SCM Paradigm & IT

IT Enabled SCM in Digital Economy

Intelligent Supply Chains

Implementation of IT in SCM

Globalization, on one hand continues to bring in new opportunities for growth and immense challenges, on the other hand. Supply Chain Management (SCM) and within it, Logistics Management (LM), involves designing, managing and improving product and service flow processes that span functions, organizations and countries in attempts to serve downstream customers' and ultimately end-use customers' ever changing desires, needs and expectations. Thus the intention is to help create superior value for and with customers over the period of time. SCM is a system approach to managing the entire flow of information, materials and services from raw material suppliers through factories and warehouses to services and the end-customer. SCM represents a philosophy of doing business that stresses processes and integration.

SCM is generally associated with Advanced Information Technologies, Manufacturing Techniques (AITs & AMTs), rapid and responsive logistics service, effective supplier management and increasingly with Customer Relationship Management (CRM). Implementation of technologies and methodologies for the management of SCs is likely to be accompanied by significant intra and inter-organizational change. In 1998, the Council of Logistics Management modified its definition of logistics to indicate that logistics is a subset of SCM and that the two terms are not synonymous. The resulting market structure is an electronic hierarchy in which business processes are integrated across organizational boundaries using inter-organizational Information Systems (ISs).

SCM has emerged a key factor in controlling costs and cornering a market share for the entire industry. SCM means transforming a company’s Supply Chain (SC) into an optimally efficient, customer-satisfying process, where the effectivity of the whole SC is more important than the effectivity of each individual department. The need for SCM and marketing is an imperative following the transition from a controlled era when customers waited at their doorsteps for products to a liberalised regime when their marketing personnel had to go out and start marketing. The perception that SCM is critical to organizational performance is growing stronger. This is reflective of current challenges in the SCM (e.g. greater complexity and exposure to risk, rising oil prices, continuing labour shortages, increasing environmental awareness) and strategic supply chain opportunities (such as global expansion, adoption of information technology, mass customization, and postponement of production or movement).

SCM involves strategically managing flow of goods, services and knowledge along with relationships within and among organizations, to achieve or support enterprise objectives. "The ultimate purpose of SCM is to demoralize supplier sales teams and transfer as much of the supplier's profits to the customer as possible." SCs are finally being recognized by the mainstream as a strategic capability of a company, rather than merely a function to execute. Competitiveness of products and services is increasingly measured, not only by individual product or service characteristics, but by the efficiency and responsiveness of the supply

networks in catering the products and services to differentiated customer requirements. Firms prioritize intangible evaluation criteria over tangible criteria as far as e-providers are concerned. SC integration of critical functions (logistics, marketing, operations, purchasing) and institutions (retailers, manufacturers, logistics service providers) is required to expand global reach and improve SC performance.

The logistics world is waking up to the enormous potential of the industry of all segments. To stay on the cutting edge and help industry keep pace with these challenges in a hyper competitive environment, expansion of unique network across continents to collaborate on supply chain and logistics projects is imperative.

The SC market globally is one of the most rapidly evolving and yet least understood range of disciplines in terms of its importance to the procurement, manufacture, transport and distribution elements of the economy. China, having more than $2 trillion dollar Gross Domestic Product (GDP) (globally fourth position) just behind Germany & double digit growth, is becoming not just the world's manufacturer but the supply chain king. More than 20% of the nation's GDP is spent on logistics compared with 8% for the U.S. As a percentage of GDP, however, China's costs have started to come down, indicating an improvement in logistics. Part of their costs involves substantial tolls and a proliferation of small trucking companies that lack efficiencies of scale. The good news is that China invested $87.8 billion in 2004 in logistics infrastructure, with 83% of that devoted to transportation improvements. To be competitive in today’s global economy, Indian companies need to be able to move products and goods securely, quickly and efficiently within our borders and beyond. India cannot compete successfully in the 21st century with a 20th century infrastructure. The best returns often come from investments made in the worst times by articulating the benefits of a major SC initiative including physical, structural & informational aspects. SCM applications enable organizations to accelerate adoption of more flexible, real-time business models that allow them to respond quickly to emerging marketplace opportunities and competitive threats round the clock and around the globe.

Progression of integration in SCs can be enlisted from Stand alone SCs, Interactive among two SCs, Integrated SCs and Supply Webs. Integrated SCs can fetch an industry quality, delivery speed & dependability, cost efficiency, volume & product mix flexibility and overall reputation. The standardized enterprises lack flexibility, while the decentralized enterprises lack visibility. Intelligent and sustainable SC solutions create a competitive edge for the customers.  The “Intelligent SC” is a new approach to organizing and developing supply chains enabled by Information Technology (IT). The biggest challenges organizations face today are cleansing, standardizing, normalising, merging, enriching & maintaining their immense databases of products, prices, contracts and spending patterns gleaned from their competitors. Modern SCs usually rely on advanced IT solutions for information processing and sharing. The capabilities of these IT systems often exceed what is used and what can be absorbed by the business organization thereby enabling individual business processes react autonomously & adroitly to even a micro level breakdowns. The role of IT and Information Systems (ISs) is very much one of a facilitator as per empirical studies. The chance to fully exploit the opportunities introduced by IT is much more an organizational problem than a technological one. What distinguishes organizations with high performance IT is not technical wizardry but the way they manage their IT activities. The elements of SCM are captured in a trilogy of intra-functional, inter-functional and inter-organizational coordination. IT is the enabler & providing an adequate IT infrastructure substantially impacts a firm’s ability to effectively meet the challenges. The IT infrastructure must allow

the company to efficiently manage the processes and implement a new integrated approach to environmental compliance in resonance with existing infrastructure and resources.

Supply WEB is an advanced, web-enabled SCM solution that is designed for effective, efficient collaboration and execution with suppliers irrespective of languages spoken amongst them or replenishment methodology used that presents one face to suppliers. It combines the information from multiple versions of disparate ERP systems in a single, universal view for the suppliers and internal users. Supply WEB gives total flexibility to control each commodity based on how it is used and consumed, including the predominant replenishment methods used around the world. To make supplier relationships as effective as possible, we need world-class supplier performance and supplier self-service capabilities. Supply WEB fills the bill by making it easy for suppliers to respond quickly to alerts and exceptions regarding shipping, receiving, quality etc. It also facilitates measurement and monitoring of (Key Performance Indicators (KPIs) related to suppliers. Supply WEB offers value in three critical areas viz. Cost reduction & ROI, comprehensive replenishment & performance and a complete order collaboration process.

Industrial Research shows that the most successful companies tend to focus not so much on cutting costs & increase their profit. By offering a higher service level, consisting of improved lead times, customer- related IT Support and Measurement, they can, not only increase their profit on existing customers but also helped them find new customers. By utilizing the new tools and technologies, they can improve their logistics performance and enhanced competitiveness.

Supply WEB offers functionality that helps in:

(A)Cost reduction and RoI by virtue of:

1. Lower inventories and carrying costs by gaining full visibility of all inventory, including in-transit;

2. Use pull-based replenishment methods such as Kanban, to manage high-volume, high-cost inventories, saving labor costs and increasing accuracy;

3. Significantly reduce the average cost of a discrete Purchase Order with Supply WEB’s discrete collaboration process

4. Use exception management tools to reduce workload of staff thereby allowing them to spend that time on more strategic matters;

5. Cut labor time and human error costs by eliminating the need for manual intervention in planning and sending of supplier schedules;

6. Eliminate the manual tasks of calculating and entering supplier performance information into computer system and handling supplier responses;

7. Deliver more information with less effort to simplify procedures such as supplier communications, accounts payable and receiving;

8. Reduce premium freight;9. Eliminate EDI VAN costs.

(B) Comprehensive replenishment and performance through:

1. Replenishment and supplier performance with one integrated package;2. Compliance with Original Equipment Manufacturers (OEMs) communication and quality3. Requirements;

4. Multiple replenishment methods including Kanban, SMI, forecast releases, ship schedules, and discrete POs

5. Web-based collaboration infrastructure for efficient negotiation of PO terms between organizations and their suppliers;

6. Automated supplier performance rating system including DMNs, DPRs, parts per million (PPMs), PPAPs etc;

7. A positive impact on the price paid for components by enabling suppliers to be more cost-effective;

(C) Internet/e-business advantages:

1. Enable a paperless system of communication with all the suppliers to meet2. the electronic communication requirements of the OEMs;3. Elimination of waste from supply chain management processes for a significant bottom

line impact;4. Easy implementation with regard to ability to connect a customer to 300 suppliers in just

two weeks;

(D)A complete order collaboration process by way of :

1. Improving supply manufacturers improve the PO negotiation and collaboration process;2. Improving ability to negotiate beginning with a discrete PO or the proposed PO3. Complete visibility into PO status throughout the process for customers and suppliers.

Supply WEB can be implemented quickly without any delay & wait for RoI. Packaged with smart functionality to address key SC challenges, the solution requires less customization, shorter implementation times and fewer IT resources to maintain. Hence, in addition to fast ROI, it delivers a lower total cost of ownership over longer duration. It also helps to:

1. Reduce costs and realize rapid ROI;2. Meet OEM compliance requirements;3. Provide support for multiple replenishment methods;4. Extend ERP systems with integrated SCM;5. Deploy “pull” replenishment methodologies such as Kanban or SMI6. Bring disparate ERP systems to a common platform, with data from all customer sites

presented in the same format;7. Standardize business processes and systems to display supply information for an

organization & it’s suppliers on the same platform;8. Gain profitability and process improvement.

However, most companies lack the tools that can quickly sift through and present data coming from SC Partners and Systems. It also includes traditional EDI communication and web-based methods, with a mix of capabilities ranging from fully integrated machine-to-machine EDI transactions to automated fax. One can achieve 100% electronic communications with all the suppliers, even those lacking EDI capability. However, there is no silver bullet to fix the SC according to Robert Parker, Vice President of consulting firm AMR Research of Boston.

Successful SC performance is based on a high level of trust and a strong commitment among SC partners. Effective SC planning based on shared information and trust among partners is

an essential requirement for successful SCM. One study reported that one-third of strategic alliances failed due to a lack of trust among trading partners (Sherman 1992).

The biggest challenge, as far as Indian scenario is concerned, is that there is no organized SC. An already weak logistics infrastructure in India can be decimated by natural calamities/earthquake etc., making it nearly impossible to get resources pooled to a location where they’re needed in a timely fashion. It may be a challenge that requires collaboration, synchronization and involvement of the local authorities and other entities. A SC needs not only roads and ports, but also manpower, equipment, facilities and accurate as well as timely access to information.

Across design, development, production and aftermarket processes, the effective use of IT based on a service orientation is crucial as these solutions help companies maximize revenue by bringing new products to market quickly and minimize costs by optimizing design, production, SC, retail and aftermarket sales and service processes.

