Reviewer - Final Exam in SCM PDF

Transport Planning for Procurement and Distribution Transport Systems Transport processes are essential parts of the supply chain. They perform the flow of materials that connects an enterprise with its suppliers and with its customers. The integrated view of transport, production and inventory ho...

Transport Planning for Procurement and Distribution Transport Systems Transport processes are essential parts of the supply chain. They perform the flow of materials that connects an enterprise with its suppliers and with its customers. The integrated view of transport, production and inventory holding processes is characteristic of the modern SCM concept. The appropriate structure of a transport system mainly depends on the size of the single shipments: Large shipments can go directly from the source to the destination in full transport units, e.g. as Full Truckload (FTL) or Full Container load (FCL). Medium sized shipments are consolidated to FTL or FCL shipments in order to increase the efficiency of transportation. A consolidated set of compatible Less-Than Truckload (LTL) or Less-than Container load (LCL) shipments constitute an aggregate FTL or FCL and will be fulfilled by a single truck or container, respectively on a single combined tour with several pickup and delivery locations. On this combined tour all shippers and receivers of the consolidated shipments are served without any transshipment. Small shipments have to be consolidated in a transport network, where a single shipment is transshipped once or several times and the transport is broken at transshipment points (TPs). A particularly effective consolidation of small shipments is achieved by a logistics service provider (LSP), who can combine the transports from many senders in his network, which often has a hub-and-spoke structure. The consolidation of transport flows decreases the transport cost. As the cost of a single trip of a certain vehicle on a certain route is nearly independent of the load, a high utilization of the loading capacity is advantageous. Moreover, the relative cost per loading capacity decreases with increasing size of the vehicles. But even with a strong consolidation of shipments to full loads, e.g. by an LSP, the smaller shipments cause relatively higher costs, because the consolidation requires detours to different loading places, additional stops and transshipments The following transport processes occur in a supply chain: The procurement of materials and their transportation from external suppliers or from an own remote factory to a production site. The distribution of products from a factory to the customers. The procurement system as well as the distribution system depends on the type of transported items: Investment goods, e.g. machines or equipment for industrial customers, are shipped only once or seldom on a certain transport link. Materials for production are also shipped to industrial customers, but regularly and frequently on the same path. Consumer goods are shipped to wholesalers or retailers, often in very small order sizes (with an average below 100 kg in some businesses), requiring a consolidation of the transports. Transport planning is usually the responsibility of the supplier. But there are important exceptions, where the manufacturer has the power to control the transports from his suppliers, e.g. in the automotive industry. In this case, transport planning occurs on the procurement side as well. The transport of materials for production, as far as controlled by the distribution system of the supplier, is mostly done in direct shipments. An LSP may consolidate the transport flows of several “shippers”, operating in separate supply chains, in his own network. Then he is responsible for planning how the transports are executed, i.e. by which vehicles along which routes. However, the decisions on the transport orders, i.e. the quantity, source and destination of every shipment, remain a task (of the APS) of the shipper. Usually, it is not practicable to include the flows of all other shippers of an LSP into the APS. However, the additional flows have an impact on the transport cost and should be taken into account implicitly by appropriate transport cost functions. Distribution Systems A typical distribution system of a consumer goods manufacturer comprises the flow of many products from several factories to a large number of customers. Pool distribution is the consolidated shipment of products to a distribution center (DC) followed by transshipment, deconsolidation and transport of the shipped products to their individual destinations. Products made to stock are often shipped on forecast by pool distribution. The deliveries of the customer orders may use the following distribution paths: Shipments may go directly from the factory or from a DC to the customer, with a single order. This simplest form of distribution is only efficient for large orders using up the vehicle. Smaller orders can be shipped jointly in tours starting from the factory or DC and calling at several customers. A stronger bundling of small shipments is achieved by a joint transport from the DC to a TP and delivery in short distance tours from there. Vendor Managed Inventory (VMI), is a beneficial concept for the supply of standard materials, where the supplier decides on time and quantity of the shipments to the customer but has to keep the stock in the customer’s warehouse between agreed minimum and maximum levels. In this case, the customer’s warehouse has the same function as a DC, so that the planning of VMI supply is similar to the DC replenishment. Procurement Logistics Systems If a manufacturer controls the transports of materials from his suppliers, he can use various logistics concepts, which differ in the structure of the transportation network and in the frequency of the shipments. They may occur in parallel for different classes of materials for the same receiving factory. Cyclical procurement in intervals of a few days up to weeks permits to bundle the transport flow into larger shipments, but generates cycle stock at the receiving factory. JIT procurement with at least daily shipments avoids the inbound material passing through the warehouse. Instead, it can be put on a buffer area for a short time.  