Recent Developments in the field of Supply Chain

Management

Tesslyn Suzanne

School Of Management Studies CUSAT, Kochi-22

E-mail:tesslyn.azad7@gmail.com

Abstract: Supply chain management is defined as the management of a

network of interconnected businesses involved in the ultimate provision of product and service
packages required by end customers. In commerce, supply chain management the
management of the flow of goods and services, involves the storage of raw materials, of work in
progress inventory and of finished goods from the point of origin to the point of consumption.
Organizations increasingly find that they must rely on effective supply chains, or networks to
compete in the global market and networked economy. AI carries great potential to
revolutionize supply chain processes. The ability to apply AI to enhance, and
even automate, decision making, reinvent business models and ecosystems,
and remake the customer experience could make many other emerging
technology trends redundant. Vendor-managed inventory (VMI) is a family of business
models in which the buyer of a product provides certain information to a supplier of that
product and the supplier takes full responsibility for maintaining an agreed inventory of the
material, usually at the buyer's consumption location. Demand chain management is the
management of upstream and downstream relationships between suppliers and customers to
deliver the best value to the customer at the least cost to the demand chain as a whole. These
types of recent developments are included, which help an organization to increase profit.

Keywords: Inventory, VMI,AI, demand chain management

1.0 INTRODUCTION

1.1 General Information

Supply chain management (SCM) is the broad range of activities required to

plan, control and execute a product's flow, from acquiring raw materials and
production through distribution to the final customer, in the most streamlined

and cost-effective way possible. SCM encompasses the integrated planning

and execution of processes required to optimize the flow of materials,
information and financial capital in the areas that broadly include demand
planning, sourcing, production, inventory management and storage,
transportation or logistics and return for excess or defective products. Both
business strategy and specialized software are used in these endeavors to
create a competitive advantage. Supply chain management is an expansive,
complex undertaking that relies on each partner, from suppliers to
manufacturers and beyond, to run well. Because of this, effective supply
chain management also requires change management, collaboration
and risk management to create alignment and communication between all
the entities. In addition, supply chain sustainability which covers
environmental, social and legal issues, in addition to sustainable
procurement and the closely related concept of corporate social
responsibility which evaluates a company's effect on the environment and
social well-being are areas of major concern for today's companies. In the
words of The Supply Chain Council,” SCM is defined as managing
supply and demand, sourcing raw materials and parts, manufacturing and
assembly, warehousing, order entry and order management, distribution
across all channels, and delivery to the customers”. The concept of Supply
Chain is not a new concept worldwide, it has increased steadily since 1980,
when companies began to make their collaborative relationships with
suppliers, manufacturers and vendors. In Indian Context, it is a still at
nascent stage. SCM is constantly evolving and there are always new trends.
Typically, SCM attempts to centrally control or link the production, shipment,
and distribution of a product. By managing the supply chain, companies are
able to cut excess costs and deliver products to the consumer faster. This is
done by keeping tighter control of internal inventories, internal production,
distribution, sales, and the inventories of company vendors. SCM is based
on the idea that nearly every product that comes to market results from the
efforts of various organizations that make up a supply chain. Although supply
chains have existed for ages, most companies have only recently paid
attention to them as a value added to their operations. With companies
 investing ever greater resources in their supply chain there is a distinct trend
to have the best and brightest employees managing those supply chains.
Supply chain professionals are always evaluating possible inefficiencies and
shortcomings of their supply networks to improve their ability to deliver to the
customer. This is especially true in today’s fast paced, highly competitive
environment where supply chain performance can provide manufacturers
with a necessary edge .In order to face a number of challenges and to be at
the forefront, companies are required to update their skills and introduce new
innovations in their Supply Chain.

DEVELOPMENTS IN SCM

Vendor Management Inventory (VMI)

VMI is a distribution channel operating system whereby the inventory at the

distributor/retailer is monitored and managed by the manufacturer vendor. It
is a family of business model in which buyer of a product provides certain
information to the supplier of that product and the supplier takes full
responsibility for maintaining an agreed inventory of the material, usually at
the buyer’s consumption location. It includes several activities including
determining appropriate order quantities, managing proper product
mixes.VMI is also QRIS (Quick response inventory system) The vendor’s
computer acquires data electronically, no manual data entry is required at
the recipient’s end which help in reducing the lead time and in eliminating the
vendors recording errors. Ex. Home Depot

