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Sai Aswathy.A

S3 MIB, School Of Management Studies


Abstract: Supply chain management (SCM), in recent time has been able to
draw maximum attention from both academia and industry for its vast potential to
provide benefits to the business organizations. In the competitive business
environment, many companies have realized the magnitude of savings that can
be achieved by planning and managing their supply chains effectively. As the
supply chain covers the entire gamut of business activities, the problems
associated with SCM are also complex in nature. The complexity of the supply
chain problems unleashes challenges to the academicians and the practitioners
for developing newer solution approaches to the problems. In the last two
decades, many models and tools have been developed to solve such problems
for effective and efficient management of the supply chains.Recent
developments in information and communication technologies have also brought
in many concepts such as e-business and enterprise integration that has directly
influenced the way the supply chains work. Exposure to some of these advances
will enable the participants from academics to introduce such topics in their
curriculum and carry on research activities in these fields. The industry
participants may directly apply the tools, technique and technologies to enhance
their supply chain operations

Keywords: SCM, business environment,e-business.


Supply chain management (SCM) is the practice of coordinating the design, procurement, and
flow of goods, services, information and finances, from raw material to parts supplier to
manufacturer to distributor to retailer to consumer. This process includes product design, order
generation, order taking, information feedback and the efficient and timely delivery of goods
and services, and typically involves many or more of the business functions in firms that are
linked to specific supply chains. Efficient and effective supply chain management assists an
organization in getting the right goods and services to the place needed at the right time, in the
proper quantity and at acceptable cost. Managing this process involves developing and
overseeing relationships with suppliers and customers, controlling inventory, and forecasting
demand. For optimal performance and improved competitiveness, this requires constant
feedback from, and coordination with, every link in the supply chain. The field of supply chain
management has undergone a number of changes in the last few years. The development of
e-commerce and information systems in SCM has played a vital role in bringing about this
change. The rise of concepts like JIT, quick response, and supply chain integration has
resulted in optimization through seamless connectivity of suppliers, intermediaries and


2.1 Information Technology

In the development and maintenance of Supply chain's information systems both software
and hardware must be addressed. Hardware includes computer's input/output devices
and storage media. Software includes the entire system and application program used for
processing transactions management control, decision-making and strategic planning.
Recent development in Supply chain management software is:

1. Base Rate, Carrier select & match pay (version 2.0) developed by Distribution Sciences
Inc. which is useful for computing freight costs, compares transportation mode rates,
analyze cost and service effectiveness of carrier.

2. A new software program developed by Ross systems Inc. called Supply Chain planning
which is used for demand forecasting, replenishment & manufacturing tools for accurate
planning and scheduling of activities.

3. P&G distributing company and Saber decision Technologies resulted in a software

system called Transportation Network optimization for streamlining the bidding and award

4. Logitility planning solution was recently introduced to provide a program capable

managing the entire supply chain.

2.2 Information technology

The Internet as well as the intranet (connecting the workstations within an organization)
and extranet (electronic network among business partners, e.g., EDI) have revolutionized
the management of supply chains. The power and flexibility of these networks offer
businesses more control over the flow of products, services and funds than ever before.
Dramatic results have been obtained from using information to improve supply chain
The Web has created a rare opportunity for organizations to access global markets. It
allows for mass customization, stronger business relationships, a greater degree of
channel coordination, and enhanced communications with customers and business
Electronic commerce has revolutionized how business is conducted in today's world. It is
now a reality in both business-to-customer and business-to-business transactions and is
rapidly accelerating in both areas.
Internet based procurement

Business-to-business sales on the Web are starting to gain popularity. Companies around
the world are getting serious about Internet-based procurement (IBP) because the return
on a relatively modest investment is high and the risk is very low, at least for many items,
companies buy routinely. There are two distinct parts of the IBP market:
• Direct-Material Procurement, which involves the acquisition of products
directly required for production. These include the components and materials from key
upstream supply chain partners.

• Indirect-Material Procurement, which is the purchase of products that are

indirectly used in the production process. They include office supplies; maintenance,
repair and operating supplies (MRO).


In the realm of supply chain management, “Just in time(JIT)” refers to an inventory

strategy that it used to improve a business’s return on investment through a reduction of in
process inventory and all related costs. Just in time is driven by a series of signals,
referred to as Kanban, which tell production processes when it is necessary to make the
next part. Kanban can be visual signals, but are generally “tickets.” When implemented in
a correct fashion, “Just in time” can help a producer improve in such areas as quality,
efficiency, as well as the return on investment.

When stock drops to a certain level, new stocks have to be ordered. This helps maintain
space in the warehouse and keeps costs down to a reasonable amount. One drawback of
“Just in time” however is that the re-order level is determined by the previous demand. If
the demand rises above that amount, then inventory will be depleted a lot faster than
usual and might cause customer service problems. In order to maintain a ninety five
percent service rate, the company should always carry two standard deviations of safety
stock. Around the Kanban, shifts in demand should be forecast until trends are
established to reset the correct Kanban level. Some feel that recycling Kanban at a
quicker pace can help the system flex by up to thirty percent. Recently, producers have
started touting a thirteen week average as a better predictor than previous forecasts would
provide.Another term employed in “Just in time” is Kaizen. It means literally the continuous
improvement of the process.

