How does technology play role in supply chain management and logistics? The way people connect, shop and work has been greatly influenced by the Internet. Technology has also changed the way businesses operate in the twenty-first century. Supply-chain management is one of the sectors of the company that is anticipated to undergo significant change in the future years. This article will reveal some ideas on the use of technology in supply chain management and logistics. Supply-chain management will continue to evolve as a result of the Internet’s power, allowing businesses to modify the way they manage inventories, place orders with suppliers, and transmit essential information.
While some of these technologies have been around for years, or even decades in the case of radio frequency identification tags, combining them with the Internet has the potential to revolutionize supply-chain management. Improved supply-chain management translates to better inventory control and higher earnings.
Nike missed its revenue objective by a large amount in 2001. A botched supply-chain automation effort contributed to the shortage. “New technologies, according to some estimates, may remove more than $30 billion in excess inventory” (Fonstad). The phrase e-business, as opposed to e-commerce, refers to the use of the Internet to speed up the process of supply-chain integration. (Lee) Four developing e-business technologies and practices will have a significant influence on supply-chain management.
Use of technology in supply chain management and logistics
o Virtual marketplaces
o Radio frequency identification tags (RFID)
o Synchronized planning
o Supplier performance management
1. Virtual marketplaces
Two of India’s top steel companies control MetalJunction, a virtual marketplace. In March 2002, Tata Steel and Sail Steel exchanged around 5,000 tons of steel. Tonnage had climbed to 43,000 tons per month by March 2003. (Mills).
What is a virtual marketplace, and how does it apply to business? E-markets, net marketplaces, and electronic markets are all terms used to describe virtual marketplaces. These markets have a few things in common.
o Internet-based reliance
o Buyers and Sellers meet without the use of a middleman.
o Impartiality (all buyers and sellers are treated the same)
o Seller and product information is supplied.
A virtual marketplace, in its most basic form, connects buyers and sellers through the internet. A virtual marketplace, at its most basic level, allows a buyer and seller to re-engineer the sales administration process, better forecasting, and scheduling, update their go-to-market strategy, reduce their order-to-cash cycle, and improve customer service (Steel24-7). Virtual marketplaces should ideally be focused on a single industry.
Steel, agricultural goods, and automobile parts are just a few examples. A virtual market may also provide product specifications, side-by-side comparisons, technical papers, and market analysis in addition to information on suppliers and basic information on its items.
Setting up an e-marketplace is fraught with difficulties. Identifying the instruments needed to utilize the market, offering a secure environment, price, payment, and delivery are among the most important. Internet protocols must be chosen for a well-ordered marketplace. The expense of using technology to get into the market and participate in it should not be prohibitive. To secure secret transactions, security and privacy must be appropriate. It must be feasible to authenticate and authorize users from various organizations. It is necessary to ensure that private communication is maintained.
Pricing rules might be predetermined or negotiated. E-Bay is a popular example of bartering or auctioning for consumer goods. Payment methods might be specified or agreed upon by the buyer and seller. Finally, order fulfillment must be guaranteed. Collapse to provide in a timely way, like in conventional marketplaces, will result in enterprises losing market power and, eventually, failure (McKnight).
Jurisdiction and controlling legislation are the last sources of worry in virtual marketplaces. Members of virtual marketplaces become part of the global trading community. Because e-markets are a new phenomenon, creating the legal system in charge of resolving conflicts is still a work in progress. The current legal reasoning places jurisdiction on the market’s location. However, in a virtual market, one must consider where the market genuinely exists. While the FTC has sought to regulate online transactions, there has yet to be a conclusive judgment on the jurisdiction of foreign e-marketplaces.
2. Radio frequency identification tags (RFID)
Wal-Mart assembled its 120 top suppliers in November 2003 to announce that radio frequency identification tags (RFID) will be required on shipping pallets and boxes of products. Wal-Mart set a January 2005 deadline for its top 100 suppliers. The remaining providers would have until the beginning of 2006 to satisfy the demand (Sliwa).
A simple RFID system consists of three parts.
o Transponder (tag)
The antenna turns on the tag, reads data from it, and writes data to it. When an RFID tag passes through a reader, its data is sent to a host computer to be processed. The majority of RFID systems are passive, with their own power supply, a small transmission range, technology in supply chain management and logistics, low-frequency operation, and cheap cost. While RFID has been around since the 1960s, new technological advancements have decreased the cost and expanded the possibilities of the technology.
The automated scanning of prepaid passes on toll roads is a popular everyday usage of RFID. RFID has a plethora of benefits. RFID, for example, is highly quick, non-contact requires no line of sight, and can function in a range of weather situations. The advantages of RFID will accrue to Wal-Mart in the example above, but the expenses will be borne by the suppliers. According to Kara Romanov of AMR Research, Inc., the startup expenses for a provider shipping 50 million containers per year will be between $13 million and $23 million. RFID tags, as well as accompanying hardware and software, are included in these expenditures (Sliwa).