Among key characteristics, a service orientation implementation of IT in SCs uses technology as an open framework to help build the flexibility, responsiveness and efficiency. Further, it integrates tightly business processes end to end, reuses modular components to drive efficiency and connects components using industry-specific open standards. Leveraging information across varied business lines & it’s integration in SCs enables organizations reap the benefits in the following arena:

1. Overcome current difficulties in obtaining customer feedback that hamper customer loyalty and weakens competitive advantage;

2. Implement flexible development and production processes to build innovative designs precisely, rapidly and cost-effectively;

3. Deliver personalized information and processes that drive employee productivity and improve customer satisfaction;

4. Proactively monitor the performance of Customer Relationship Management (CRM), Design, Manufacturing, Supply Chain and Warranty Processes;

5. Dynamically change processes to respond to changing customer demands and minimized cycle times;

6. Implement effective outsourcing and design models for production to optimize inventory and manage relationships with partners, suppliers and Original Equipment Manufacturers (OEMs);

7. Integrate applications and data between Product Life-cycle Management (PLM), Enterprise Resource Planning (ERP) and Manufacturing Execution Systems (MES) applications;

8. Create highly secure, standards-based development, engineering and manufacturing environments that span internal, outsourced, dealer and customer communities;

9. Optimize build-to-order capabilities to increase customer satisfaction, minimize in-house & Vendor Managed Inventory (VMI) and maximize resource utilization and flexibility in the Supply Chain;

10. Help avoid mistakes due to manual procedures—both internal processes and those that involve dealers and other aftermarket partners;

Spendthrift IT Scenario

This paper explores how the power of an information availability solution can unlock the latent potential of an IT environment and deliver new value for an organization. It can enable an organization to immediately tap into the unused value—downtime—that exists within an IT infrastructure. The Bottom Line would be that if an organization can minimize or eliminate planned downtime, it can free up specific, measurable (currently unrealized) potential to immediately support productivity and profitability strategies. It also delivers opportunities for revenue and asset growth, new competitive positioning opportunities, Merger & Acquisition (M&A) plans and customer-facing initiatives.

Although, much of the debate over supply chain infrastructure focuses on international trade, the fact remains that the domestic commerce is responsible for more than 85 percent of gross goods movement through United States of America via rail, road, air and marine transportation. This implies that America’s supply chain infrastructure deficiencies not only impact the competitiveness of Indian foreign trade, they also affect the strength of the entire American economy. And the logistics sector represents about 10 percent of U.S. GDP by itself. By international standards, that is relatively low and suggests a high degree of efficiency, especially in comparison with other important economies that spend as much as 20 percent or more of GDP on logistics and transport.

Of five major industry sectors that represent over 80 percent of the U.S. economy, four sectors viz. manufacturing, retail, services, and agriculture & natural resources are critically dependent on transportation. The fifth sector is the transportation and distribution sector itself. Last year, the U.S. Chamber of Commerce reported that employment in these four transportation-dependent sectors accounted for some 99 million U.S. jobs, or nearly 71 percent of the U.S. workforce. The transportation and distribution sector including direct transportation, warehousing and wholesale trade account for an additional 7.5 percent of India’s workforce, nearly 11 million jobs.

Albeit half of the people in corporate IT departments manage and support infrastructure rather than develop and maintain applications, yet infrastructure represents only a tiny percentage of the IT labor offshored to low-cost locations so far. One of the reasons could be that the managers might have been reluctant to send such mission-critical operations too far from home. However, in the past few years, constraints on the off-shoring of infrastructure have started to ease and the market appears poised to follow the growth trajectory of other IT-off-shoring segments. Offshore vendors have started to invest aggressively both in infrastructure talent and redundant networks from the United States and Western Europe.

Amid the economic downturn, organizations have been searching for every opportunity to cut costs. IT represents an important part of total spending. In some industries (>5 %), direct contribution of IT investments to revenues and profits is often difficult to assess. As an unsurprising result, many Chief Executive Officers (CEOs) and Chief Finance Officers (CFOs) are eager to squeeze their Chief Information Officer’s (CIOs) budgets. But finding substantial savings isn’t easy. Many CIOs have already spent years reducing costs in operations, procurement, and outside services. Among many other things, they have consolidated their data centers and help desks, virtualized servers instead of buying more expensive new ones, rationalized procurement processes, postponed upgrades, and outsourced services to less expensive offshore providers.

Nonetheless, significant additional reductions and higher efficiencies are possible if companies take a broader look at the way they manage the IT architecture as a whole. The

key to these economies is bringing business and IT leaders together in a combined effort to rationalize not only business applications and processes but also the core IT infrastructure and operations. At one large consumer products company, for example, such a joint initiative to combine, consolidate, and rationalize disparate IT systems across business units led to a drastic reduction in the size of the IT staff (by more than 50 percent in the application-management area) and inventories of spare parts, increased leverage in negotiating discounts with suppliers and faster completion of new IT initiatives.

Companies have been swinging the axe at their spending on IT. Most of them have drastically reduced expenditures on new hardware and software by 15 to 25 percent, on an average, compared to an increase of 5 to 10 percent annually during the past decade. The same applies to many companies in North America & Europe primarily by halting incomplete projects and laying-off employees. Many of the cuts have been made to improve earnings, though they also reflect management's disappointment with the results of huge spending on technology during the high-tech bubble years of the late 1990s. On the contrary, in some instances, IT investments deliver more value to a company’s top and bottom lines by creating new efficiency levels and increased revenues than any savings gained from traditional IT cost cutting strategies.

A host of companies have decided that IT cost cutting provides a great opportunity to untangle their systems and projects. Rather than taking short-term view, such companies are looking to the longer run, transforming their business activities and IT processes in ways that will strengthen their systems and, at the same time, eliminate deeper causes of bloated IT spending. In a sense, the companies are finishing a job they didn't have time to complete during the bubble years. The scale of corporate spending on IT infrastructure has increased from almost negligible networked storage in early ‘90s to dramatically billions of dollars thereafter. In some cases, it has moved from basements with a few dozen servers to innumberable sophisticated data centres. There are good reasons for this expansion. Infrastructure runs the applications that process transactions, handles the customer data that yield market insights, and supports the analytical tools that help executives and managers make and communicate the decisions shaping complex organizations. In fact, infrastructure has made possible much of the corporate growth and rising productivity of recent years. Yet the very ubiquity of IT resources (computing, storage and networking technologies) makes some executives regard IT infrastructure as a commodity that seems to be a mistake. Effective infrastructure operation that can create value can only be achieved by making sound choices about which technologies to use and how to integrate them.

IT has come a long way over the past decade. Budgets grew rapidly during the dot-com boom and the run-up to Y2K and then declined drastically when the bubble burst. Over the following years, such organizations improved the performance of IT departments by streamlining application portfolios, reducing infrastructure costs, improving governance, consolidating vendors and outsourcing many activities. Much has changed across the business landscape as well. Technology now meshes tightly with operations in ways that weren’t possible a decade ago. At every level of a SC, one sees more advanced IT

applications, more sophisticated equipment & more integrated business processes. These developments require higher levels of education and training plus some means to fund them. The challenge ahead is to explore supply chain issues in an interconnected & intermodal way that cuts across the broad range of national priorities and sets the path to future success.

In the global economy, there’s no room for error thereby causing wasted potential. To support the complexities arising out of intense new product introductions and variations, the operations philosophy has been “Think globally, act locally, i.e. balancing localized decision-making with global planning. With the strategy of replacing inventory with information and creating a pull-driven supply chain with end-to-end integration linking suppliers, factories, telecom operators, channel partners, contract manufacturers, banks, sales, iHubs and logistics service provider to the consumer. This approach intends to create the most efficient supplier network that offers the best solutions to meet customer expectations. Fundamentals for success included creating a value-based partnership with suppliers based upon factual information, leadership, flexibility and trust thereby “Making the impossible possible through collaboration”. Based on this approach, the supplier network is now considered the central point for reaching the corporate objectives viz. great products, operational excellence and customer satisfaction.

The results of such transformation have been impressive with increased sales and reduced component inventories not only within an organization but also reduce inventories throughout the pipeline including supplier and customer inventories. Sourcing excellence is a key ingredient of the above said business model transformation. Benefits include time-to-market, risk management, agility and financial model flexibility. It is believed that there can be two critical factors instrumental in such transformation success. One is leadership and the other being communication of the vision. The leadership philosophy relies on four equally important elements viz. head, heart, hands, and guts. These leadership attributes are exemplified through energy and passion, trust as the base for business, focus and drive, active communication and flawless execution.

The main tenets of SCM were listed decades ago by Oliver and Webber. According to them, SC was considered as a single entity, balancing of inventories as last resort and targeting system as their integration. These tenets have still not been implemented largely. While parts of individual supply chains may be well coordinated or even well-focused on the end customer, few exemplars of overall supply chain management can be identified. The risk management along international supply chain & the use of integrative IT Tools is still underdeveloped. Even as of now, SCM is still in emergence stage in terms of both theory and practice. While these achievements are still problematic, the supply chain theme is extending from being strictly “technical” on flow optimization and improvement, towards taking into account broader issues such as social responsibility & ethics and looking at certain sustainable development issues. The SC is a critical system in which it is possible to evaluate and allocate strategies related to the concepts of efficiency/effectiveness but also the issues of responsibility/fairness.

A Gartner study says SCM is the way to sustained profitability for e-businesses. The study predicts that 90% of businesses that fail to leverage SCM technology are at risk of losing their preferred vendor status. Some of the world’s largest retail companies and Personal Computer (PC) manufacturing companies are clear manifestations of this. The answer to this riddle lies in building robust adaptive Supply Chain Networks (SCNs) that seamlessly and

flexibly connect supply, planning, manufacturing and distribution operations to critical enterprise applications and provide near real-time visibility across networks. Such networks possess the flexibility to continually evolve and respond to the environment in real time without compromising operational and financial efficiencies. Companies need to transit from managing sub-optimal and sequential supply chains into controlling adaptive networks wherein processes are traditionally managed by single enterprises. The same are spreading out across multiple enterprises and the characteristics of SCNs are beginning to look drastically different.

Five key elements of business network include:

1. Demand Network viz. customers, retailers, distributors & whole sellers;2. Enterprise includes manufacturers & distributors;3. Supply Network includes system suppliers, tier suppliers, raw material suppliers &

providers of other services;4. Logistics Network means Third Party Logistics (3PLs), shippers, carriers etc.;5. Financial Network refers to banks, SC finance providers, accounts payable etc.

During such transition, companies must map three key process enablers viz. management of transparency/visibility, management of speed/velocity and management of flexibility/variability to key information enablers such as quality, timeliness and depth of information to maximise network supply responsiveness and enhance efficiency of value creation. The adaptive SCN puts the customer at the centre of all activities in the whole SC that allows companies to improve overall costs and profits across the networks besides ensuring the following:

Alignment of Business Processes with Customer Needs: Internal integration helps enterprises break down functional silos and share actionable information upon real-time integration of all supply chain systems including networking, planning, execution, coordination and performance-management systems. It creates competitive advantage by making fundamental changes in internal operations starting with integration of processes and systems across organisational boundaries.

Adaptive Planning: Today, most Supply Chain Planning and Scheduling Systems rely primarily upon historical data collected from Enterprise Resource Planning (ERP) and legacy systems. However, as companies aim to create virtually inventory-less supply chains, they require the ability to realign demand and supply almost continuously to consider the latest demand situation and supply status. Adaptive planning replaces batch-oriented, period planning with an event-driven, real-time response to demand signals and changing supply situations.

Dynamic Collaboration: Traditional supply chains rely mostly upon inventory and assets, but the adaptive supply chain network is information-based. It uses shared data for planning and execution processes.

Distributed Execution: Most of the execution systems are ill-prepared to support the emerging virtual supply network. Distributed execution considers the distributed nature of processes in a world of outsourcing where multiple partners in the extended network might manage a single process.