If the arrivals are even synchronized with the production sequence, the material can be put immediately to the production line where it is consumed. The latter case is called synchronized procurement or JIS (just in sequence) procurement. The following transport concepts exist for procurement: Direct transports from the supplier are suitable for cyclical supply and, if the demand is sufficiently large, also for daily supply. Only if the distance is very short, direct transports may be used for synchronized procurement. A regional LSP collects the materials in tours from all suppliers in his defined area, consolidates them at a TP and ships them in full trucks to the receiving factory. This concept permits frequent supply, up to daily, even from remote suppliers with low volume. The trunk haulage can also be carried out by rail, if there are suitable connections. An LSP warehouse close to the receiving factory suits for synchronized procurement: The LSP is responsible for satisfying the short-term calls from the receiver by synchronized shipments. The suppliers have to keep the stock in the warehouse between agreed minimum and maximum levels by appropriate shipments, like in the VMI concept. Returned empties cause a non-negligible overhead and costs, whose significance is depending on the type of packaging, containers or pallets used for transport. In order to reduce these costs, the return of empties should be consolidated and integrated into the flow of products. In case that the transport of products is outsourced to an LSP, it is favorable to outsource the responsibility and management of empties to the LSP, too. Information Management Information Management is based on the above planning tasks. It provides and integrates all relevant data which are necessary for the control and fulfillment of the previously planned transportation tasks as well as all data which is needed for the tasks following the factual transportation fulfillment. A well-functioning Information Management enables to guarantee the consistency of the information which has been sent to the suppliers, the LSP and the incoming goods department. For transportation processes on the distribution side, similar support for the generation of documents and the integration of information is needed. The following information and documents are generated: the notifications of dispatch which are sent to receivers, the bordereaux (loading lists) and loading plans for the vehicles, accompanying documents. Transport and Inventory Transport planning has a strong impact on the inventory in the supply chain. It directly creates transport lot- sizing stock and transit stock and influences the necessary safety stock. The lot-sizing stock results from the decision on the transport frequencies. The present APS does not (yet) support the optimization of mid-term transport planning with regard to inventory. Transportation and Safety Stocks In a distribution system for products made to stock, the safety stocks that are necessary for guaranteeing a certain service level, depend on the strategy of the transports between the factory and the DCs (Distribution Centers). Push system - any production lot is distributed immediately to the DCs. - global information on the demand and stock situation at every DC is required for the central control. Pull system - transports are triggered by the local stock at every DC, when it reaches a defined reorder point. - system, global information can improve the central allocation of stock in case of a bottleneck. In an APS - such global information should be available for the whole supply chain. The Push system corresponds to the case of synchronized production and distribution and thus requires less cycle stock, but in general higher total safety stock or more cross-shipments between the DCs. The local safety stock at a DC has to cover the local demand uncertainty during the transport lead-time. The total system safety stock has to cover the total demand uncertainty during the production lead-time and production cycle time. In a Consumer goods distribution system, the transport cycle time is usually very short, as a DC is usually replenished daily, but the production cycle time may last weeks to months, if many products share a production line. The system safety stock calculation should be based on a periodic review model with the review period equal to the production cycle. MAKING AND DELIVERING PRODUCT DESIGN (MAKE) Product designs and selections of the components needed to build these products are based on the technology available and product performance requirements. Until recently, little thought was given to how the design of a product and the selection of its components affect the supply chain required to make the product. Yet these costs can become 50 percent or more of the product’s cost. When considering product design from a supply chain perspective the aim is to design products with fewer parts, simple designs, and modular construction from generic sub-assemblies. This way the parts can be obtained from a small group of preferred suppliers. Inventory can be kept in the form of generic sub-assemblies at appropriate locations in the supply chain. There will not be the need to hold large finished- goods inventories because customer demand can be met quickly by assembling final products from generic sub-assemblies as customer orders arrive. The supply chain required to support a product is molded by the product’s design. The more flexible, responsive, and cost efficient the supply chain is, the more likely the product will succeed in its market.  Cross-functional product design teams with representatives from these three groups have the opportunity to blend the best insights from each group. Cross-functional teams can review the new product design and discuss the relevant issues. PRODUCTION SCHEDULING (MAKE) Production scheduling allocates available capacity (equipment, labor, and facilities) to the work that needs to be done. The goal is to use available capacity in the most efficient and profitable manner. The production scheduling operation is a process of finding the right balance between several competing objectives: High Utilization Rates—This often means long production runs and centralized manufacturing and distribution centers. The idea is to generate and benefit from economies of scale. Low Inventory Levels—This usually means short production runs and just-in-time delivery of raw materials. The idea is to minimize the assets and cash tied up in inventory. High Levels of Customer Service—Often requires high levels of inventory or many short production runs. The aim is to provide the customer with quick delivery of products and not to run out of stock in any product. FACILITY MANAGEMENT (MAKE) All facility-management decisions happen within the constraints set by decisions about facility locations. Location is one of the five supply chain drivers discussed in Chapter 1. It is usually quite expensive to shut down a facility or to build a new one, so companies live with the consequences