Vendors benefit from more control of displays and more customer

contact for their employees; retailers benefit from reduced risk, better store
staff knowledge (which builds brand loyalty for both the vendor and the
retailer), and reduced display maintenance outlays.
Consumers benefit from knowledgeable store staff who are in frequent and
familiar contact with manufacturer (vendor) representatives when parts or
service are required. Store staff have good knowledge of most product lines
offered by the entire range of vendors. They can help the consumer choose
from competing products for items most suited to them and offer service
support being offered by the store.
At the goods' manufacturing level, VMI helps prevent overflowing
warehouses or shortages, as well as costly labor, purchasing and
accounting. With VMI, businesses maintain a proper inventory, and
optimized inventory leads to easy access and fast processing with reduced
labor costs.
 fig.1 VMI Process

Cross Docking

Cross docking is a practice in Logistics of unloading materials from an

incoming semi- trailer, truck or rail, car and loading this material directly into
outbound trucks, trailers, or rail cars, With little or no storage between them.
It is a function of warehouses or distribution centers, which was introduced
by Wal Mart. Cross docking is a system in which the vendor’s ship
merchandise to a distribution centres in pre packed quantities required by
each store. The merchandise is delivered to one side of the distribution
centre; the floor ready merchandise is then transferred to the other side of
distribution centre for delivery to a store. Cross docking is a process by
which products are aptly room the inbound dock to the outbound dock,
avoiding the need to store and prepare order replenishment. It either picked
or moved directly from the inbound dock to the outbound dock, avoiding the
need to store and prepare order replenishment. It not only reduces material
handling but also reduces the need to store the products in the warehouse.
Fig 4. Difference between traditional distribution and crossdocking
 Enterprise Resource Planning
Enterprise resource planning (ERP) integrates internal and external
management information
Across an entire organization, embracing finance/accounting, manufacturing,
sales and service,
Etc. ERP systems automate this activity with an integrated software
application. Its purpose is
to facilitate the flow of information between all business functions inside the
boundaries of the
Organization and manage the connections to outside stakeholders.
ERP systems can run on a variety of hardware and network configurations,
typically employing
a database to store data.
ERP systems typically include the following characteristics:
An integrated system that operates in (next to) real time, without
relying on periodic
Updates.
A common database that supports all applications.
A consistent look and feel throughout each module.
Installation of the system without elaborate application/data
integration by the
Information Technology (IT) department.

Advantages
The fundamental advantage of ERP is that integrating the myriad
processes by which
businesses operate saves time and expense. Decisions can be quicker and
with fewer errors.
Data becomes visible across the organization. Tasks that benefit from this
integration include:
Sales forecasting, which allows inventory optimization
Order tracking, from acceptance through fulfillment
Revenue tracking, from invoice through cash receipt
Matching purchase orders(what was ordered), inventory receipts (what
arrived), and costing
(what the vendor invoiced)ERP systems centralize business data.
Benefits of this include:
Eliminates synchronizing changes between multiple systems—
consolidation of finance,
marketing and sales, human resource, and manufacturing applications
Enables standard product naming/coding.
Provides comprehensive enterprise view (no "islands of information").
Makes real
–time information available to management anywhere, anytime to
make proper decisions.
Protects sensitive data by consolidating multiple security systems into
a single
structure.

Disadvantages
 Customization is problematic.
Re–engineering business processes to fit the ERP system
may damage
competitiveness and/or divert focus from other critical activities
ERP can cost more than less integrated and/or less comprehensive
solutions.
High switching costs increase vendor negotiating power vis a vis
support,
maintenance and upgrade expenses.
Overcoming resistance to sharing sensitive information between
departments can
divert management attention.
Integration of truly independent businesses can create unnecessary
dependencies.
Extensive training requirements take resources from daily operations.

Radio Frequency Identification (RFID)

It is a technology that uses communication via electromagnetic waves to

exchange data between a terminal and an object such as product, animal, or
person for the purpose of identification and tracking. it is a device that
contains a chip and an antenna , which can be physically inserted or stuck to
a product. The basic information about the product can be stored in this chip.
The tagging of this chip enables companies to identify and track their goods
at various levels in a distribution chain. The reason this technology is being
increasingly used is due to its extraordinary ability to track almost anything
and know where it is at any step of the distribution process. The end result,
companies become more efficient increase sales and reduce costs. Ex. Wal-
Mart, SamSys Technologies of Richmond Hills.