Event-Driven Coordination: Today, even small disruptions in supply chains initiate a wave of e-mails, faxes and phone calls just to keep pace with the problem. Adaptive SCNs address the challenge of managing the virtual enterprise through up-to-the minute monitoring and control of business processes and the rapid, intelligent resolution of exceptions.

Continuous Performance Management: Be it known that consistent performance metrics are the key to steering the behaviour of individuals and reconciling conflicting goals across functional areas. However, Key Performance Indicators (KPIs) also play a major role in managing collaborative processes and in providing decision-makers with actionable information to improve the quality & speed of decisions at comparable costs.

Adaptive SC also goes a long way in how companies manage profits by pricing and revenue optimisation. Pricing continues to be one of the least-understood profit levers. This is because of the sheer number of variables that need to be factored into the pricing decision, lack of a single point price ownership within organisations, inability to have timely visibility into market dynamics and lack of an integrated tool that supports complex disaggregated pricing processes. Companies that fully exploit the benefits of intelligent pricing will be those that successfully integrate pricing optimisation, pricing execution and pricing visibility to other enterprise applications. According to Forrester, “Adaptive supply nets are an evolution of SCs that will lead to a dynamic trading environment. Firms will be able to rapidly respond to unplanned events and make critical SC decisions in a split second based on real-time data collected across multiple tiers, up and down their value chain.”

For all the manufacturing companies today, electronic collaboration and execution with supply base is essential to lean manufacturing. Equally important is better management of domestic or global SC and better understanding of suppliers’ ability to deliver in order to compete in today’s marketplace of an ever-shifting landscape of consolidation, globalization and escalating pressure to reduce costs and get products to market faster. One can navigate this landscape successfully if S/He had the right technology partner with the right SCM solutions.

Proven to lower SC costs, reduce inventory and increase operational efficiencies, the solution delivers significant Return on Investment (RoI) by increasing supplier visibility, enabling inter-enterprise communication, and providing a high level of systems integration etc. An intelligent SC is often encapsulated by the properties of: Agility, Adaptability, Alignment and Architecture. The notion of SC intelligence addresses the need for frequent change in response to dynamic market conditions, emerging technologies and information systems. An enterprise architecture for intelligent SCs include XML and other emerging middleware for integration; Virtual Private Networks (VPNs) and other technologies that add security and reliability to the Internet; directories and entitlements for defining business policy and networked applications for managing collaborative SC business processes.

Manufacturers can integrate their SCM with a Global Positioning System (GPS) to gain access to enhanced tracking data. SCM GPS integration usually starts with logistics services.Integrating SCM with ED) can help manufacturers transmit data on orders. To accomplish this, SCM EDI integration needs to occur through an ERP system. Success with manufacturing ERP change management is less about the technology and more about preparing users for success by winning over their psychologies.

Eighty percent of companies reassess their SCNs less than two times a year. Aberdeen research finds that over 90% of companies leverage a spreadsheet-based application or a consulting-based approach rather than an application package such as ERP for doing network design and hence are unable to make extensive trade-offs between constraints. The promise of shorter implementations times, lower up-front costs and subscription-based payments combined with shorter, less costly development cycles and simplified functionality updates/maintenance for the vendor have everyone jumping on the SCM bandwagon.

Manufacturing has been moving away from “Home Town” in many countries for many years. Cheaper space and labour overseas mean goods and services often can be supplied from abroad at a fraction of the price that could be achieved in the “Home Town”. According to Simchi-Levi , "Fluctuating transportation costs, high volatility in demand volume and mix, commodity price volatility, increased labor costs in developing countries and the pressure to reduce inventories are just a few of the challenges companies are struggling to overcome today ". The financial benefits to be gained by utilising low-cost production centres offshore indicate that global sourcing and manufacturing are becoming competitive necessities. As SCs become increasingly multinational and complex, companies are seeking to establish IT infrastructures to support worldwide interests and strategies.

Effective global SCM is a key issue for many businesses. As with traditional local or national SCM in the past, today’s increasing focus on this aspect of business operations is driven by a need to reduce the costs of procurement and minimise risks related to sourcing goods. However, because global supply chain management can involve several countries or continents, this itself can bring issues and difficulties that need to be managed. 

The plethora of factors that must be considered can make judging where to manufacture a product extremely difficult. Although there are always trends as to which countries are perceived as providing the most competitive supply, the most effective sourcing location will vary greatly from company to company. For instance, in the clothing and textile industries, China and India are currently popularly perceived as attractive locations due to their large pools of skilled workers and their relatively low labour costs. The most competitive place to source from, however, will vary greatly according to the market niche a company occupies, the size of their typical orders, the materials that need to be utilised and so forth. Likewise, Pakistan and Bangladesh, may be cheaper than China for jeans and shirts, which are very important markets for these countries.

Future SCM

The SC is a highly complex area. As a result, it can be a source of great efficiency and cost-savings gains. Companies are realizing that more than ever, SC Excellence drives competitive advantage, customer relationships and shareholder value. However, the business case for better SCM mandates a deep examination of myriad sources of potential benefits including:

Faster Response: With increased visibility into the SC and adaptive SCNs, one can be more responsive and sense/respond quickly to changes as well quickly capitalize on new opportunities.

High Customer Satisfaction: By offering a common information framework that supports communication and collaboration, SAP SCM enables better adaption to and meet fluctuating customer demands.

Improved customer retention and increase customer loyalty: Improvement of customer satisfaction via improvements like streamlining and reducing errors in the invoicing process, eliminating backorders, reducing errors, improving quality, reducing time to receipt is quite possible.

Compliance: One can track and monitor compliance with reference to regulatory requirements such as environment, health and safety.

Reduced accounts receivable, bad debt write-downs and disputes: Better management of accounts receivables to eliminate extending credit in error, recognize collection issues sooner & managing them more effectively and reducing disputes and related costs can also be achieved.

Reduced transportation duties & taxes and increased rebates and incentives: Optimization of production and shipping activities reduces transportation duties & taxes and increase rebates and incentives.

Improved cash flow: Information transparency and real-time business intelligence can lead to shorter cash-to-cash cycle times. Reduced inventory levels and increased inventory turns across the network can lower overall costs.

Higher margins: With SAP SCM, the operational expenses can be lowered with timelier planning for procurement, manufacturing and transportation. Better order, product and execution tracking can lead to improvements in performance and quality beside lower costs. One can also improve margins through better coordination with business partners.

Synchronization with business priorities: Tight connections with trading partners can retain aligned SCs with current business strategies and priorities, improving overall performance and achievement of goals.

Enhanced Collaboration: SC Softwares bridge the gap between disparate business softwares at remote locations to dramatically improve collaboration among SC Partners. With such softwares, all participants can dynamically share vital information viz. demand trend reports, forecasts, inventory levels, order statuses and transportation plans in real-time. This type of instantaneous, unhindered communication and data-sharing will help keep all key stakeholders informed & let the SC Processes run as flawlessly as possible.

Increased inventory turns/reduced days in inventory (inventory and inventory carrying cost: More accurate forecast and the amount of inventory needed, leading to an increase in inventory turns and reduction in days in inventory. This leads to a one time inventory reduction and ongoing carrying cost reduction on the saved inventory.

Reconfigured SCNs: Many companies have SCNs developed for a different era. Fuel prices, green SCM concerns, virtualization and more will lead many of them to fundamentally rethink those networks over the next few years.

Improved SCN: SC softwares provide complete, 360 degree visibility across the entire SCN that cannot be easily achieved with disjointed manual processes. Thus the users can monitor the status of all the activities across all suppliers, production plants, storage facilities and distribution centres. This enables more effective tracking and management of all related processes, from ordering and acquisition of raw materials, through manufacturing and shipping of finished goods to customers or retail outlets. So the status of mission-critical activities can be tracked at all times and potential inefficiencies or problems can be identified and corrected immediately.

Improved SCM staff and task productivity: Automation of various SCM tasks ranging from plan-to-produce, source-to-settle and order-to-cash processes and improved business processes, leading to increased productivity benefits. Typical productivity improvements include savings in sourcing, supplier management, production planning and analysis, production management, production staff, change order processing and management, quality control and analysis, sales order entry and processing, promotions management, fulfillment and transportation and logistics.

Blurred SC Planning: There is a need for response based on market demand and other factors to outstrip current planning cycles. Tactical and even some operational planning has become completely intertwined with execution, causing changes in organizational structures, processes and technology. 

Reduced Overall Inventory Levels: Inventory levels have remained flat for many years. But the lessons learnt from recession may enable us to get more with less combined with SC simplification programs and new technology will drive drastic drop in inventory levels by 2015.

Improved net fixed asset (NFA) utilization, avoiding net fixed asset additions: More effective utilization of current net fixed assets such as plant & equipment and potentially avoid planned investments to handle growth.

Reduced days sales outstanding (days in accounts receivable reduction): reduce accounts receivable collections with better visibility, aging and extension of credit, helping to reduce days sales outstanding.

Reduced inventory scrap: It is possible to reduce scrap write-downs with better quality control and planning/forecasting.

Web-based SC: Software tools such as global transportation/logistics, reverse logistics, material and information flow, e-commerce, telecommunications/Internet, data visualization, data mining and geographic information systems are predominant these days. By 2015, shift to software based SCM will happen rapidly once the major implications are overcome.

Green Transportation: The logic of transportation collaboration and financial benefits haven’t achieved desired results. The capacity crunch of 2005-06 affected but then went away. Green will finally do the trick and we will see much more cross company load-linking and even sharing of capacity between competitors.

Time Saving: Video-conferencing substituting for meetings, EDI substituting for manual keying of orders, billings and so on, ERP substituting for manual operational planning, MRP substituting for manual calculation of needs, re-ordering, scheduling and so on, CAD substituting for manual design and calculation of components, etc.

Minimized Delays: Many SCs particularly those that haven’t been enhanced with a SC Application, are plagued by delays that can result in poor relationships and lost business. Late shipments from vendors, slow downs on production lines and logistical errors in distribution channels are all common issues that can negatively impact a company’s ability to satisfy customer demand for its products. With SC Software, all activities can be seamlessly coordinated and executed from start to finish, ensuring much higher levels of on-time delivery across the board.

Visibility: The IT, despite RFID’s current lack of direction, will become very commonplace by 2015.

Common deployment of real-time performance management: Scorecards are rear-view looking; dashboards help you make decisions right now. A few companies have already developed these kinds of capabilities; they will be widely deployed by 2015.

Automated Distribution: Lean, un-automated and very flexible or automated to a level hard to imagine distribution shall be there once robots are in place.

Emerging Markets: The growth shall be perhaps explosively accelerated for companies like Procter & Gamble that smartly focus on “micro-logistics.” This will impact product design, pricing, logistics etc. & fetch huge corporate advantage.

Impact on Physical SC: A tsunami wave of digitization will dramatically impact Physical SCs as is happening in the audio industry wherein itunes is putting CD makers and even producers of plastic resins used to make CDs out of business.

Improved production exception handling: Better planning and management of production helps reduce exceptions and the associated resolution costs.

Improved purchase order, invoice and payment productivity: It is possible to automate purchase order forms and processing, improving the process and productivity of contract and vendor managers, purchasing agents, employees and managers on purchase order requests and approvals.

Consolidated current SCM solutions: It is quite possible to avoid current spending on systems, support & maintenance contracts, application development & integration, systems administration and support via consolidation to a newer consolidated platform.