of decisions they make about where to locate their facilities. Ongoing facility management takes location as a given and focuses on how best to use the capacity available. This involves making decisions in three areas: 1. The Role Each Facility Will Play 2. How Capacity Is Allocated in Each Facility 3. The Allocation of Suppliers and Markets to Each Facility The role each facility will play involves decisions that determine what activities will be performed in which facilities. These decisions have a big impact on the flexibility of the supply chain. They largely define the ways that the supply chain can change its operations to meet changing market demand. If a facility is designated to perform only a single function or serve only a single market, it usually cannot easily be shifted to perform a different function or serve a different market if supply chain needs change. How capacity is allocated in each facility is dictated by the role that the facility plays. Capacity allocation decisions result in the equipment and labor that is employed at the facility. It is easier to change capacity allocation decisions than to change location decisions, but still it is not cost effective to make frequent changes in allocation. So, once decided, capacity allocation strongly influences supply chain performance and profitability. Allocating too little capacity to a facility creates inability to meet demand and loss of sales. Too much capacity in a facility results in low utilization rates and higher supply chain costs. ORDER MANAGEMENT (DELIVER) Order management is the process of passing order information from customers back through the supply chain from retailers to distributors to service providers and producers. This process also includes passing information about order delivery dates, product substitutions, and back orders forward through the supply chain to customers. This process has long relied on the use of telephone and paper documents such as purchase orders, sales orders, change orders, pick tickets, packing lists, and invoices. In the last 20 years or so, supply chains have become noticeably more complex than they previously were. Companies now deal with multiple tiers of suppliers, outsourced service providers, and distribution-channel partners. This complexity has evolved in response to changes in the way products are sold, increased customer service expectations, and the need to respond quickly to new market demands. The traditional order-management process has longer lead and lag times built into it due to the slow movement of data back and forth in the supply chain. This slow movement of data works well enough in some simple supply chains, but in complex supply chains faster and more accurate movement of data is necessary to achieve the responsiveness and efficiency that is needed. Modern order management focuses on techniques to enable faster and more accurate movement of order-related data. In addition, the order-management process needs to do exception handling and provide people with ways to quickly spot problems and give them the information they need to take corrective action. This means the processing of routine orders should be automated and orders that require special handling because of issues such as insufficient inventory, missed delivery dates, or customer change requests need to be brought to the attention of people who can handle these issues. Because of these requirements, order management is beginning to overlap and merge with a function called customer relationship management (CRM) that is often thought of as a marketing and sales function. Because of supply chain complexity and changing market demands, order management is a process that is evolving rapidly. However, a handful of basic principles can be listed that guide this operation: Enter the Order Data Once and Only Once—Capture the data electronically as close to its original source as possible and do not manually reenter the data as it moves through the supply chain. It is usually best if the customers themselves enter their orders into an order-entry system. This system should then transfer the relevant order data to other systems and supply chain participants as needed for creation of purchase orders, pick tickets, in-voices, and so on. Automate the Order Handling—Manual intervention should be minimized for the routing and filling of routine orders. Com- puter systems should send needed data to the appropriate locations to fulfill routine orders. Exception handling should identify orders with problems that require people to get involved to fix them. Make Order Status Visible to Customers and Service Agents—Let customers track their orders through all the stages, from entry of the order to delivery of the products. Customers should be able to see order status on demand without having to enlist the assistance of other people. When an order runs into problems, bring the order to the attention of service agents who can resolve the problems. Integrate Order Management Systems with Other Related Systems to Maintain Data Integrity—Order-entry systems need product descriptive data and product prices to guide the customer in making their choices. The systems that maintain this product data should communicate with order-management systems. Order data is needed by other systems to update inventory status, calculate delivery schedules, and generate invoices. Order data should automatically flow into these systems in an accurate and timely manner. DELIVERY SCHEDULING (DELIVER) The delivery scheduling operation is of course strongly affected by the decisions made concerning the modes of transportation that will be used.The delivery-scheduling process works within the constraints set by transportation decisions. Two types of delivery  Direct Deliveries - are deliveries made from one originating location to one receiving location. With this method of delivery the routing is sim- ply a matter of selecting the shortest path between the two locations. The advantages of this delivery method are found in the simplicity of operations and delivery coordination. Direct deliveries are efficient if the receiving location generates economic order quantities (EOQs) that are the same size as the ship- ment quantities needed to make best use of the transportation mode be- ing used. Milk Run Deliveries - Milk run deliveries are deliveries that are routed to either bring products from a single originating location to multiple receiving locations or deliveries that bring products from multiple originating locations to a single receiving location. The advantages of this method of delivery are in the fact that more efficient use can be made of the mode of transportation used and the cost of receiving deliveries is lower because receiving locations get fewer and larger deliveries. There are two main techniques for routing milk run deliveries. 