Quick response is a management concept created to increase consumer satisfaction and

survive increasing competition from new competitors. It intends to shorten the lead time
from receiving an order to delivery of the products and increase the cash flow. The basic
idea behind quick response is that in order to reap the advantages of time-based
competition it is necessary to develop systems that are responsive and fast. Essentially
these strategies are based upon the idea of “substituting information for inventory”. In this
case the critical information relates to actual market demands and challenges to create
the means for accurately capturing that demand and to transmit back up the supply chain
as quickly as possible.

For the last decade or so the continued trend towards globalization of business has been
evident. Markets have become global in the sense that the same brands and products are
increasingly offered for sale around the world. Equally apparent has been the move
towards global sourcing and manufacturing as companies concentrate their operations so
that often just one or two factories serve the whole world.

Paradoxically the trend to globalization has increased the complexity of logistics. Often
pipelines are longer with greater reliance on outsourced supply chain partners. Further
more local differences in requirements still exist so the needs of local markets must be
balanced against the economic advantages of standardized products. Thus the challenge
to global logistics management is to structure a supply chain that is agile and flexible
enough to cope with difference in customer requirements and yet can enable benefits of
focused manufacturing to be realized.


Benchmarking is the process of identifying "best practice" in relation to both products

(including) and the processes by which those products are created and delivered. It can
also be defined as the process of comparing the business processes and performance
metrics including cost, cycle time, productivity, or quality to another that is widely
considered to be an industry standard benchmark or best practice.

The objective of benchmarking is to understand and evaluate the current position of a

business or organisation in relation to "best practice" and to identify areas and means of
performance improvement. The search for "best practice" can taker place both inside a
particular industry, and also in other industries.

Many organizations now recognize the need to improve processes if outputs are to be
enhanced. In the same way that ,some years ago, manufacturing managers found that the
key to quality was not to inspect the output but rather to control the process, so too in
logistics we are coming to recognize the importance of process improvement and process
control. This is the underlying philosophy of logistics process benchmarking.

The key to quality improvement is not to rely on output but to improve the process itself.
Imagining the process to be a ‘pipeline’ that begins with the suppliers, runs through
various business intermediaries and on to customers. To ensure satisfaction at customer
end everything that happens in the pipeline should be carefully monitored and controlled.


Automatic identification, or auto ID for short, is the broad term given to a host of
technologies that are used to help machines identify objects. Auto identification is often
coupled with automatic data capture. That is, companies want to identify items, capture
information about them and somehow get the data into a computer without having
employees type it in. The aim of most auto-ID systems is to increase efficiency, reduce
data entry errors, and free up staff to perform more value-added functions, such as
providing customer service. There are a host of technologies that fall under the auto-ID
umbrella. These include bar codes, smart cards, voice recognition, some biometric
technologies (retinal scans, for instance), optical character recognition, and radio
frequency identification (RFID).

2.7 ERP

ERP stands for ERP is a way to integrate the data and processes of an organization into
one single system. Usually ERP systems will have many components including hardware
and software, in order to achieve integration, most ERP systems use a unified database to
store data for various functions found throughout the organization.

The term ERP originally referred to how a large organization planned to use organizational
wide resources. In the past, ERP systems were used in larger more industrial types of
companies. However, the use of ERP has changed and is extremely comprehensive,
today the term can refer to any type of company, no matter what industry it falls in. In fact,
ERP systems are used in almost any type of organization - large or small.

In order for a software system to be considered ERP, it must provide an organization with
functionality for two or more systems. While some ERP packages exist that only cover two
functions for an organization (QuickBooks: Payroll & Accounting), most ERP systems
cover several functions.

Today's ERP systems can cover a wide range of functions and integrate them into one
unified database. For instance, functions such as Human Resources, Supply Chain
Management, Customer Relations Management, Financials, Manufacturing functions and
Warehouse Management functions were all once stand alone software applications,
usually housed with their own database and network, today, they can all fit under one
umbrella - the ERP system.

2.7.1The Ideal ERP System

An ideal ERP system is when a single database is utilized and contains all data for various
software modules. These software modules can include:

• Manufacturing: Some of the functions include; engineering, capacity, workflow

management, quality control, bills of material, manufacturing process, etc.
• Financials: Accounts payable, accounts receivable, fixed assets, general ledger and
cash management, etc.
• Human Resources: Benefits, training, payroll, time and attendance, etc
• Supply Chain Management: Inventory, supply chain planning, supplier scheduling,
claim processing, order entry, purchasing, etc.
• Projects: Costing, billing, activity management, time and expense, etc.
• Customer Relationship Management: sales and marketing, service, commissions,
customer contact, calls center support, etc.
• Data Warehouse: Usually this is a module that can be accessed by an organizations
customers, suppliers and employees.

2.7.2 Advantages of ERP Systems

There are many advantages of implementing an EPR system; here are a few of them:

• A totally integrated system

• The ability to streamline different processes and workflows
• The ability to easily share data across various departments in an organization
• Improved efficiency and productivity levels
• Better tracking and forecasting
• Lower costs
• Improved customer service

The recent developments in the field of SCM should that the focus is on achieving optimal
performance through cost minimization, reduced lead times, efficient systems and
enhanced connectivity in order to meet the requirements of today’s fast moving world.
With increased globalization and offshore sourcing, global supply chain management is
becoming an important issue for many businesses. Like traditional, supply chain
management, the underlying factors behind the trend are reducing the costs of
procurement and decreasing the risks related to purchasing activities.

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