Fig 5 RFID and its working process

Supply chain management objective is to increase the long-term

performance of individual companies and the overall supply chain by
maximizing customer value and minimizing costs. RFID is a technology
with unique characteristics that make it suitable to enhance data
collection processes along the supply chain. EPC Global, the standards body
sets the standards for how basic product information is encoded in the RFID
chips. The vision that drives the developments of standards is the
universal unique identification of individual items. The unique number,
called EPC (electronic product code) is encoded in a Radio Frequency
Identification (RFID) tag. There are three types of RFID tags, all of which can
either be read-write or read only.
Passive Tags -simply store data and draw power from a reader whose
electromagnetic wave induces a current in the tag’s antenna for short-range
communication (up to 10 m).
Semi-passive Tags -use an integral battery to run the chip’s circuitry but
draw power from the reader to communicate.
Active Tags -are capable of communicating over greater distances (up to
100m) but are currently far more expensive. The benefit of an EPC code is
primarily derived from the ability to automatically pin-point the exact location
of goods and documents anywhere within an extended enterprise. Such
ability leads to the following benefits:
• Enhance supply-chain control. As the location of a part can be identified at
every transfer point with accuracy, the whole supply-chain can be controlled
with close to 100% accuracy.
• Security and authentication. A RFID tag can be written with an identifier
chosen by the enterprise. This unique identifier can be used to authenticate
a part or a document. The RFID technology also supports encryption
and other security models so that a tag cannot be easily duplicated or forged.
• Enhanced customer service. The RFID technology can promote
customer service by allowing faster check-outs, returns, and
personalization of service. RFID will have a significant impact on every facet
of supply chain management—from the simple tasks, such as moving
goods through loading docks, to the complex, such as managing
terabytes of data as information about goods on hand is collected in real
time. It has a potential to dramatically improve supply chain by reducing
costs, inventory levels, lead times, stock outs and shrinkage rates;
increasing throughput, quality, manufacturing flexibility, inventory visibility,
inventory record accuracy, order accuracy, customer service, and the
collaboration among supply chain members. The automatic identification
of products with RFID in the warehousing and distribution centre
environments has a consequence: increased visibility and accuracy
of the inventory. This increases the warehousing efficiency and order
accuracy. At the same time it reduces shrinkage, stock outs and
inventory levels. The increased warehousing efficiency has as a
consequence a reduction in the operation costs, which translates into
increased profits and also a reduction in lead times. Reduced lead times
means increased customer service as well as decreased inventories
along the supply chain. Ultimately, reduced inventories increase ROI. The
use of RFID systems to track asset provide a distinctive set of
benefits. RFID tags enable an increased visibility and accuracy of the
asset pool. This visibility and accuracy impacts six main areas:
operating costs, shrinkage, lead times, inventory visibility and accuracy,
customer service and integration among parents. RFID streamline
the management of assets (such as machinery or containers) and
increase the efficiency by reducing the equipment needed or reducing
labor, thus translating into higher profits. Reduced assets shrinkage,
increase ROI. Lead times (total cycle time) are reduced with the
increased efficiency to handle the assets the automatic identification of
products inside the store would increase the inventory visibility and its
accuracy

Advanced Planning and Scheduling

It is also referred to as APS and Advanced Manufacturing. It refers to a

manufacturing management process by which raw materials and production
capacity are optimally allocated to meet the demand. APS is especially well
suited to environments where simpler planning methods cannot adequately
address complex trade-offs between competing priorities. Traditional
planning system utilize a stepwise procedure to allocate material and
production capacity. This approach is simple but cumbersome, and does not
readily adapt to changes in demand, resource capacity or material
availability. APS has commonly been applied where one or more of the
following conditions are present- 1) Make to order manufacturing 2) Capital
intensive production processes, where plant capacity is constrained 3)
Products that require a large number of components or manufacturing task.

Electronic Data Interchange (EDI)

EDI is the structured transmission of data between organizations by

electronic means. It is
used to transfer electronic documents or business data from one computer
system to another
computer system, i.e. from one trading partner to another trading partner
without human
intervention. It is more than mere e-mail; for instance, organizations might
replace bills of lading and even cheques with appropriate EDI messages. It
also refers specifically to a family of standards.
In 1996, the National Institute of Standards and Technology
defined electronic data
interchange as "the computer-to-computer interchange of strictly
formatted messages that
represent documents other than monetary instruments. EDI implies a
sequence of mess
ages between two parties, either of whom may serve as originator or
recipient. The formatted data representing the documents may be
transmitted from originator to recipient via telecommunications or
physically transported on electronic storage media." It
distinguishes mere electronic communication or data exchange, specifying
that "in EDI, the usual processing of received messages is by computer only.
Human intervention in the processing of a received message is typically
 intended only for error conditions, for quality review, and for special
situations. For example, the transmission of binary or textual data is
not EDI as defined here unless the data are treated as one or more
data elements of an EDI message and are not normally intended for
human interpretation as part of online data processing."
EDI can be formally defined as the transfer of structured data, by agreed
message standards,
from one computer system to another without human intervention.