1. The Savings Matrix Technique - The savings matrix technique is the simpler of the two techniques and can be used to assign customers to vehicles and to design routes where there are delivery-time windows at receiving locations and other constraints. It provides a reasonably good routing solution that can be put to practical use. 2. The Generalized Assignment Technique - The generalized assignment technique is more sophisticated and usually gives a better solution than the savings matrix technique when there are no constraints on the delivery schedule other than the carrying capacity of the delivery vehicle. Delivery sources Deliveries can be made to customers from two sources: 1. Single-Product Locations - Single-product locations are facilities such as factories or warehouses where a single product or a narrow range of related items are available for shipment.These facilities are appropriate when there is a predictable and high level of demand for the products they offer and where shipments will be made only to customer locations that can receive the products in large, bulk amounts. They offer great economies of scale when used effectively. 2. Distribution Centers Distribution - centers are facilities where bulk shipments of products arrive from single- product locations.When suppliers are located a long distance away from customers, the use of a distribution center provides for economies of scale in long-distance transportation to bring large amounts of products to a location close to the final customers. RETURN PROCESSING (DELIVER) This process is also known as “reverse logistics.” All supply chains have to deal with returns. This is often a difficult and inefficient process and in the Supply-Chain Council’s supply chain operations reference (SCOR) model a whole category of activities has been devoted to this pro- cess. End customers, retailers, distributors, and manufacturers all return products under certain circumstances. The most common circumstances are: the wrong products were delivered; the products that were delivered were damaged in transit or were defective from the factory; and more product was delivered than was needed by the customer. All of these circumstances arise from supply chain inefficiencies that created the need to return products. Companies and supply chains as a whole need to keep track of the kinds of returns that happen, their frequency, and if the return rates are rising or falling. Return processing should be efficient, yet at the same time remember that if other supply chain activities are managed effectively there will not be the need for a lot of return processing. Optimizing the return process can become an exercise in improving the efficiency of a process that should not be happening in the first place. If return rates are increasing it is far more effective to find and fix the sources of the problems that make returns necessary. One area where returns are a value-added activity for the entire supply chain is where product recycling comes into play. In this area returns happen at the end of the product life cycle as the end user sends the product back to the manufacturer or some other organization that will either reuse or safely dispose of the product. As environmental awareness spreads and companies and governments adopt green policies and regulations, there will be a steadily growing volume of recycling activity. And recycling companies will emerge to handle this activity not as return processing but instead as a sourcing activity. This will be the way they acquire their raw materials. facility management Key Steps in Return Processing (Deliver): 1. Initiating the Return: The customer initiates the return by contacting the seller or manufacturer, often through customer service or an online system. 2. Return Authorization: The company reviews the request and issues a return authorization (RA), allowing the product to be sent back. 3. Product Return: The product is returned by the customer through a designated logistics channel, such as shipping or a return to a physical location. 4. Inspection and Sorting: Once received, the product is inspected to assess its condition (e.g., damaged, defective, or as new). Based on the inspection, products may be repaired, restocked, or discarded. 5. Restocking, Repair, or Disposal: Depending on the condition, products are restocked, refurbished, or recycled, while damaged or unusable products may be disposed of. 6. Refund or Replacement: Based on the company’s return policy, the customer receives either a refund, credit, or a replacement product. SUPPLY CHAIN MANAGEMENT - USING INFORMATION TECHNOLOGY Information Systems that Support the Supply Chain Information technology supports internal operations and also collaboration between companies in a supply chain. Using high-speed data networks and databases, companies can share data to better manage the supply chain as a whole and their own individual positions within the supply chain. The effective use of this technology is a key aspect of a company’s success. 1. DATA CAPTURE AND DATA COMMUNICATION Data capture is the process of gathering information such as inventory levels, shipping status, and demand forecasts, which helps in decision-making and real-time data. While data communication refers to sharing and transferring information. 1.1 The Internet The Internet is the global data communications network that uses what is known as Internet Protocol (IP) standards to move data from one point to another. The Internet is the universal communication network that can connect with all computers and communication devices. Once a device is hooked into the Internet it can communicate with any other device that is also connected to the Internet, regardless of the different internal data formats that they may use. 1.2 Broadband Basically, this means any communication technology that offers high-speed (faster than a 56Kb dial-up modem) access to the Internet with a connection that is always on. This includes technologies such as coaxial cable, digital subscriber line (DSL), metro Ethernet, fixed wireless, and satellite. Broadband technology is spreading and, as it does, it becomes possible for companies in a supply chain to easily and inexpensively hook up with each other and exchange large volumes of data in real time. 1.3 Electronic Data Interchange (EDI) Electronic data interchange (EDI) is a technology that was developed to transmit common types of data between companies that do business with each other. 