Reduced maverick spending: Once the purchase order requests and approvals are managed more effectively, it automatically reduces maverick spending, while increasing strategic sourcing and resultant discounts.

Reduced transportation error costs: Reduction of transportation errors, elimination of error-related costs to resend or reroute shipments enables overall cost reduction.

Reduced Costs: A SC Software can help reduce overhead expenses in a number of ways. These include improved inventory management, facilitating the successful implementation of just-in-time stock models and eliminating strain on real estate and financial resources caused by the need to store excess components and finished goods. Further, they enable more effective demand planning that enable production output levels that can be set to most effectively address customer requirements without shortages that result in lost sales or wastages that drains budgets. Hence, relationships with vendors and distributors improve upon so that the purchasing and logistics professionals can identify cost-cutting opportunities such as volume discounts etc.

Reduced cost of goods sold (COGS): SCM enables reduction in cost of goods sold with various improvements such as more effective sourcing of raw materials, tracking of work-in-process, reductions in production quality, issues & planning, increases in production efficiency and reduction in production overhead.

Improved strategic sourcing: Strategically sourcing of direct & indirect materials and better management of vendors, leading to material cost savings are the additional benefits of SCM.

Industry wise Obstacles/Potential Hurdles and Problems (Attributes)

In case of SMEs, the basic management systems are missing or it is too difficult to add communication modules to the system (such as EDI), Communicate by telephone and fax. They hesitate in joining the EDI society as resources are lacking. Although Large Sized Industries have in-house developed systems or adapted production systems as management information systems & have the possibility to use EDI, but the system is presently not being used by many of their customers. Those using EDI have been ‘‘forced’’ to do so and often do not reap any economic benefit from it’s implementation. Whereas, industries representing “huge size category”, they have advanced in-house developed systems and integrated communication modules which communicate by all possible methods. But, still have problems realizing the benefits to full extent as there are just a few using EDI. While the SCM & IT Concepts seem as good a match as chocolate and peanut butter, there are certain common issues and challenges that need to be addressed:

Security Concerns: Although the issues on security in the cloud are much better understood than three years ago, the fundamental challenges of protecting data outside a company’s firewall remain and need to be mitigated. These challenges can be compounded by Intellectual Property (IP) protection concerns and differing data privacy regulations across the globe;

Participant Inequality: The idea that every SC participant would come to a central location to collaborate and conduct commerce is nice, but it’s often unrealistic. Different participants wield different levels of power and can dictate the terms of collaboration and interaction. Moving the SC in the cloud will require a high degree of flexibility to support different deployment models, from centralized to federated;

Master Data Management: Companies struggle with managing the master data challenges within their own organizations, often lacking the tools and stewardship necessary. This problem will only be compounded as more information is shared across trading partners because processing of such information had inherited Description Complexity, Technology, Supply & Demand Uncertainty, Product Criticality, Firm & Supplier Investment and last, not the least, Trust amongst all the stakeholders;.

Rather than thinking and planning for each independently, companies will be forced to change their integration strategies into ones that are more holistic, including applications, processes and data;

Manpower: The emergence of Logistics and SCM as a specialized industry has spurred the need for professionals in this sector. The variances in SC activities make it really difficult for the companies to identify actual skills and experiences needed for a particular position. Recruiting the appropriate manpower for this business is posing enormous challenge for companies.

Scope of Study

Companies (includes Manufacturers, vendors, distributors and other active participants in the SC) dedicate a significant amount of their technology budgets to the acquisition and administration of SC softwares. Therefore, the success of these softwares is critical. Although informative, the literature related to SCM Systems (SCMSs) needs to be developed further to provide insight related to the realized benefits of adopting firms. Specifically, there is a need to analyze empirically and systematically the potential benefits and variables that explain the differences in benefit variation. To contribute to this need, the study analyzed SCMS benefits in four steps. First, drawing from survey responses of a diverse group of manufacturing plants, the study sought evidence of the claimed benefits found in the literature. Second, the study built on the claims and findings of previous researchers to formulate and test hypotheses related to factors that help explain differences in benefits. Third, once the explanatory variables were analyzed in isolation, they were then analyzed for the incremental effects. Finally, based on the results of the first three steps, the study refined the results to produce a synthesized explanatory SCMS benefit model.

In fact, leading industry analyst firm AMR Research claims that revenues from purchases of new SC softwares, software upgrades, enhancements and replacements, has grown at an average rate of four percent annually over the past several years. Additionally, AMR expects that spending on this count will continue to rise well into the foreseeable future. Therefore, it is critical that businesses understand how to maximize value and get the most out of their SC investments.

As such, it is imperative for all the prospective beneficiaries of SCMSs to focus their strategies around following issues of concern:

1) Involvement

There are many critical stakeholders, both within and outside an organization, who contribute to the effectiveness of SC operations. Not just internal employees of production teams, purchase departments, stockrooms and warehouses, but external business partners such as vendors and distributors must have an active participation in the strategic planning of SCMSs. Since SC software will impact each and every one of these constituents, they must be fully involved in each initiative and their feedback must be gathered as early on in the process as possible. This will help facilitate widespread user adoption and ensure that the SC software will satisfy everyone’s needs.

2) Robust Demand Planning and Forecasting Capabilities

Many experts believe that the ability to accurately predict sales demand and adjust output & supply levels accordingly, is the key to SC success. Without SC software and powerful forecasting functionality it provides, there looms the risk of:

Product shortages that can lead to low levels of customer satisfaction and high levels of churn;

Component shortages that can cause delays in production activities; Too wide variety of components that leads to overstocked warehouses and increased

inventory management costs;

Excess finished products which can take up valuable warehouse space and force companies to cut prices to deplete remaining stock.

3) Integration

In most companies, SC operations span multiple departments and business units. In order to coordinate the seamless execution of activities across these groups, SC software must tightly integrate with the applications they utilize.

4) Test Processes

The purchase of new SC software or a significant upgrade to an existing one, presents a great opportunity to evaluate current processes and re-vamp them as needed to make them more productive and cost-efficient. Analyst firm Gartner suggests starting with a pilot project that involves just one or two suppliers & distributors and using limited information sharing to test different procedure scenarios by iteration method until the one that proves to be most effective is discovered.

5) Collaboration

One of the primary benefits of SC software is its ability to enable rapid, unhindered information sharing. Companies who don’t fully leverage these capabilities – using them to communicate with and make data available to external supply chain partners in real-time – will realize only limited benefits from their supply chain softwares.

SC integration is measured at three levels: information, resources and organization.

J Jayaram, SK Vickery, C Droge - … of Physical Distribution and Logistics Management, 2000 - emeraldinsight.com

Abstract:

An empirical study of 57 top-tier suppliers to the North American automotive industry examined the direct and complementary effects of information system infrastructure (ISI) and process improvements on time-based performance. The results show that the three dimensions of ISI – design-manufacturing integration (DMI), manufacturing technology

(MT), and information technology (IT) – directly influenced at least one dimension of time-based performance. For example, DMI influenced manufacturing lead time, MT influenced new product development time, and IT influenced customer responsiveness. Process improvement also directly influenced supply-chain time performance. Finally, ISI and process improvement had a positive and complementary effect on time-based performance. Specifically, the IT factor along with process improvement variables (standardization and concurrent engineering) had a complementary and significant positive influence on time-based performance. The findings strongly support the idea of joint deployment of information system infrastructure and process improvement to streamline cycle time performance in a supply chain.

The impact of information technology on supply chain capabilities and firm performance: A resource-based view

Fang Wu a , , Sengun Yeniyurt b , ,Daekwan Kim c , and S. Tamer Cavusgil d , ,

Abstract

Organizations increasingly rely on information technology (IT) to improve the supply chain

process. Yet, past evidence suggests that the investment in IT per se does not guarantee

enhanced organizational performance. Drawing from the resource-based view, this study

proposes that IT-enabled supply chain capabilities are firm-specific, and hard-to-copy across

organizations. These capabilities can serve as a catalyst in transforming IT-related resources

into higher value for a firm. Based on data collected from surveying supply chain and

logistics managers in various industries, the present study sheds light on these issues. The

findings provide a new perspective in evaluating IT investment in the supply chain process.

Analyzing alternatives for improvement in supply chain performance

Ashish Agrawal,Ravi Shankar,

Work Study, Vol.51,2002

The performance of a supply chain is characterized by its ability to remain market-sensitive without losing the integration through the chain. One of the difficulties in designing and analysing a supply chain is that its processes are governed by the strategic attributes of the supply chain.

2002 Industry Studies: Strategic SupplyAuthors: Ann Budd; Marcus Caudill; Michael Chambers; Karen Clougherty; Ernest Dobson; INDUSTRIAL COLL OF THE ARMED FORCES WASHINGTON DC  Abstract: Strategic Supply is a unique industry study that focused not on a single industry, but rather on a process common to many industries known as Supply Chain Management (SCM). We found that the successful, global and innovative companies of today leverage their supply chains to achieve competitive and comparative advantage in their chosen marketplace. Strategy formulation and execution, affecting lasting change and knowledge management are achieved through the skillful application of information systems. We discovered collaboration to be the synergistic force behind emerging SCM theory and practice and a number of key business models and approaches that have promising application to U.S. Department of Defense (DoD) logistics transformation.

Adoption and diffusion in technology implementation: a supply chain studyIJOPM,2004,24/6

Abstract:

A survey of 553 Australian companies was conducted for the purpose of determining some of the primary characteristics of organisations actively implementing supply chain management enabling technologies. Three groups of organisations were identified based on the extent to which these technologies and methods have been adopted and used in dealings with trading partners. These groups have been labelled “strategic”, “tactical” and “reactive”. the results clearly indicate that the “tactical” and “strategic” groups derive significantly greater business benefit from the use of the EAN (European article numbering) system, are more knowledgeable of the techniques and implications of use, and perceive implementation to deliver significantly greater benefits over time relative to the cost of implementation. There is a significant relationship recorded between company size, industry sector and the extent of implementation. This indicates that “strategic” implementers are more likely to be larger organisations in the retail or wholesale distribution sectors. Organisations implementing more extensively are more proactive in their planning, more focused on the need to change and realign processes, and more likely to be investing in supporting infrastructure rather than just technology. Between the “strategic” and “tactical” groups, there is also a clear indication that the “strategic” group perceive all of these outcomes to be central to the effective operations of their organisations. By contrast, the “reactive” group can be characterised as at best ambivalent, and at worst extremely negative about the techniques and methodologies, and the contribution of the system to potential and/or real business outcomes.

Focusing information in manufacturing: a knowledge management perspective

Ind Mgt & Data Systems

2002, 102/7

Abstract:

This paper addresses, from a knowledge management perspective, the following question: How are companies choosing the information that is considered more important for the management of the manufacturing process? We analyze empirically, from a strategic approach, how different types and sources of information may influence information characteristics like accuracy, access, and timing. In addition, we also evaluate how information is related to manufacturing competencies and performance. The results indicate that customer-focused information and information technologies (IT) are the most important aspects that influence information characteristics.

Curing Supply Chain Indigestion"The pressure to improve supply chain performance has never been greater. The rise of e-commerce as well as intensifying competition in general have dramatically raised the benchmarks for speed, reliability, customization, and quality. In response, companies have been investing huge sums in new information technology, equipment, and processes. But many companies have invested and reengineered without fully understanding supply chain dynamics and economics. As a result, they have not come close to realizing the improvements they anticipated. To avoid supply chain indigestion, companies need to understand the interactions among the five elements of supply chain performance: volume, velocity, variety, volatility, and value . Two companies pursuing different supply-chain strategies will have to optimize and balance the Vs in different ways."

