology will help bring 2D
bar codes into the mainstream for item
management, traceability, MRO (maintenance,
repair, overhaul) and other operations.
Most organizations have needs for multiple
bar code applications with different symbologies,
symbol sizes and encoded data. For example, largeformat linear symbologies are ideal for warehouse
shelf location labeling, four-inch labels with a bar
code field are common for shipment labeling, and
2D bar codes are ideal for work-in-process tracking
plus lifetime part identification and traceability. A
traditional reader couldnt recognize both a linear
shelf label from 50 feet away and a 2D symbol on a
part. Carrying two separate readers is impractical,
so organizations have often foregone the use of 2D
symbols in favor of more common linear bar code
applications.
Now users no longer have to make a
tradeoff. Readers now exist that can read linear and
2D bar codes alike from 50 feet away and as close
as six inches. Complementary developments in
illumination technology enable bar codes to be
successfully read in dark environments where they
couldnt be read before. These developments make
bar coding available in environments previously
thought to require RFID, or where automated data
capture was considered impractical.

Radio-Frequency Identification (RFID)

RFID is more practical than ever before,
with clear business cases being demonstrated for
asset management and supply chain operations
alike. For example, the U.S. Navy used RFID data
entry to reduce the time for one mission-critical
inventory process by 98 percent. TNT Logistics
reduced its truck load verification time 24 percent
by using RFID to automatically record goods loaded
onto its trailers. Hundreds of other companies
around the world are also implementing RFIDbased shipping, receiving and inventory visibility
applications.
A sub-trend behind RFID adoption for
inventory, warehouse and distribution operations is
the use of vehicle-mounted and other mobile RFID
readers to enhance or replace stationary models.
With a mobile infrastructure, companies dont
need to purchase, install and maintain a separate
RFID reader for each dock door. Forklift-mounted
and handheld readers can cover multiple docks,
and be used in warehouse aisles and elsewhere
throughout the facility, further reducing the
required RFID investment.

Real Time Location Systems (RTLS)

RTLS allows for the expansion of a Wireless
LAN into an asset tracking system. Any device
connected to the wireless LAN can be tracked and
located. One application is to track forklifts via their
vehicle-mounted computers radio. The Wireless
Location Appliance and supporting software can
track the radios location in real time to support
efficient dynamic storage, routing, monitor dwell
time, and gather data for productivity and asset
utilization analysis. Many other expensive products
and assets can be equipped with an RTLS device for
real-time monitoring.

Remote Management
Using wireless LANs to track warehouse and
factory assets is an example of how a mainstream

Supply Chain Management and Technology 5

IT resource has been adapted to benefit industrial
environments. Another example, powerful remote
management systems have been developed
specifically to configure, monitor and troubleshoot
bar code readers and printers, RFID equipment,
ruggedized computers and other industrial data
collection and communications equipment.
Network administrators have typically had little
visibility or control over these remote devices
because enterprise IT asset and network
management systems are made for common PCs,
servers, and network equipment and dont address
the configurations and usage conditions specific to
data collection and computing in industrial
environments.
Device management software is available to
meet all these needs plus provide real-time
monitoring and notification if devices go offline,
and if implemented with open systems standards, it
can be accessed through your enterprise network
management solution. Companies use such
software to improve reliability and uptime in
mission-critical production, distribution and service
operations. Such software is also extremely
valuable during rollouts and upgrades, because
system administrators can use it to set
configurations and install software remotely and
across groups of devices, instead of having to
handle each device individually. These features take
a lot of the time and cost out of managing devices,
making it much more cost efficient to keep systems
up-to-date with new software and security
enhancements.

A competitive firm has to have the ability to

acquire the goods and services it needs just when
and where it needs them, at a favorable price, and
with acceptable payment and delivery terms. A
competitive firm needs to directly manage the flow
of goods through its distribution networks in a costeffective manner. Organizations have come to
realize that they can achieve this by integrating
their supply chains. Implementing ICT to support
supply chains can be cost saving for the company in
many ways. It can lower the costs of labor, increase

flexibility, achieve faster response times and cut

down the occurrence of errors on paper based
operation, reduce unauthorized buying outside
preferred supplier agreements, and reduce
stocking, hence achieve competitive advantage.
Automation processes can shorten the cycle
time from ordering to distribution, thus resulting in
enhanced production ability and increased
efficiency. For suppliers, they can also benefit from
ICT adoption as this will shorten business
transaction cycle, lower capital cost in stocking,
lower labor cost, increase efficiency, enhance
accuracy and faster handling time and delivery
speed.
Even though the SCM profession and the
technology are beginning to grow rapidly, many
companies are still entrenched in outdated,
monolithic systems, using phone, fax and email to
communicate throughout their lengthy and
complicated supply chains. But even these
companies feel the pressures of competition and
keeping costs down pushing them towards more
and better technology and automated processes
that provide a way to notify everyone along the
chain (Ghorban, 2011).
Companies that properly utilize SCM and its
supporting technologies experience collaboration
with all entities of the supply process that was
unknown before. For example, theres the
relationship between WalMart and Procter &
Gamble (P&G). Before these two companies started
collaborating back in the '80s, retailers shared very
little information with manufacturers. But then the
two giants built a software system that hooked
P&G up to Wal-Mart's distribution centers. When
P&G's products run low at the distribution centers,
the system sends an automatic alert to P&G to ship
more. In some cases, the system communicates
down to the individual Wal-Mart store, allowing
P&G to monitor the shelves through real-time
satellite link-ups that send messages to the factory
whenever a P&G item swoops past a scanner at the
register. The relationship has expanded to include
radio-frequency identification (RFI D) technologies

Supply Chain Management and Technology 6

to gain even more insight into ridding inefficiencies
in the supply chain.
With this kind of minute-t o-minute
information, P&G knows when to make, ship and
display more products at the Wal-Mart stores.
There's no need to keep products piled up in
warehouses awaiting Wal-Mart's call. Invoicing and
payments happen automatically too. The system
saves P&G so much in time, reduced inventory and
lower order-processing costs that it can afford to
give Wal-Mart "low, everyday prices" without
putting itself out of business.
The fact that technology has influenced the
SCM scene is evident by the increasing trend
towards just-in-time (JIT) inventory management.
JIT is a great way to free up cash and increase
working capital by letting inventory run down. This
can free up many millions of dollars, not just held in
the goods themselves, but in storage, security and
management of goods. It also reduces the risk of
inventory becoming obsolete while in storage.
The IT industry is a very busy industry,
providing systems and solutions to millions. But
many a time, they neglect to use these very
technologies to help solve their own supply chain
problems. Firms like IBM and Apple benefited
greatly from turning their technology and expertise
inward. They were so able to satisfy their
customers with a fast and effective ordering and
delivery process. IBM and Apple created configureto-order systems which enabled customers to
access real-time information directly from their
websites, and also buy directly from them. Apples
manufacture-to-order system ensured that the
manufacturing process would begin automatically
once an order was configured by a customer
online, and resulted in a shrinkage of production
cycle times by as much as 60%.

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