1.4 eXtensible Markup Language (XML) XML (eXtensible Markup Language) is a technology that is being developed to transmit data in flexible formats between computers and humans. 2. DATA STORAGE AND RETRIEVAL The second functional area of an information system is composed of technology that stores and retrieves data. A database is an organized grouping of data that is stored in an electronic format. 3. DATA MANIPULATION AND REPORTING Different supply chain systems are created by combining processing logic to manipulate and display data with the technology required to capture, communicate, store, and retrieve data. Data manipulation is a process of changing data so that it can be analyzed, aggregated, and visualized. 3.1 Enterprise Resource Planning Enterprise Resource Planning (ERP) systems gather data from across multiple functions in a company. ERP systems monitor orders, production schedules, raw material purchases, and finished-goods inventory. They support a process-oriented view of business that cuts across different functional departments. departments. For instance, an ERP system can view the entire order-fulfillment process and track an order from the procurement of material to fill the order to delivery of the finished product to the customer 3.2 Procurement Systems Procurement systems focus on the procurement activities that take place between a company and its suppliers. The purpose of these systems is to streamline the procurement process and make it more efficient. They also keep track of part numbers, prices, purchasing histories,and supplier performance. 3.3 Advanced Planning and Scheduling (APS) Advanced Planning and Scheduling (APS) systems are highly analytical applications whose purpose is to assess plant capacity, material availability, and customer demand. These systems then produce schedules for what to make in which plant and at what time. They then use linear programming techniques and other sophisticated algorithms to create their recommended schedules. 3.4 Transportation Planning Systems (TPS) - Enable people to compare different modes of transportation, different routes, different carriers. - Transportation plans are then created - Sold by system vendors - Other providers - known as content vendors - provide the data that is needed by theses systems such as : mileage, fuel costs, and shipping tariffs 3.5 Demand Planning Systems (DPS) - Systems that use special techniques and algorithms to help a company forecast its demand. - Take historical data and information about planned promotions and other events that can affect customer demand such as: Seasonality and Market trends. They use this data to create models - help predict future sales - Often associated with DPS is revenue management. - it lets a company experiment with different price mixes for its different products in light of predicted demand. Already using this techniques- Companies in the travel industry : airlines, rental car agencies, and hotels. 3.6 Customer Relationship Management (CRM) and Sales Force Automation (SFA) - Systems of this type automate many of the tasks related to servicing existing customers and finding new customers. Customer Relationship Management (CRM) systems - track buying patterns and histories of customers. - Benefits : consolidate a company’s customer-related data in a place where it is quickly accessible to customer-service representatives and salespeople who use the data to better respond to customer requests. Sales Force Automation (SFA) systems- allow a company to better coordinate and monitor the activities of its sales force. - Benefits : automate many of the tasks related to scheduling sales calls and follow-up visits and preparing quotes and proposals for customers and prospects. 3.7 Supply Chain Management (SCM) Systems - Collections of different applications designed for managing the various aspects of a supply chain. - Integrated suites : contains advanced planning and scheduling, transportation planning, demand planning, and inventory planning applications. - Rely on ERP or relevant legacy systems- to provide them with the data to support the analysis and planning task. - Analytical capabilities - to support strategic-level decision making. 3.8 Inventory Management System (IMS) - Support the activities : tracking historical demand patterns for products, monitoring inventory levels, calculating economic order quantities, and the levels of safety inventory. - Used to find the right balance for a company between the cost of carrying inventory and the cost of running out of inventory and losing sales revenue because of that. 3.9 Manufacturing Execution Systems (MES)- - Focus is on carrying out the production activities in a factory. - Less analytical than an APS. - It produces short-term production schedules and allocates raw materials and production resources within a single manufacturing plant. - It is similar in its operational focus to an ERP system and frequently MES software is produced by ERP software vendors. 3.10 Transportation Scheduling Systems (TSS) - Similar to ERP and MES applications- less analytical and more focused on daily operational issues. - It produces short-term transportation and delivery schedules that are used by a company. 3.11 Warehouse Management Systems (WMS) - Support daily warehouse operations, and provide capabilities to efficiently run the ongoing operations of a warehouse. - Keep track of inventory levels and stocking locations within a warehouse and they support the actions needed to pick, pack, and ship products to fill customer orders. 4. NEW TRENDS IN SUPPLY CHAIN TECHNOLOGY The global economy’s demands are forcing companies and entire supply chains to adopt more flexible and responsive modes of operations. The interdependence of businesses and the fast-paced nature of events require quicker and more strategic responses. To meet these challenges, companies must enhance their existing supply chain systems by providing timely and accurate data, improving coordination, and focusing on overall supply chain improvements rather than just individual activities. There are four promising technologies that can be used to complement existing supply chain systems. These four technologies are: 1. Radio Frequency Identification (RFID) RFID is increasingly used in supply chains to track products from manufacturers to customers; while not new, it is now more cost-effective and feasible for global use. RFID technology includes both hardware (tags, scanners, and antennas) and the information captured, each playing a crucial role in enhancing supply chain efficiency. RFID Technology: RFID tags come in two types: ○ Active tags: Have their own power