How Do Suppliers Benefit From IT Use In Supply Chain Relationships?Supply Chain Management Systems (SCMS) championed by network leaders in their supplier networks are now ubiquitous. While prior studies have examined the benefits to network leaders from these systems, little attention has been paid to the benefits to supplier firms. This paper explains organizational theories of learning and action and transaction cost theory to propose a model relating suppliers' use of SCMS to benefits. It proposes that two patterns of SCMS use by suppliers - exploitation and exploration - create contexts for suppliers to make relationship-specific investments business processes and domain knowledge. These, in turn, enable suppliers to both create value and retain a portion of the value created by the use of these systems in interfirm relationships.

Benefits Of IT In Supply Chain ManagementIt is commonly acknowledged that Information Technology (IT) is and increasingly will be an essential element of managing logistics operations in networks. However, there is less empirical evidence describing of the actual benefits of IT in Supply Chain Management (SCM). This paper, by means of a small survey and case-interviews, examines within selected progressive companies what are the benefits, types of use, and trend in the use of information technology in industrial supply chains. Five propositions on the use and benefits of IT are presented.

how sensor technologies, new analytic capabilities and simulation techniques can predict, if not prevent, disruptions before they occur.

SUPPLY CHAIN MANAGEMENT IMPLEMENTATION AND PRIORITY STRATEGIES

IN DANISH ORGANIZATIONS

By Kotzab, Herbert

Publication: Journal of Business Logistics

Date: 2006 2006 INTRODUCTION

This paper presents selected results from a research project that investigated how supply chain management (SCM) is developed and implemented within Danish business organizations (see Friis et al. 2004, Kotzab et al. 2006). The goal of this paper is to provide insights for prioritizing

strategic decision making when implementing SCM in an organization. We use the SCM definition of the Council of Supply Chain Management Professionals (CSCMP) from Grant et al. (2006 p. 15) as "the planning and management of all activities involved in sourcing and procurement, conversion, and all Logistics Management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence. Supply Chain Management integrates supply and demand management within and across companies" (our emphasis in italics). SCM is seen as an internal and external integration of business processes with customers and suppliers in order to add customer value (Cooper and Ellram 1993; Cooper et al. 1997). SCM thus incorporates different implementation requirements provided by several actors between the point of origin and point of consumption, but mainly seen from a single actor's point of view (Lee and Billington 1992; Handfield and Nichols 1999). The need to implement SCM within organizations stems mainly from changes in competition that nowadays is between networks rather than between single actors (Corbett et al. 1999; Christopher 2000). Organizations therefore have to incorporate SCM into their existing competitive strategies.

Lambert et al. (2005, p. 25) argue that SCM "is implemented by integrating corporate functions using business processes within and across companies." However, there is a lack of literature regarding SCM implementation, integration and an organization's competitive strategies. Heusler (2004) identified some important implementation factors and how managers might prioritize and apply those factors to implement SCM in their organizations. However, he recognized this lack of literature and called for more quantitative empirical

research, rather than qualitative research, to investigate company-wide implementation of SCM.

In a Danish context the need for more specific research on SCM implementation has arisen from work by Christiansen and Maltz (2001) and Bagchi et al. (2003), who noted problems of SCM implementation within Danish organizations. Although SCM has been regarded as a powerful management concept for many years in Denmark, only a few large Danish companies consider SCM in their corporate strategies, while the majority of Danish companies only consider SCM in a limited manner (Jespersen and Skjoett-Larsen 2000; Breil-Hansen 2004).

This paper builds upon the results of a study by Kotzab et al. (2006) that developed driving forces of SCM implementation within Danish organizations and presents an implementation and prioritization tool derived from theoretical concepts of Johnson and Gustafsson (2000) and Heusler (2004) to assist managers in determining influential factors affecting SCM implementation within their organizations. The tool is an application of Johnson and Gustafsson's (2000) importance-performance analysis and can be used to assess the current degree of SCM implementation within an organization and set implementation priorities in order to increase this degree of implementation.

The article is structured as follows. We first examine the literature on theory and frameworks for SCM implementation and the resultant Kotzab et al. (2006) empirical study. We then turn to the development and application of our SCM implementation and strategy prioritization tool to this extant work. Finally, we provide a critical summary and outlook for further research.

LITERATURE AND BACKGROUND

SCM's main features include long-term relationships between supply actors, a customer orientation, mutual benefits and/or sharing of information, profits and risks (Arlbj0m 2002). Kopczak and Johnson (2003) call this a 'supply chain management effect' that shifts business focus from crossfunctional to cross-enterprise. This effect may help to increase a firm's competitiveness or organizational effectiveness relative to competitors by lowering costs and increasing profits and customer satisfaction (Elmuti 2002, Tan 2002, Wisner 2003).

A key problem is how to identify the start and end of such interwoven supply chains. Ganeshan et al. (1999) limited the scope of a supply chain to inter-connected activities in planning, coordinating and controlling materials, pans, and finished goods from supplier to customer concerned with only two distinct flows, material and information, through the organization. They also raised a responsibility problem, i.e. who is responsible for the supply

chain? This issue of who is in control, either as a legitimate 'channel captain' or as an actor with inordinate power, is also important for determining how much influence any one firm has throughout the entire supply chain? (Grant 2005). The potential power of an individual actor to change a given supply chain set up leads to questions such as 'who is in charge of SCM?' or 'what, where and how much of SCM can be used?' (New 1997; Bretzke 2005; Gudehus 2005). These questions refer to implementation problems, however they are difficult to investigate. We now turn to how SCM can be theoretically modeled before we can discuss implementation.

Croxton et al. (2001) examined the importance of SCM in business processes and differentiated between strategic and operational SCM processes. Both types refer to processes that interconnect organizations within a network. They also presented the construct of organizational behavior as one strategic component of SCM, which includes variables of culture, power and human resources. Further, Mentzeret al. (2001) established an SCM model built upon the prerequisite of a relationship orientation that serves as a driver for connecting business processes between a minimum of three organizations. They implicitly referred to certain 'soft' factors such as: mutual understanding, and trust or commitment needed in order to connect organizations within a network, which have subsequently been empirically supported (Borchert 2002).

Min and Mentzer (2004) developed and measured different SCM concepts based on constructs of both SCM and supply chain orientation (SCO). While SCO is about how certain implications of managing various flows are implemented within a company, SCM is about coordination between traditional business functions and tactics across a channel. The reason why companies should pursue both paths is improved performance measured by growth, profitability, availability, timeliness and products and service offerings.

Finally, Lambert et al. (2005) compared different SCM frameworks in order to identify how SCM should be implemented in an organization. Implementation simply refers to the integration of the stated business processes that lead to an increased economic value-added (EVA). This work described and compared two frameworks in detail but did not present any empirical evidence on how these frameworks are implemented within organizations.

What all these discussions have in common are the strategic importance of SCM, the interorganizational aspect of SCM, the integration issue of different flows and processes, a customer orientation (upstream as well as downstream meaning suppliers and customers) and value generation. All these factors should help organizations in being more competitive in terms of doing more with less.

SCM implementation therefore refers to the degree of internal and external integration of business processes with suppliers and customers (Cooper and Ellram 1993; Cooper et al. 1997; Kotzab et al. 2006). Heusler (2004) also presented various influential factors that affect SCM implementation depending on whether SCM is considered a strategic management concept, a reorganization object, a change management agent or a process.

SCM implementation is also dependent on identifying those supply chain members who are crucial for integration and the relevant integration links (Lambert et al. 1998). Lambert (2004) presented empirical evidence based on case study research that showed implementation refers to the internal and external integration of eight key business processes and that 'implementation homework' has to be done internally before concentrating on external integration or implementation. Lambert and Knemeyer (2004) further argued that a comparison of different expectation levels between supply chain actors and partners regarding their external integration performance has to be examined as most SCM projects fail due to unbalanced output expectations.

Heusler's (2004) resource based implementation model takes the perspective of a focal network actor and mainly determines the change and implementation ability of this actor in terms of the resource based view. Heusler's main notion is that a company that desires to implement SCM needs specific implementation competence. He also refers to the necessity of one specific actor in the chain who should initiate the implementation of SCM by starting first within the organization in order to set the necessary requirements for external integration.

Kotzab et al. (2006) developed an implementation framework to do just that using the Churchill (1979) and Dunn, Seaker and Waller (1994) two-step typology for developing and testing variables and constructs. Their approach enhanced Heusler's (2004) implementation competency profile and Lambert et al.'s (1998) mapping/linking/structuring approach as they developed a model based on a content analysis of 61 journal articles.

This model was empirically tested in the Danish context using a self-administered survey instrument and contains four major factors as shown in Figure 1:1) Implementation of SCM within organizations, 2) SCM-activities, 3) internal SCM-conditions, and 4) joint SCM-conditions. The internal and joint SCM-conditions are considered antecedents for SCM-activities, which then directly affects an organization's degree of SCM implementation. Details of Kotzab et al.'s (2006) empirical testing are contained in Appendix One.

A shortcoming of this work is that there is no mechanism or tool for managers to extract and use this information to generate specific implementation decisions. We thus develop a

priority setting model for SCM implementation in the next section based on the data from Kotzab et al. (2006) and following suggestions of Johnson and Gustafsson (2000). In doing so we are heeding a call for research to identify the integration need between different process links levels, which in our case are the SCM-condition and SCM-activity factors and the resultant one SCM-implementation factor (Lambert et al. 1998).

METHODOLOGY

Johnson and Gustafsson's (2000) model of priority setting was developed to measure and increase customer satisfaction in companies. The idea of priority setting refers to the need of management to translate certain information into management action. The knowledge of certain customer satisfaction values is not sufficient, however management also needs to know which drivers of customer satisfaction to change in order to positively influence it. Johnson and Gustaffson (2000) presented an approach that can be used for this information/decision translation. This can be seen as an application of an importance-performance analysis introduced by Manilla and James (1977, p. 79) as a "low cost, easily-understood technique that can yield important insight into which aspect of the marketing mix a firm should devote more attention". The importance-performance analysis is a widely accepted analytical tool within the area of customer satisfaction research (Matzler et al. 2004).

However, the analysis has also been used in other areas. Dawes and Patterson (1987) adapted the importance-performance analysis for analyzing product management amongst Australian companies, while Dolinsky (1991) extended the approach for assessing the influence of competition in strategy development within the health care industry. Levenburg and Magal (2004) recently applied importance-performance analysis for evaluating ?-business strategies amongst small and medium sized firms.

We adopted this approach to identify levels of SCM implementation within Danish organizations by assessing a supply chain management implementation performance index, which was afterwards transferred onto priority maps that show those areas requiring focus to improve such SCM implementation. The data for our approach was taken from Kotzab et al.'s (2006) study.

Development of a Supply Chain Implementation Performance Index

We calculated a performance index to determine performance levels of SCM implementation within organizations and analyzed how different SCM-elements are linked to the SCM-factors using the component score coefficients from the analysis as presented by Kotzab et al. (2006) by calculating an index as follows:

Supply chain implementation performance index = {((il / sil)* al) + ((i2 / si2)* a2) + ... ((in / sin)* an)} / (il + i2 +... in):

Where the index is sum of the product of i (representing the impact of an SCM-element based on its factor score coefficient divided by its standard deviation) and a (representing the performance level of that SCM-element) divided by the sum of the impact of all the SCM-elements based on their factor score coefficients (Johnson and Gustaffson 2000).