Two leaders in the use of RFID in supply-chain management are SamSys Technologies of Richmond Hills, ON, and ThingMagic, LLC of Cambridge, MA. Sam-Sys is committed to an open system environment in which RFID is not limited to a particular protocol or frequency spectrum. This attitude is predicated on the assumption that multiple providers and readers will collaborate effortlessly (SamSys).
ThingMagic was created by five MIT graduates in 2000. It has created RFID solutions that are minimal in cost. ThingMagic is currently working on building and marketing protocol agile RFID tag scanners (ThingMagic). The Department of Defense (DOD), in addition to Wal-Mart, is a major player in RFID development and implementation.
By January 2005, the Department of Defense has announced a new regulation requiring all suppliers to insert passive RFID chips in each individual product if possible, or at the case or pallet level if not. The Department of Defense held a symposium for its vendors in February 2004 to discuss its RFID ambitions (Broersma). To quote Colin Cobain, Tesco Stores’ Chief Technology Officer: “The question isn’t if RFID will alter the way you do business; it’s whether RFID will change the way you do business. The question is whether or not you are prepared ” (ThingMagic).
3. Synchronized planning
“One of the most interesting advances in supply chain management in many sectors is synchronized planning, which takes the shape of collaborative forecasting and replenishment, coordinated production, inventory and capacity plans, information integration, and direct links of ERP systems” (Synchronous). Synchronized planning entails a number of phases with technology in supply chain management and logistics(Lee).
o Integration of information
o Synchronization planning
o Coordination of work processes
o Innovative business models
To begin, information integration necessitates data exchange and openness. It is the exchange of information among supply chain participants. Inventory levels, manufacturing timetables, and shipment schedules are examples of information that may be transmitted. Better task scheduling and a decrease in the bullwhip effect are two of the advantages. “The effect shows a lack of supply chain member coordination. Even a small shift in consumer purchases sends ripples upstream in the form of increased oscillations, similar to what happens when you flip a bullwhip handle ” (Chase 335).
The term “planning synchronization” refers to the process of deciding what to do with the information that has been communicated. This can involve things like shared planning and design. The advantages include cheaper costs and better service.
If planned synchronization is the “what” that has to be done with shared data, workflow coordination is the “how.” Procurement, engineering, design adjustments, and production planning are all operations that may be integrated. Early speed to market, greater service, and increased efficiency are just a few of the advantages.
New business models can emerge from synchronized planning. Not only may these new business models alter workflow, but they can also lead to shifts in responsibility for various supply-chain components. A reimagined supply chain may lead to the development of new goods and the expansion of new markets (Lee).
Synchronized planning, on the other hand, is impossible to achieve without a strong relationship between all enterprises in the supply chain. Communication channels must be clearly specified, and the performance of each link in the chain must be closely monitored. Members of the integrated supply chain must be held accountable for their contributions to the process. As product life cycles get shorter and shorter, supply-chain synchronization becomes increasingly important. Synced planning is essential for ensuring that the supply chain is driven by consumer demand and reducing the bullwhip impact (Lee).
4. Supplier performance management
As diverse firms’ supply chains grow increasingly interwoven, it becomes vital to assess the performance of each link in the chain. In February 2001, former Federal Reserve Chairman Alan Greenspan testified before Congress that firms were unable to predict the past recession’s economic slowdown, overbuilding inventories despite increasing supply-chain automation (Fonstad). Even the most cutting-edge technology may not be enough to ensure that a supply chain is running smoothly, technology in supply chain management and logistics.
Developing supplier scorecards is one method to address the issue of how well a supply chain is performing. There are five steps to creating a useful scorecard (Golovin).
o Agree on what matters and how to assess it.
o Use web-based incident reports to report issues as they arise.
o Maintain a continual supplier management program
o Take preventative measures rather than reacting
o Use web-based software that all providers can use without having to make costly software and training expenses.
It is critical that the buyer and seller agree on what is significant and how it is measured from the start. This is important because once chosen, the provider will optimize its work to meet the specified standards. If just-in-time delivery is a top priority, the provider may prioritize this component of the order over other aspects. Furthermore, standards for measuring supplier performance must be reasonable and achievable.
The actual performance should then be compared to these benchmarks on a regular basis. Benchmarks that are consistent with industry performance and product standards should be developed together by the manufacturer and supplier. It’s critical to use web-based incident reports to keep track of problems as they arise. Incident reports should be utilized for more than just tracking problems; they should also be used to remedy problems in real-time. It’s also crucial to track how long it takes the provider to fix the problem.