C2C

Importance of closed loop supply chain is emerging nowadays. Sometimes

referred to as a cradle-to-cradle (C2C) supply chain, this term describes a
zero-waste supply chain that re- uses all materials. Certifying the suppliers'
supplier as a sustainable source is very important. Comprehensive back-end
research is required to manage this process, and enormous effort is being
devoted to ensure the selection of the right certification system.

Fig 6.process of C2C

COMMODITY TRADING

Commodity trading is a new practice and procurement professionals

managing sustainable supply chains are becoming conversant with this
practice. Supply chain executives now must understand how all these
markets work and the impact they may have on their businesses. In the 21st
century, supply chain professionals must be highly competent in negotiating
complex and dynamic agreements in the buy/sell space. They also need to
familiarize themselves with hedging, and understand the working of the just-
in-time delivery inventory management approach.
Fig 7. Managing risk in commodity supply chain
1.2 3.0 Shortened and More Complex Product Life Cycles

Today many companies are under pressure to develop innovative products

and bring them to market more rapidly while minimizing cannibalization of
existing products, which are still in high demand. In order to meet the needs
of both customers and consumers, companies need more efficient product
lifecycle management processes. This includes heavy emphasis on
managing new product introduction, product discontinuation, design for
manufacturability and leveraging across their entire product and
infrastructure characteristics. One chief benefit of product lifecycle
management (PLM) processes and technology is helping companies design
products that can share common operations, components or materials with
other products, thereby reducing risks of obsolescence write offs, increasing
cost leverage on the purchasing of key materials and ensuring that
infrastructure investments are optimally utilized. Additionally, getting this right
will help to improve your time to market. By focusing product lifecycle
management efforts in these areas, a company can buffer itself against the
risk of an unplanned cost increase, a poor new product launch, an unplanned
obsolescence write off and can enhance the overall customer perception of
the company as an effective innovator. Typically when companies begin the
process of introducing new products to market, they coordinate marketing,
engineering, sales and procurement and develop sales forecasts to plan
products in the pipeline. Without a formalized product lifecycle process the
end result isn't always predictable. Recently, a U.S.-based major appliance
manufacturer, struggling with sky-rocketing product development costs and a
cumbersome, manual development process, was looking to implement a
PLM initiative to help reduce the cycle time between development and entry
to market. While implementing a new PLM environment the company
designed innovative, common product development processes and selected
a PLM solution to control engineering document management, online mark-
up and Web-based collaboration with suppliers and contract manufacturers.
As a result the company increased parts re-use, improved document retrieval
time, reduced design cycle time and ultimately reduced new product
development cost by 15 percent. These improvements helped the company
grow revenue by 25 percent, mainly from an increased rate of product
introductions. As the economy becomes more global, labeling and
compliance to packaging requirements and regulations have become critical
to success. Without adherence to local packaging and labeling regulations a
product may violate local requirements, preventing it from being distributed
and sold in that market. Product lifecycle management technology processes
can help ensure that products being produced and targeted for specific
markets are well-managed and are compliant. Product lifecycle management
tools and processes have helped consumer goods companies with their
efforts to try to continually drive demand through packaging and labelling
innovation and design. Implementation of an optimal PLM process and
technology can allow a consumer goods company to effectively produce and
distribute products that are only targeted for regional promotions or
consumer preferences.
2 4.0 CONCLUSION

Gone are the days where customer service was merely a buzz word. With
the focus on customer service, companies have moved away for a supply
driven business towards a demand driven business. Companies are also
constantly searching for ways to reduce inventory and holding cost. The
increase in speed has forced companies to search for ways to reduce
product cycle time and move product quickly and cost effectively. With this
the concept of Supply chain has emerged to be one of the important sectors
across worldwide. It is so considered because of the time utility factor
concerned with it. Supply Chain Management with I.T. services has
completely changed the outlook of how companies manage their supply
Chain and how they maintain their collaborative relationships with their
suppliers and satisfy the needs of their customers. This paper depicts the
emerging trends in Supply Chain as well as points out the difference of
India’s Supply Chain with that of India, in which China proves to have
competitive edge. India is one of the world’s fastest growing economies with
diverse markets. Managing Supply Chain in such a vast country is most
challenging for any organization because of business practices, govt.
regulation, technology, capability, transportation and infrastructure. Thus in
every case, Indian Organization need to act fast to capitalize on these
opportunists to be competitive with the world market.
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