This supply chain implementation performance index shows the degree to which an organization has achieved a low or high integration of internal and external business processes with customers and suppliers, which equals the degree of SCM implementation. The index may also be used to set priorities for improving SCM implementation levels within an organization. However, it is first necessary to develop a tool to set directions for what constitutes high versus low implementation impact and high versus low implementation performance.

Levenburg and Magal (2004) describe general importance-performance-analysis steps in detail which include several steps identifying the critical elements to be evaluated from survey development, data gathering and plotting mean ratings for importance and performance on a four-quadrant matrix to identify areas for improvement as well as areas that already perform effectively. Johnson and Gustafson (2000) label this a strategic satisfaction matrix, which we have adapted for a strategic SCM implementation matrix to set SCM implementation priorities.

Development of SCM Implementation Matrix for Setting Priorities.

The results for our calculated performance indices indicate the potential for improvement, which can be examined by assessing prioritization maps with the performance indices on the x-axis and the standardized beta-values on the y-axis. We selected Gustafson and Johnson's (2000) approach to derive an objective evaluation of the impact/importance of the elements (beta values) as opposed to asking respondents about an element's importance.

The priority map of the final result - which is the implementation of SCM within organizations depends on the prioritization of the preceding 'SCM-activities' factors and elements as well as on the prioritization of the preceding 'SCM-conditions' factors and elements. The map includes the following four cells:

* Focus on improvements, which represent SCM factors with a high impact but a low implementation degree;

* Maintain or improve, which represents SCM factors with both, a high impact and a high implementation degree;

* Maintain or reduce, which represent SCM factors with a low impact but a high implementation degree;

* Irrelevant, no resources needed, which represent SCM factors with both, a low impact and a low implementation degree.

The positioning of the vertical and the horizontal axes and quadrant boundaries is, according to Manilla and James (1977 p. 79), "a matter of judgement" but items in each quadrant reflect a discriminant cluster of results compared to other clusters. The following section presents the results of our SCM implementation importance - performance analysis.

ANALYSIS AND DISCUSSION

Results from the Danish Performance Index

The results for the calculated SCM implementation performance indices are presented in Table 1. The level of SCM implementation within Danish organizations has an SCM implementation performance index value of 50. The indices for the nine identified factors lie in a range between 39 and 64.

A closer look at the condition, activity and implementation levels shows the following:

1. The market-oriented SCM activities (index 53) are less than the logistics-oriented SCM activities (index 64) which is an expression of a logistics focus in Danish companies.

2. Regarding internal SCM conditions, we have identified a performance index of 54 for resource-based conditions and a performance index of 57 for integration oriented conditions. These results can be considered being medium.

3. The performance indices for the four joint SCM conditions range between 39 and 53. The decision-based joint SCM conditions (performance index 49), the negotiation-based joint SCM conditions (performance index 39) and the organizational match based conditions (performance index 43) are below average which might be due to lack of a organizational cultural fit between the involved organizations, such as different management styles or organizational hierarchies. The higher performance index (53) of the mutuality and information based condition could be an expression of installed IT-systems that are used for SCM information exchange.

Overall, the SCM implementation stage within Danish organizations can be considered medium, although the last few years have seen an increasing importance of SCM within the

Danish economy. This is supported by several KPMG Danish Logistics Analyses that show 'classical' logistics functions such as inbound and outbound transportation, warehousing, materials handling, order fulfilment, logistics network design, inventory management, supply/demand planning, and management of third party logistics service providers (Grant et al. 2006) have gained strategic importance within the Danish economy while holistic SCM is the exception than rather the rule (KMPG 2004; Uth 2005).

A comparison of the SCM implementation performance index for the internal and external SCM conditions shows that internal conditions perform better than external ones which may be seen as an indicator of SCO lacking within Danish business organizations (Mentzer et al. 2001 ). However, this result is not intuitively a surprise as companies tend to improve internal processes before external processes, which is also confirmed by the latest KPMG Danish Logistics Analysis (Uth 2005).

We were also interested in differences amongst different groups of companies that would allow some benchmarking. Based on ANOVA-analysis (rx.05) we were able to identify significant differences on all factor levels between large companies, i.e. more than 500 million DKK sales volume and more than 500 employees, well as companies that use specific IT such as EDI, XML and web-portals which all have a higher total SCM performance level than smaller companies and those who do not use this specific IT. The same results were seen with logistic oriented SCM-activities, internal resource-based SCM-conditions and joint decision-based SCM-conditions. Significant differences in the performance index of market-oriented SCM-activities were only identified between larger and smaller companies and those companies using web-portals.

Setting Priorities for Improving Implementation in Danish Organizations

Next we developed our supply chain implementation matrices. According to the SCM implementation performance index results we assume that overall implementation of SCM within organizations will be increased if companies focus on improving their external integration of business processes with suppliers and customers. Their internal integration of business processes seems to be satisfactory and should be maintained as is.

We first looked at the implementation factors and worked through the framework in Figure 7 from right to left. The overall results for the priority maps are presented in Table 2, which is then translated into the priority maps as shown in the subsequent Figures 2 to 6.

Setting SCM implementation priorities

The results of our prioritization analysis are presented in Figure 2. Respondent companies have reached a satisfactory stage of internal integration of business processes since this variable is clustered in the 'maintain or reduce' quadrant. When it comes to external integration with customers and suppliers, the matrix suggests respondent companies should set priorities in the direction of 'focus improvements'. Next, it is relevant to know which activity to concentrate on in order to improve external integration.

Setting SCM activity priorities

The SCM implementation matrix shown in Figure 3 suggests setting priorities towards focus improvements for market-oriented SCM activities rather than logistics oriented SCM activities.

It appears that while logistics-oriented activities are already good, there might be deficits within market-oriented SCM activities. The results of our priority map calculation for market-oriented SCM activities (see Figure 4) indicate that decision makers should 'maintain or improve' product development and returns and 'use no resources' for customer relationship management (CRM). It also appears that procurement is already well established within the analyzed organizations so they should 'maintain or reduce.'

Setting SCM condition priorities

We then examined those conditions able to influence market-oriented SCM-activities. The results of this analysis are shown in Figures 5 and 6.

Figure 5 shows that Danish organizations should 'focus improvements' on the implementation of decision-based joint SCM-conditions and 'maintain or improve' resource based internal SCM-conditions. Using 'fewer resources' is suggested for organization-based joint SCM-conditions as any attention here does not positively affect SCM implementation within business organizations. 'Maintain or reduce' is suggested for mutuality and information based joint SCM-activities.

Figure 6 identifies results for the joint decision-based SCM-activity factor and suggests three elements for improvement - 'shared performance measurement', 'planning and control'; 'shared vision and goals'; and the Organizational structure in form of joint project groups'. The remaining factors should be maintained as they are already at a satisfactory level. The matrix of the internal resource-based SCM-activity factor suggests improvement should be based on 'dedication of financial resources', 'human resources' and 'internal vision and goals'.

A Framework for Setting Priorities in SCM Implementation

The summarized results for our SCM implementation priority setting for Danish companies are shown in our final framework in Figure 7.

Our results indicate that Danish managers can improve SCM implementation within their organizations if integration between customers and suppliers is increased. This can be achieved by focusing on market-oriented SCM activities in particular. While the return process can be either improved or maintained, the product development process and commercialization seems to be a crucial factor that helps to improve implementation. Market-oriented SCM activities can be improved by resource-based SCM conditions, in particular with the dedication of human and financial resources, better internal goal setting, the staff's technical expertise and with better support of top management. However, joint decision-based SCM-conditions can help improve market-oriented SCM activities. This refers especially to joint goals and vision, joint performance measurement, planning and control and a joint organizational structure in terms of joint project groups.

CONCLUSIONS AND OUTLOOK

We have followed a call for further research on SCM implementation and herein presented an SCM implementation performance index and matrices as beneficial tools that can be used for supply chain management implementation within business organizations. The results of our analysis show that SCM implementation across several organizations in the small country context of Denmark depends on specific market and logistics oriented SCM-activities, which in turn are dependant on specific internal and joint SCM-conditions.

Figure 6 identifies results for the joint decision-based SCM-activity factor and suggests three elements for improvement - 'shared performance measurement', 'planning and control'; 'shared vision and goals'; and the Organizational structure in form of joint project groups'. The remaining factors should be maintained as they are already at a satisfactory level. The matrix of the internal resource-based SCM-activity factor suggests improvement should be based on 'dedication of financial resources', 'human resources' and 'internal vision and goals'.

A Framework for Setting Priorities in SCM Implementation

The summarized results for our SCM implementation priority setting for Danish companies are shown in our final framework in Figure 7.

Our results indicate that Danish managers can improve SCM implementation within their organizations if integration between customers and suppliers is increased. This can be achieved by focusing on market-oriented SCM activities in particular. While the return process can be either improved or maintained, the product development process and

commercialization seems to be a crucial factor that helps to improve implementation. Market-oriented SCM activities can be improved by resource-based SCM conditions, in particular with the dedication of human and financial resources, better internal goal setting, the staff's technical expertise and with better support of top management. However, joint decision-based SCM-conditions can help improve market-oriented SCM activities. This refers especially to joint goals and vision, joint performance measurement, planning and control and a joint organizational structure in terms of joint project groups.

CONCLUSIONS AND OUTLOOK

We have followed a call for further research on SCM implementation and herein presented an SCM implementation performance index and matrices as beneficial tools that can be used for supply chain management implementation within business organizations. The results of our analysis show that SCM implementation across several organizations in the small country context of Denmark depends on specific market and logistics oriented SCM-activities, which in turn are dependant on specific internal and joint SCM-conditions.

We have shown that the respondents focus on internal integration and implementation, which can be interpreted as a sign for improving the level of internal supply chain implementation and thus internal logistics processes. These results may not be surprising as other studies in Denmark (e.g. KMPG 2004 or Uth 2005) have also shown this tendency that supply chain focus follows internal logistics improvements. Danish organizations seem to have insufficient supply chain orientation (Menzter et al. 2001 ) in order to direct their actions on business process integration with suppliers and customers.

However, before starting any external integration, the 'right' partners have to be selected in order to avoid certain pitfalls for making a supply chain 'reality', such as lack of coordination, inefficient IT-systems, organizational barriers or incomplete supply chains (Lee and Billington 1992). Our results have particularly noted the incomplete supply chain, where actors focus too much on internal affairs, and should caution Danish organizations to now examine their external integration if the 'SCM effect' (Kopczak and Johnson 2003) is to be totally exploited.

Our final framework shown in Figure 7 may be considered a tool to measure SCM implementation within organizations, the results of which, within the focal organization and selected suppliers and customers, can be used to improve supply chain integration strategies. This suggestion is supported by our empirical findings for overall SCM implementation levels within the surveyed organizations. The findings illustrate which activities and conditions should be prioritized when increasing SCM implementation. In the case of Danish

organizations implementation may be improved if external integration is increased by focusing on market-oriented SCM activities.