source and continuously broadcast data. ○ Passive tags: Require energy from a scanner to activate and transmit data. Scanners operate on specified radio frequencies and power levels, with standards that are still evolving as technology advances. Passive tags are widely used because they are cheaper and simpler, with large companies (e.g., Wal-Mart) mandating their use on pallets and cases, moving towards tagging individual items as costs decrease. RFID Information: RFID data includes product information and tracking details, tracing product movement in the supply chain. A universal standard (GS1) is set to allow global consistency in reading and sharing RFID data, simplifying international supply chain operations. RFID Benefits and Challenges: Benefits: ○ Reduces costs of capturing data on product movement and increases data accuracy. ○ Enables detailed tracking from containers to individual items, improving visibility and efficiency in supply chains. ○ Facilitates easier data sharing across supply chain partners, enhancing collaboration.  Challenges: ○ RFID technology is still evolving and can be difficult to implement, often requiring adjustments for high data-read accuracy. ○ Passive tags may face obstacles (e.g., metal, liquids) that lower read rates, necessitating time and trial for optimal setup and data-read efficiency. 2. Business Process Management (BPM) BPM is a strategy for continuous improvement in business operations. It involves mapping key processes, defining steps, and using BPM software to automate tasks and monitor data flow. This software improves process visibility, enabling quicker responses to issues, and provides data that can be used to redesign processes as needed. 3. Business Intelligence (BI) BI systems help companies stay informed by collecting and analyzing data from sources like sensors, transaction systems, and ERP systems. This data is stored in a database and analyzed using BI tools, from simple spreadsheets to advanced models, depending on the users' needs. BI supports decision-making by offering insights into internal operations and market trends. 4. Simulation Modeling Simulation modeling software enables companies to test decisions like factory layouts or distribution routes by creating models and applying various scenarios. It reduces risk by highlighting potential issues before actual implementation. By using data from BI systems, companies can simulate and test new business models, allowing them to make confident, informed decisions. THE IMPACT ON SUPPLY CHAIN OPERATIONS Combining BPM, BI, RFID, and simulation modeling can optimize supply chains. RFID tracks items in real-time, while BPM software visualizes supply chain flow, identifying bottlenecks. BI analyzes issues, and simulation models test process changes. Together, these technologies enable efficient, responsive supply chains, fostering competitive advantages in the market. CLOUD COMPUTING Since the early 2000s, rapid advancements in various information technologies, including the Internet, Web browsers, server virtualization, parallel computing, and open-source software, have collectively enabled the delivery of on-demand computing resources. This convergence of technologies is known as cloud computing. Cloud computing represents both a model for business-computing service delivery and a methodology for managing and operating computing infrastructure. Various definitions exist, but all highlight three fundamental characteristics: Practically Unlimited Resources: Computing power, storage, and user access are scalable and readily available. No Long-Term Commitments: Resources are available immediately and can be retired as needed.  Pay-as-You-Go Cost Structure: Costs vary based on usage, providing flexibility for businesses. Supply Chain Coordination Supply Chain Coordination refers mainly to the inter-firm operational coordination within a supply chain. It involves the coordination of continuous material flows from the suppliers to the buyers and through to the end-consumer in a preferably JIM manner. Coordination In Supply Chain Management The management of inventory, knowledge, and financial flows in a network of suppliers, manufacturers, distributors, and customers is known as supply chain management (SCM). Supply Chain coordination aims at improving supply chain performance by aligning the plans and the objectives of individual enterprises “The Bullwhip Effect” The bullwhip effect is a supply chain phenomenon describing how small fluctuations in demand at the retail level can cause progressively larger fluctuations in demand at the wholesale, distributor, manufacturer and raw material supplier levels. The effect is named after the physics involved in cracking a whip. Inventory levels in supply chain over time illustrating the wild swings that develop as product demand distortion moves from customer to retailer to distributor to manufacturer. Swings in product demand appear more pronounced to companies further up the supply chain. This distortion makes effective supply chain management very difficult. Five Major Factors That Cause the Effect 1. Demand Forecasting - based on received orders can lead to inaccuracies, exacerbated by the bullwhip effect. Sharing point-of-sale data among supply chain members helps align forecasts with actual market demand, reducing distortions and improving accuracy. 2. Order Batching - minimizes processing and transportation costs, but distorts demand. Reducing these costs encourages smaller, frequent orders, improving efficiency through electronic ordering and third-party logistics 3. Product Rationing - Manufacturers respond to demand exceeding supply by rationing products based on order quantity, leading to "shortage gaming." Solutions include basing rationing on historical data and informing customers in advance. 4. Product Pricing - fluctuations distort demand, leading to inconsistent supply chain flows. Everyday low prices encourage stable purchasing based on need, enhancing forecasting efficiency. 