As manufacturers outsource more of their activities, continuous supplier management, also known as supplier engineering, has grown more vital. When it comes to developing an innovative product, a 90-day review cycle might be disastrous. “The life cycle of innovative items is usually only a few months” (Chase 337). A 90-day review period may come dangerously close to eroding an innovative product’s competitive edge. Continuous supplier management must be tailored to specific time frames and tolerances in order to be effective. This is then linked to web-based incident reports, which trigger alerts when items or deliveries fall outside of pre-determined limits.
Instead of responding to issues, a successful supplier scorecard should be put up to avoid them. The sooner you recognize an issue, the less expensive it will be to resolve it, and the more likely you will be able to avoid it completely. The greatest scorecards don’t only measure events after they’ve occurred; they also keep track of performance in real-time. The use of automation is critical to achieving this goal.
A system that compares invoices to purchase orders, for example, will discover price problems before a check is written and a manufacturer’s money is spent. Using web-based software not only lowers the cost of connecting with a manufacturer but also speeds up the process. Small and big suppliers may both participate in the supply chain thanks to web-based applications.
The other four factors above all rely on a manufacturer’s and a supplier’s capacity to engage in product planning, sourcing, quality control, and delivery. The Internet allows all supply-chain participants to interact and work as a team. Finally, by making supplier performance available on the internet, suppliers may take part in their own performance improvement (Golovin).
How to enable technology in supply chain management and logistics
Supply-chain management is a fascinating and challenging topic. It is at the heart of innovative business practices in the twenty-first century. The Internet’s near-universal availability is the enabling technology for improvements in how a company’s supply chain is managed. Organizations may also use the Internet to embrace new business strategies and penetrate new markets. Supply-chain management will continue to expand beyond the current changes by leveraging the power of the Internet.
E-business is the natural progression of e-commerce. E-business makes use of the Internet’s capacity to help supply-chain integration expand faster. While e-business has had a significant influence on supply-chain management, it may also be used in both front-end and back-end operations (Lee). Improved supply-chain management has a number of advantages, including better inventory control and higher earnings.
Nike missed its 2001 profit forecasts, in part owing to the failure of a supply-chain automation initiative, as stated in the introduction. It’s also been predicted that by improving supply-chain management, surplus inventories worth more than $30 billion may be removed. These substantial cost reductions may be applied immediately to the bottom line.
Virtual market places, radio frequency identification tags, synchronized planning (RFID), and supplier performance management are four emerging technologies and business strategies that utilize the power of the Internet. Virtual marketplaces allow consumers and sellers to connect 24 hours a day, seven days a week, thereby establishing a business that never shuts. The absence of an intermediary, access to product and vendor information, and a neutral market where all buyers and sellers are treated equally are all advantages of virtual marketplaces. Both buyers and sellers can use virtual markets to re-engineer their sales administration processes.
As previously said, RFID has been around since the 1960s; however, advancements in technology and the integration of RFID with the Internet have allowed this monitoring mechanism to spread beyond its original use in manufacturing facilities. An antenna, a transceiver, and a transponder are the three components of an RFID system (tag).
When used across a supply chain, synchronized planning includes collaborative forecasting and replenishment, coordinated production, inventory and capacity planning, information integration, and direct ERP system connectivity. Information integration, planning synchronization, workflow coordination, and the possibility to establish new business models are the four important phases in synchronized planning. The use of the Internet for information exchange is critical to synchronized planning.
Better task scheduling and a reduction in the bullwhip effect are two advantages of synchronized planning. The bullwhip effect increases upstream supply-chain oscillations driven by changes in consumer sales. Synchronized planning also establishes what should be done with shared data and how it should be done. As product life cycles get shorter, companies that can effectively synchronize their supply chains will be rewarded.
Supplier scorecards are a way of assessing supply-chain participants in increasingly linked businesses. Many companies were unable to predict the last recession, as Alan Greenspan pointed out in 2001, and continued to overbuild inventories despite having invested extensively in supply-chain automation. This remark emphasizes the need of developing tools to track the performance of companies all the way up and down the supply chain.
Agreeing on what is essential and how it will be scored, using web-based incident reports, engaging in continuous supplier management, monitoring to prevent issues, and using web-based software are the five stages to developing a successful scorecard. It is critical that both the buyer and the seller agree on what is significant and how it will be monitored before implementing these technologies. The next steps follow the first.
The Internet has had a huge influence on businesspeople’s personal and professional life. On the commercial side, the Internet has given established technology new life and allowed enterprises to participate in the global economy. The use of the Internet by businesses has resulted in increased collaboration and information sharing across the supply chain. Businesses have been able to strengthen their supply chains by using the Internet to manage inventories, place orders, and transmit crucial information.
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