This study is therefore valuable for SCM researchers as well as SCM practitioners as we present a tool to improve a given SCM-situation in a specific company setting. However, we recognize that this study is limited to an internal view of an organization and does not reflect views of external or inter-connected actors as suggested by Croxton et al. (2001). Nevertheless, we believe this process is an appropriate first step before looking at external relations. We suggest future studies use this framework in a direct supply chain setting as suggested by Mentzer et al. (2001 ) where it would be interesting to identify the priorities to be set in dyadic or triadic situations.

Further research should also focus on two key areas. First, studies should test whether the stage of implementation of SCM measured with the performance index depends on the focal firm's position in the supply chain. Is there a difference between the focal firm and manufacturers, distributors, and different tier customers and suppliers? Is there a dependency by the focal firm on certain actors in the supply chain? If so, is such dependency recognizable and thus are different prioritization strategies really necessary?

From a more holistic point of view do actors in the same supply chain have the same implementation status and do they have to set the same priorities? Reutterer and Kotzab (2000) argue there is no ideal logistics system, thus can there be an ideal supply chain implementation performance? And, if different priorities have to be set, what does this mean from a total supply chain or channel perspective, will there be implementation conflicts?

SCM Tools

There are many tools in use, but today the focus is on three of them:

• schedule sharing• consignment• vendor-managed inventory.

SCHEDULE SHARING—OVERCOMING THE WEAKNESSES OF FORECASTING

Why should one share the upcoming manufacturing schedule with one's suppliers? After all, is it not sufficient to send them orders and expect them to deliver one's product on time? What kind of inefficiency justifies this change in strategy?

Most manufacturing and distribution companies decide what to make and in what quantities by forecasting customer demand. A tremendous amount of corporate resources

is devoted to developing, manipulating, tracking, and assessing the accuracy of the forecast. Despite all of this effort, is the forecast 100 percent accurate? With the exception of the occasional lucky strike, the answer is no. Why? Because a forecast is just "an estimate of future demand."1 And most of us cannot predict the future. (If anyone disagrees with this statement, try going to one of the states that hold weekly lotteries and predicting the outcome of the next drawing. If done successfully, I will be wrong and you will be rich!).

Unfortunately, one's customers want to buy real parts, not estimates. By sharing one's schedule with the supplier, the opportunity to work with real demand is provided, not a forecast. This also allows the supplier to reduce the amount of finished goods safety stock on hand, thereby reducing costs.

TIPS ON SHARING ONE'S SCHEDULE WITH ONE'S SUPPLIERS

First of all, one needs to meet with one's suppliers so that they understand that the information that one will be sharing is highly confidential. One doesn't want one's schedule to end up in the possession of a competitor! Having one's supplier sign a confidentiality agreement reinforces this goal.

If one is on a material requirements planning (MRP) or an enterprise resources planning (ERP) system that generates requirements to one's Purchasing Department, one can generate requirements to one's supplier fairly easily.

• First, segregate the requirements by vendor. This will form the basis of the information that will be transmitted to the supplier.• Determine how solid or fluid the quantities and items are within the company's time fences. For example, if quantities are frozen within the first four weeks but subject to 25 to 50 percent swings from weeks 4 to 8, document this information so it can be discussed it with the supplier.• Meet with the supplier to review how the information is structured. Keep in mind that MRP may be a foreign concept to some of the suppliers so in-depth training may be needed for them to understand how to use the information to help schedule their business.• The most effective schedule-sharing agreements include a guarantee from the customer that once an item is called for within the frozen time fence, the supplier will purchase it. Suppliers will not be nearly as reluctant to produce—and possibly customize—inventory for a customer that guarantees it will be purchased.• Review seasonal trends and abnormal events such as vacation shutdowns or special promotions with the supplier and obtain an agreement as to how these special events will be handled.• Finally, determine how often and in what form the schedule will be transmitted. Should it be sent daily, weekly, or monthly? Sent via mail, fax, electronic data interchange (EDI), or e-mail?

Once these details are ironed out, one can begin sharing the schedule with the supplier. If the operation needs a periodic delivery (such as every Tuesday at 10:00 a.m.), bring the transportation provider into the loop. By setting up regularly scheduled deliveries, one can ensure that all of the hard work with the supplier does not go to waste because the product is left sitting on their dock. In addition, one can make the most efficient use of the receiving employees by helping smooth out the peaks and valleys of incoming deliveries

CONSIGNMENT—JUST A FINANCIAL GIVEAWAY TO THE CUSTOMERS?Turning again to the APICS Dictionary', we define consignment as "the process of a supplier placing goods at a customer location without receiving payment until after the goods are used or sold" (author's emphasis). Why would a supplier want to give goods to the customer without receiving payment until after they are used? Isn't this the same as giving money directly to the customer without receiving any benefit? In short, what is in it for the supplier?To answer these questions, let us look at the cost of holding inventory. If a manufacturer is a distributor or a make-to-stock supplier, one is generally expected to keep safety stock in finished goods for the customers. Is this safety stock maintained without cost? Not according to Ross2, who, according to the table below, indicates that most companies have an annual inventory carrying cost of 20 to 36 percent.

Cost of capital 10-15%Storage and warehouse space 2-5%Obsolescence and shrinkage 4—6%Insurance 1-5%Material handling 1-2%Taxes 2-3%Total annual inventory carrying costs 20-36%

Larger companies tend to have a lower cost of capital because they can go directly to the debt and equity markets instead of relying on banks. As one looks at the carrying costs outlined above, the question presents itself: "Would I as a supplier still be responsible for all of these carrying costs if I consigned my product to my customers?" I would argue that one would not, particularly if one developed a comprehensive consignment agreement, which included customer responsibility for insurance, obsolescence, and shrinkage, that will be discussed in the next section. By operating under such an agreement, one could reduce one's annual inventory carrying costs by 40 to 50 percent:

Cost of capital 10-15%Storage and warehouse space 0%Obsolescence and shrinkage 0%Insurance 0%Material handling 0%Taxes 2-3%Total annual inventory carrying costs 12-18%

KEY POINTS IN A CONSIGNMENT AGREEMENT

There are three critical elements to consider when developing a consignment agreement—level of consigned inventory, responsibility for slow-moving inventory, and responsibility for damaged or lost inventory.3

• Level of consigned inventory. A customer would prefer to hold a large amount of consigned inventory, viewing it as a cheap way of buffering against demand uncertainty. The supplier, however, must determine the level at which it can provide consigned goods profitably. Negotiating a set number of weeks or months of supply based on the customer's sales/usage can meet the needs of both parties. If the customer sells/uses $12 million dollars a year and the agreement calls for two months of supply, both parties know

that $2 million is the consigned level. The supplier can now budget for the capital required and the potential taxes involved in supporting the inventory. Adjustments can also be made in its cash flow projections. This arrangement also provides the customer with an incentive for increasing sales of the suppliers' products because an increase in sales translates into an increase in consigned inventory.

• Responsibility for slow-moving inventory. Another key element in a successful consignment relationship is to keep the inventory moving. Developing inventory turn goals, by individual product or by product group, can uncover slow-moving items that are inappropriate for consignment. During negotiations, it is important to determine which party will monitor inventory turnover and how slow-moving goods will be handled, whether they will be returned to the supplier or purchased by the customer and removed from the consigned inventory.

• Responsibility for damaged or lost inventory. Another critical factor to address during negotiations is the disposition of stolen or damaged inventory. It is customary for the customer to assume complete responsibility for all consigned inventories—lost, stolen, or damaged—on its premises. It is therefore important for both parties to fully understand and agree on such issues as receiving procedures and security. An ongoing cycle count program or periodic physical inventory needs to be established to account for all con-signed inventories.

VENDOR MANAGED INVENTORY-FOUNDATION FOR A TRUE PARTNERSHIP

Under vendor-managed inventory (VMI) suppliers actually take on the responsibility of managing their inventory throughout their customer's supply chain. This can take several forms, the simplest being going to the customer's location at certain designated intervals (such as weekly) and resupplying their inventory of one's product to a predetermined level. Or it can be as sophisticated as downloading information directly from their cash registers into one's computer system via EDI for analysis and determination of the specific inventory items and quantity to be resupplied.

To establish a VMI relationship, several key elements must be present between the two parties. The customer must be convinced that the supplier has a high degree of competence when performing the materials management function. After all, would a customer be likely to agree to let a vendor with a 65 percent service level manage its inventory? A partnering mindset accompanied by an environment of openness between the two parties is crucial. Once a VMI program is established, customers certainly do not want to waste their time putting out competitive bids to make sure the supplier rs honestly providing the product at a fair price.

The real key advantage of VMI is to replace the forecast—with all of its inherent inaccuracies—with hard data. In the article "Integrating Vendor-Managed Inventory into Supply Chain Decision Making," Mary Lou Fox4 points out several of these advantages of VMI:

1. improved customer service. By receiving timely information directly from cash registers, suppliers can better respond to customers' inventory needs in terms of both quantity and location.

2. reduced demand uncertainty. By constantly monitoring customers' inventory and demand stream, the number of large, unexpected customer orders will dwindle, or disappear altogether.

3. reduced inventory requirements. By knowing exactly how much inventory the customer is carrying, a supplier's own inventory requirements are reduced since the need for excess stock to buffer against uncertainty is reduced or eliminated.

Improved customer service, reduced inventory requirements and reduced demand uncertainty: how many suppliers would dislike that combination? However, reduced reliance on forecasting is only one benefit of VMI. A second and potentially more powerful benefit is the binding of the customer to the supplier. Establishing a VMI relationship—particularly one that includes an EDI interface—takes a great deal of work. Just ensuring the validity of the information traveling between the two different companies is a daunting task. Once the relationship is established, however, most customers will be very reluctant to endure the amount of work needed to replace one supplier with another.

CONCLUSION

There should be many tools in the tool box of managers who are leading their companies into profitable supply chain partnerships. These tools must take advantage of newly emerging technologies but be stable enough to outlast any one program or piece of hardware. Companies that are becoming increasingly specialized and interdependent must be able to develop meaningful partnerships. In a fast-paced economy that demands change and flexibility, the new methodologies must be durable enough to allow for change within the new paradigm. We have discussed three of these critical tools: schedule sharing, consignment, and vendor-managed inventory. As managers apply and master these tools, they will continue to transform the companies they lead into solid links in a strong supply chain.

A growing number of manufacturers are turning to ERP supply chain management (SCM) integration. Integrating best-of-breed SCM applications with ERP, as opposed to relying on the innate SCM functionality in some ERP systems, provides a manufacturer with specialized SCM features, according to Holger Kisker, senior analyst at Forrester Research.

This two-way information exchange enables manufacturing companies to optimize processes across the product lifecycle. For example, they can forecast supply and demand based on algorithms for specific industries or on factors like seasonal variations.

When beginning an ERP SCM project, the first step is an initial upload of basic ERP customer and product information that the SCM system doesn't typically have, said Kisker. For maximum effectiveness, it's important to keep data consistent and key fields, like customer ID, continually synchronized between the two systems.

For example, the ERP system can provide the SCM application with inventory information such as current availability of materials or parts coming out of the production system or warehouse. The SCM application, in turn, would provide ERP with information about

planned and actual movements of materials, parts and products, so that inventory stays up to date.

ERP platforms' growing support of service-oriented architecture (SOA) is also making it easier to set up dynamic collaboration between SCM and other manufacturing applications. "When the supply chain application wants to update an order because of a schedule change, it calls up the SOA service from the ERP system, brings up the object in the CRM system, and changes it," Kisker said.