5. Performance Incentives - In supply chains, companies and individuals often work in isolation, resulting in misaligned incentives. Monthly sales targets lead to discounts on unnecessary products, while conflicting internal goals hinder efficiency. Accurate costing data and new incentive plans are essential for alignment. Global Data Synchronization Network The Global Data Synchronization Network (GDSN) is a network of independently owned and operated databases that can exchange data with each other and the GS1 Global Registry. The GS1 Global Registry acts as a central coordinator between all the other databases to provide for timely and traceable distribution of verified product descriptive information between all the databases. It is the locator and routing mechanism for finding source data and sending requested data between databases. GS1 is a global, not-for-profi t organization of member organizations, including GS1 US, representing more than 100 countries around the world. GS1 is based in Brussels, Belgium. GS1 US is the former Uni- form Code Council and consists of the EAN UCC System, UCCnet, EPCglobal US, RosettaNet, and UNSPSC. GS1 US is based in New Jersey, USA (www.gs1us.org). The GDSN is being administered by GS1 and increasingly is being used by companies in consumer goods retail and related areas. It allows data about products to be continuously updated as new products are re- leased, existing products evolve, and obsolete products are discontinued. The benefits are significant beginning with the fact that each company needs only to make a single connection to their selected database or “data pool” as GDSN calls them. Once they do this they can send and receive data to and from any other company that is connected to any other data pool that is part of the GDSN. Other benefits include things such as elimination of the need for companies to maintain massive cross-reference tables to translate be- tween the different part numbers for the same product that are used by different supply chain partners. This reduces many ordering and billing errors that consume people’s time and result in delays in product deliveries and cash flows between companies. It also simplifies order tracking and tracing individual items as they move through a supply chain. Other benefits include things such as elimination of the need for companies to maintain massive cross-reference tables to translate be- tween the different part numbers for the same product that are used by different supply chain partners. This reduces many ordering and billing errors that consume people’s time and result in delays in product deliveries and cash flows between companies. It also simplifies order tracking and tracing individual items as they move through a supply chain. 1. Load Item and Location Data – the seller or manufacturer registers with a GS1 certified data pool and uploads item and location data to their data pool. 2. Register Data – a small subset of item and location data is sent by the data pool to GS1 Global Registry. 3. Request for Subscription Data – the buyer or retailer subscribes to a data pool and to categories of products or to particular suppliers to receive the related item and location data. Buyer requests data from their data pool. The data pool requests this data from the GS1 Global Registry and the Global Registry sends the request to the data pool containing this data. 4. Publish Requested Data – the seller’s data pool provides requested item and location data to the data pool of the buyer and the buyer’s data pool sends the data to the buyer. Buyer updates its systems with this data. Buyer and seller now have identical item and location data—data synchronization is complete. PRODUCT CLASSIFICATION Products that move through a supply chain need to be identified and traced so that people know how many products are moving through their supply chains. Products also need to be classified so that people know what types of products they are handling. All supply chains handle a mix of different product types and that mix changes over time. As the product mix changes, the supply chain itself must change. There are two major standards presently in use for product classification. 1. The United Nations Standard Products and Services Code (UNSPSC). The United Nations Development Program (UNDP) and Dun & Bradstreet Corporation (D&B) jointly developed the UNSPSC in 1998. The UNSPSC is a hierarchical classification with five levels. These levels allow analysis by drilling down or rolling up to analyze expenditures and product usage at each level. Each level in the hierarchy has its own unique number. Starting with the highest level, the five levels are segment, family, class, commodity, and business function. 2. The GS1 Global Product Code or GPC. The GPC was developed by GS1 and is used in the GDSN to identify different types of products. The GPC is also a Procter & Gamble classification scheme and it has four levels: Segment; Family; Class; and Brick. These two product-classification schemes are not mutually exclusive and they can be used together. It does require all parties to agree on the rules they will use to translate product codes between UNSPSC numbers and GPC numbers. COLLABORATIVE PLANNING, FORECASTING, AND REPLENISHMENT Collaborative Planning Negotiate a front-end agreement that defines the responsibilities of the companies that will collaborate with each other Build a joint business plan that shows how the companies will work together to meet demand Collaborative Forecasting Create sales forecasts for all the collaborating companies Identify any exceptions or differences between companies Resolve the exceptions to provide a common sales forecast Collaborative Replenishment Create order forecasts for all the collaborating companies Identify exceptions between companies Resolve the exceptions to provide an efficient production and delivery schedule Generate actual orders to meet customer demand  CPFR IN ACTION Nimble Co. makes home entertainment systems. They’ve set up a collaborative system with their suppliers and retailers. This means they share data like sales numbers, inventory levels, and future forecasts with each other, so everyone can plan ahead more effectively. Sales & Operations Planning (S&OP) is a business process that helps companies maintain demand and supply balance by focusing on aggregate volumes and handling mix issues. It occurs monthly and involves General Management, Sales, Operations, Finance, and Product Development. S&OP links the company's Strategic Plans to detailed processes, allowing managers to view the business holistically and predict future outcomes. Supply Chain Innovation for the Real-Time Economy Learning by Trial and Error Alone is a Lot Riskier than It used to Be. Consider trends that make coordination and collaboration key requirements for success in twenty-first century supply chains. Discuss the potential of real-time simulation and massively multi-player online games as a source of ideas for new supply chain operating models. Appreciate the need for universal, easy, and inexpensive data connections between all parties in a supply chain and see why these connections will improve supply chain performance and profitability. Start to assess the potential for using social media to enhance supply chain capabilities. The Challenges of Traditional Learning Rising Costs: The increasing costs of raw materials necessitate rethinking and redesigning supply chains. Thin Profit Margins: The competitive landscape demands efficient and effective supply chains. Rapid Market Evolution: Supply chains must constantly adapt to changing demand and market conditions. The Solution: Simulation Games Definition of Supply Chains: Supply chains consist of facilities, routes, vehicles, and inventory. Simulation Game Mechanics: a. Users design and evaluate supply chain options on a virtual map. b. They define facilities, routes, vehicles, and operating parameters. c. Simulations assess performance and costs. Benefits of Simulation Games: d. Experimentation and optimization of supply chain designs. e. Identification of efficient supply chain configurations. f. Real-world application of optimized designs. g. Real-time monitoring of supply chain operation Supply Chains and Simple Data ConnectionsIntroduction Information is a crucial driver in supply chain management, enabling effective decision-making and optimization of production, inventory, location, and transportation. The lesson discusses the five drivers of supply chains and the importance of information in achieving balance and efficiency. The Five Drivers of Supply Chains 1. Production: The creation of goods or services. 2. Inventory: The stock of goods or materials held by a company. 3. Location: The physical placement of facilities and resources. 4. Transportation: The movement of goods and materials. 5. Information: The data and knowledge used to support decision-making. The Goal of Supply Chain Management Balancing Efficiency and Responsiveness: Increasing throughput while reducing inventory and operating expense (as stated by Eliyahu Goldratt). The Role of Information: Accurate and timely information is essential for achieving this balance. The Importance of Information Decision-Making: Information empowers effective decision-making across all supply chain functions. Efficiency Optimization: Data-driven adjustments of production, inventory, location, and transportation. Leveraging Information: Information is the central point for managing supply chains effectively. Supply Chain Innovation for the Real-Time Economy In today’s dynamic business world, supply chains undergo complete transformations thanks to real-time data and technologies. Real-time inventory management and instantaneous demand forecasting are just two examples of how supply chains must adapt to satisfy the increasing demands of speed, accuracy, and transparency. This shift toward a real-time economy necessitates innovative solutions that enhance coordination, reactivity, and agility in order to be successful in an interconnected global marketplace. Coordination and Collaboration in Supply Chains Collaboration- Working together (Sharing ideas and efforts) Coordination- Organizing together (Making sure everything runs smoothly) Over the past twenty years, supply chains have experienced substantial changes that require new organizational and operational strategies. Today's global market is both complex and dynamic, and companies can't operate in isolation. Coordination is more effective than control, and collaboration is essential. This underscores the importance of cultivating robust networks and reputations, as they are essential to the operation of the supply chain. While price significantly influences success, it is no longer the exclusive determinant. Companies must incorporate additional elements. There is an inescapable tension between efficiency and responsiveness. Enterprises must ascertain the appropriate equilibrium according to their specific conditions. Like a versatile vehicle, contemporary supply chains must be able to adjust to many "terrains," including stable markets and rapidly evolving circumstances. As market conditions change, businesses must continually evaluate and adjust their stance on the efficiency-responsiveness continuum. In the present economy, consumers must recognize their desire for more than reduced prices. Success in today's organizational environment requires a balance between efficiency and adaptability. Time to Get Agile and Reinvent Traditional Supply Chain Operations The evolution of supply chains in the contemporary global economy requires transitioning from conventional, efficiency-oriented models to more agile and collaborative strategies. Modern supply chains must swiftly adjust to market fluctuations, disturbances, and opportunities, much to a meticulously managed squad in a rapid-paced competition. This change necessitates incorporating advanced real-time visibility and decision-making technologies, including data analytics, cloud-based platforms, and IoT devices. Organizations increasingly prioritize collaboration throughout their supply networks, integrating conventional methods with novel approaches such as Collaborative Planning, Forecasting, Replenishment (CPFR), and Sales and Operations Planning (S&OP). Collaborative Planning, Forecasting, and Replenishment (CPFR) - is a supply chain management technique in which companies collaborate with partners, such as vendors or retailers, to improve inventory control, forecasting, and planning.  Sales and Operations Planning (S&OP) - is a business management technique that helps companies align their supply chain, production, marketing, and sales strategies. The focus has transitioned from centralized governance and strict efficiency to decentralized, adaptive systems that can swiftly adjust. This new paradigm allows firms to expedite product launches, respond rapidly to changes, and satisfy diverse client expectations while preserving operational efficiency. The contemporary supply chain transcends mere cost- effectiveness; it emphasizes responsiveness, collaboration, and agility within a dynamic business environment. Massively Multi-Player [Serious] Supply Chain Games Massively Multi-player Online Role-Playing Games (MMORPGs) players from all over the globe log into virtual worlds via the Internet; they learn different roles and skill sets and come together in self- selecting teams to carry out daring missions in pursuit of common goals. It is seen as entertainment but is now recognized for its potential to develop real-world business skills, particularly in supply chain management. Massively multiplayer online role-playing games (MMORPGs) mirror the collaborative, complex nature of global supply chain operations. Players develop skills, build alliances, and navigate complex systems—similar to supply chain coordination. These games simulate real-world dynamics through “unscripted emergent experiences,” like the chaos of real- time market changes.