This broader SCM integration with ERP delivers greater efficiency and responsiveness to the entire manufacturing process. If, for example, a company is scheduled to deliver an order to ten clients tomorrow but the SCM solution calculates it can only deliver to five, ERP can pull data from the CRM system to determine which orders should be fulfilled.

"The SCM application puts the five in one bucket and sends it on to the ERP system for next day," said Kisker. "So not only is there movement of information, but order triggering between the two systems."

Video Conference

When miles separate meeting attendees, video conference can offer the most effective solution. The power of the Internet is harnessed through this truly phenomenal alternative to face to face meetings. The video conference eliminates the cost of bringing meeting attendees to a central location, and still allows them to share ideas and enjoy the same back and forth as they would in a traditional meeting. Through video conference there still exists the ability to meet on a personal level regardless of the physical distance. And the availability of this type of technology opens many doors for companies looking to grow and expand their business.

Web Conference

With the Internet on our side, the conference call of the past is out the window. Online meetings are the modern way of communicating and the web conference has opened the door. Through The Conference Group’s ReadyShow® web conferencing, our clients can customize their web conference experience – choosing those features that are likely to give them the highest level of effectiveness in any given meeting. Through web conference, meeting attendees can logon to have live access to those documents being referenced during the call; and feature controls allow everything from document sharing to the ability to take polls.

Audio Conference

When only the best audio conferencing will do, The Conference Group stands above the rest in providing comprehensive, worldwide call solutions. We provide International toll free access, allowing those companies with global partners the ability to communicate efficiently and cost-effectively. Choose from among our many services to customize your audio conference including the option of having a full time operator, the ability for digital record and playback, operator provided Q&A, and a host of other services designed to personalize your experience and get the most from audio conferencing. When it’s more than just a phone call audio conferencing takes communication to the next level.

These days, manufacturers seeking a competitive edge typically want tools and techniques with these capabilities:

The ability to track and manage all supply chain activities in real time from a central location. In industry parlance, this is known as end-to-end visibility;

A means of analyzing the potential impact of unplanned events, and making quick decisions to head off any problems such events might trigger; and

Methods for collaborating with customers and suppliers in both the planning and execution of supply chain processes.

Automation:

While automation is a key enabler of any Knowledge Management KM) initiative, the main purpose of automation is to increase the levels of collaboration and analytical efficiencies which involve information availability, storage, cataloguing, organizing, sorting, and analyzing.

faster does not necessarily equate to better. KM is about substance, automation is all about efficiency.Technology automation accounts for only 15% of what could be defined as a successful SCM implementation.Having the capability to store terabytes of data and the ability to deliver the same in nanoseconds is a technology achievement, not a SCM achievement.Remember 85% is psycho-sociological, 15% are bits and bytes. 85% is the human factor and the systems that human beings are bound to, and 15% are the tools and implements (technology) that enable human beings to do their work.

The Future Of Collaborative Supply Chains And Global Business 2005-2010

As corporations become increasingly dependent on global trade to offset local maturing markets, the borderless transnational enterprise will require a streamlined new generation of supply chains. Innovations today will seem less so in the future. This report considers the leading trends that may indicate what's next for supply and chains and how these changes will both drive industry, economics and global markets in the near future. The key trend that will enable the future of supply chains is electronic collaboration. Electronic collaboration between all the players of the supply chain, once collaboratively enabled, from the DNA of the products' inception to the customers' digestion-will be the sea change. Article discusses the seven key paradigm shifts point the way to the future of supply chains such as : Real-time Predictive Forecasting, Business Intelligence, On-Demand Service, Pervasive Networking, Electronic Markets, Smarter Software, Next Generation Collaborative IT Infrastructure. It also discusses the key drivers of emerging Collaborative Supply Chain future.

Supply Chain Flexibility

An organization must be flexible in order to adapt to changes. The three T's of Technology, Terrorism, and (world) Trade are the drivers that create waves in the supply chain network.

Observations suggest that whenever new technology, new terrorist threats, or new world trade economics occur, supply chain networks must be ready to react to the ripple effect.

DEBATE

IT is only an enabler and not a business driver

SP Arya, Hero Cycles Ltd on 4/24/2004      

This because today's business can not be run without taking IT as a key area of the business and if run will be outsmarted by the competition very soon. You may take plenty of examples where businesses have flourished once they have inherited IT very well as an integral part of the business and have aligned the IT & business strategy. All Banking, insurance, finance sectors and other many are the flagrant example of this. The state is that none of hight tech or automated company can run without IT with such an enormous efficiency as they are with today.

Every business contains lot of activities and tools which helps business, in enhancing and scale high in terms of eficiency and productivity. Though all these enable busness and can be done manually also but all of these are being driven by IT at their peak now. While these are driven by IT menas the busness automatically is driven by IT.

IT is like salt to food,and here you will agree that salt is very important ingrediant of the food without this food will no longer be liked by anyone and you may not take it for a long time.

pankaj kumar jain, on 4/26/2004      

Today, adopting IT has already become paramount for business survival - no one in their right mind questions that anymore. How then does it remain an enabler, instead of becoming a driver?

IT would remain an enabler because as competition increases, organizations worth their salt would go in for IT in ever-increasing doses. Not in the distant future, but in the foreseeable future too. The question then would not be whether an organization has adopted IT, but would be how much IT has the organization taken to and how much of the IT it has taken to is really useful and productive. IT will always enable organizations to perform better. But in the foreseeable future, it would cease to be a USP or a driver at that point of time - becoming a necessity necessarily means becoming an enabler!

Nihar Rao, OM Kotak Mahindra Life Insurance Co. Ltd on 4/26/2004   

IT operates at each level of the organisation (i.e.) a) Infrastructure (email, networks, desktops are like "old" infrastructure such as power, water, furniture etc.)b) Tactical level: Applications such as Accounting; HRIS etc. which provide efficient "applications" infratsructurec) Strategic Level: Leading "Advantage" applications that can make or break applications

I think we shouldnt mix-up the role of the IT department and the role of IT. IT like many

other resources is by itself neither enabler nor driver - it is only the appropriate use of IT as of Finance or Marketing etc. that diferentiates the roles.

J B TAKIDAR, KSB PUMPS LTD on 4/26/2004      

IT (Information Technology) is a resource available to those who are entrusted with the responsibility to run or "drive" Business, with the objective of acheiving better returns for all stake holder, in the ever changing and increasingly competitive world. These Business experts use their skill, knowledge and various tools, techniques and "enablers" to achieve their goals. For example, they would use JIT, KANBAN, TPM, BPR, Internet, B2B, ERP, SCM, CRM, etc. In all the above, the Business expert employs IT as an "enabler" resource in such a way that maximum return can be achieved.

P.Seshureddy, HMT Limited on 4/26/2004      

We are clear about the role of IT as a Product in IT industry, where their business is IT Products (Hardware / Software) and IT clearly acts as perfect Driver for their business Success.

Other wise IT is only a service in manufacturing or service industries (i.e. Physical Product manufacturing, Financial services, Public services etc.) where IT is a service tool that can only make the business more AGILE (by reducing the cycle time, controlling the cost, by creating efficient link between stake holders etc.) and acts as perfect business enabler.

Either IT is an enabler of a business or driver for the business in today’s context we have to seriously consider efficient utilisation of IT be the key success factor for any business success.

Bipin C Pandey, Cites India Ltd on 4/27/2004      

I would like to take it to a different plane. I consider IT as a resource that has a multiplier effect. Businesses or individuals can use a resource such as IT as an enabler or a driver depending on the level of awareness, usage and penetration within the organisation. Perhaps the mindset that IT is just a service may amount to lowering the importance and impact IT can have in the overall functioning of the organisation. However I would personally like to use IT to enable the business drivers and also be a business driver itself.

Christopher Stanley, ITC Ltd., on 4/27/2004      

Here is another perspective to the ones available already...When we look at IT initiatives that seamlessly integrate various business processes, we are tempted to say that they actually drive business. However, IT is to business what Salt is to food; and you will agree that salt alone will not do !!

IT when well executed drives business, when badly implemented can drive away business.

The essence of IT is in optimal service deliverability, not just the strength of the technology behind it.

Ishwar Jha, Sony Music Entertainment (India) Pvt. Ltd on 4/30/2004      

its one of the most vital and integral part of an enterprise like electricity, raw material, consumer, etc.

If we think little forward then consider electricity - our whole life depends on it - but we never say electricity is enabler or driver?

Lets make it simple - IT is an important and core facet of enterprise

Srinivas Sriram, WeP Peripherals Ltd on 5/4/2004      

IT definitely has evolved more than an enabler role. With web connecting all stake holders and driving the system along with Supply chain management, Sales force automation and Customer Releationship management - the criticality of IT is increasing by the hour. The scope and coverage of IT is ever expanding. I wud say IT will definitely be a differentiator if not driver for business.As IT folks we need not be defensive about the criticality and importance of IT

Sandeep Todi, Electrosteel Castings Ltd on 5/21/2004      

Business today looks to IT as if it were electricity. Just like electricity, IT is supposed to be there where required. And it is supposed to be ON all of the time. This is perhaps the evolutionary phase in Indian business where the criticality and dependability on IT for operational efficiency and strategic advantage is an absolute necessity.

So does that mean IT is an enabler or a driver ? I think it is none of the above. IT is an essential requirement of business, not just an enabler. Further, IT can never be a driver in isolation. It is the innovative use of IT and internal alignment of IT with business strategy which yields the differentiating edge. To achieve this alignment, you need CIO vision, CEO commitment, business heads active participation and agility in the IT organization.

Kumanan V C, Infrastructure Development Finance Corporation on 6/15/2004     

IT is irrefutably the enabler for most organisations. The day IT becomes a business driver, one can see competition falling apart, unless they join in. Another way to look at this would be to compare a fully automated, connected bank with a marginally computerised one. The difference would be very evident. The today's customer wants things fast and at his desk and such a delivery is difficult even with the best of people unless IT enables it. Ofcourse what role IT would play will depend on the clear management thinking.

The use of Information and Communications Technologies (ICTs) to provide and improve public-sector services, transactions, and interactions have enabled government organizations to deliver better service and improve effectiveness as well as efficiency. In many countries,

more than 70 percent of taxpayers now file taxes electronically while performing other transactions ranging from renewing drivers’ licenses and paying parking tickets to managing government benefits online. Employees within government agencies also use the Internet & Intranet routinely to manage internal processes.

However, despite the continued allocation of enormous resources, progress on the e-government front appears to have plateaued over the past few years. Many new e-government initiatives have neither generated the anticipated interest among users nor enabled clear gains in operational efficiency. In the face of unprecedented fiscal constraints, as well as users’ heightened expectations based on the integration of the Internet into their daily life and work, it is imperative that the public sector refine its approach to e-government to ensure that these initiatives achieve maximum impact.

In our experience, three obstacles have, however, limited the impact of e-government efforts: ineffective governance, lack of Web-related capabilities, and reluctance to allow user participation in the creation of applications and content. </P...< p...>

Strategic Planning of IT in SCM

Marketing reasons of IT in SCMEconomic reasonsOrganizational reasonsTechnological reasons

Virtual Enterprise in SCM

PartnershipVirtual reality and supply chainVirtual enterprise and IT

E-commerce and SCM

PurchasingB2B e-commerce and supply chainLogistics

Infrastructure for IT in SCM

Organizational/Cross functional IntegrationTechnological

Knowledge and IT Management in SCM

Technology ManagementEducation and Training