The Internet has enormous impact on the way people communicate, shop, and work. This technology has also made changes in the way companies do business in the 21st century. One of the areas of business that is likely to see tremendous change in the coming years, the supply-chain management. By harnessing the power of the Internet, supply chain management will continue to evolve in a way that allows companies to change the way they manage inventory, orders with suppliers, and communicate important information with each other.
While some of these technologies have been for many years or decades in the case of radio frequency identification tags, harnessing the Internet to this technology offers the potential to transform the supply-chain management. Improve supply-chain management also means improving inventory control and increase profitability.
In 2001, Nike lost revenue goal by a significant amount. The shortfall was explained in part by a failed supply chain automation project. “Some estimate that the new technology could strip out more than $ 30 billion in excess inventory” (Fonstad). The term E-Business – as opposed to e-commerce – can be used to describe the adoption of the Internet to speed up the objective of supply chain integration (Lee) Four new technologies and practices in e-business will have a dramatic impact on inventory management.
o Virtual marketplaces
o Radio Frequency Identification tags (RFID)
o Synchronized plan
o Supplier performance management
actual market PLACES
Metal Junction is real market held by the two largest steel producers India. Tata Steel and Sail Steel traded more than 5,000 tons of steel in March 2002. In March 2003, the tonnage had increased to 43,000 tonnes per month (Mills).
What is the real market and it has its applications to the industry? Virtual market has many names such as e-markets, net market places and electronic markets. These markets all have common characteristics.
o Reliance on the Internet
o buyers and sellers come together without an intermediary
o Neutrality (all buyers and sellers are treated the same)
o Information provided by vendors and products
in the most basic form, virtual market place brings together buyers and sellers today. At its highest level, a virtual market place gives the buyer and the supplier the opportunity to re-engineer sales administration processes, improve forecasting and scheduling, update Go-to-market approach, shortening the order-to-cash cycle, and extra customer (Steel24-7). Preferably, the actual market positions centered on a particular industry. Some prominent examples are steel, agricultural products, and automotive parts. In addition to providing information on manufacturers and general information about their products, the actual market can also offer product information, side-by-side comparison, technical papers and market.
Many challenges in setting up the e-market. Primary among these are defining the tools necessary to use the market, providing a safe environment, price, payment and fulfillment. For regulated markets, Internet protocol will be selected. The cost of technology to access and participate in the market may not be prohibitive. Privacy and security must be sufficient to ensure confidential business. Authentication and authorization of users from many institutions will be possible. Private communications must be guaranteed.
pricing policy can be set or bartered. A common example of bartering, or auction, is E-Bay for consumer goods. Payment methods can advance or arranged between buyer and seller. Finally, the fulfillment of orders must be ensured. As in the case of traditional marketplaces, failure to deliver in a timely manner will result in companies losing market share and ultimately can lead to failure (McKnight).
The final issue of concern in real markets, jurisdiction and applicable law. Virtual markets put their members in the international trading community. Since e-markets are a recent phenomenon, defining the legal system that is responsible for the settlement of disputes is an evolving process. Current rationale proposed jurisdiction in the locality in the market. In the virtual market, however, one must ask where the market actually exists. Although the FTC has tried to control the on-line business, the final ruling on jurisdiction to international locations E-market has not yet been made.
Radio Frequency Identification tags
In November 2003, Wal-Mart collected 120 Its Top Suppliers to announce that it would require radio frequency identification tags (RFID) on shipping pallets and cases of merchandise. Wal-Mart set the deadline of January 2005 for its top 100 suppliers. The remaining suppliers will were there in early 2006 to meet the requirements (Sliwa).
A basic RFID system has three components.
o transponder (TAG)
The antenna activates the tag, reads and writes data to it. When the RFID tag moves past the reader, the information is sent to the host computer for processing. The most common RFID systems are passive and contain their own power supply of, the short range transmitter, operating at low frequencies, and low cost. Although RFID has been since recent technological changes in 1960 have reduced costs and allowed the technology to be used in more applications.
common everyday use of RFID is an automatic reading prepaid passes on toll roads. Benefits of RFID are many fold. For example, RFID is very fast, non-contact, does not require line of site, and can operate in various weather conditions. In the case mentioned above, the benefits of RFID will go to Wal-Mart, but the costs are the responsibility of the suppliers. Kara Romanov, an analyst with AMR Research, Inc., estimates the initial investment cost for a supplier who ships 50 million containers per year will run between $ 13 million and $ 23 million. These costs include RFID tags and related hardware and software (Sliwa).
Samsýn Technologies Richmond Hill, ON and Thing Magic, LLC Cambridge, MA are two leaders in the application of RFID for supply chain management. Sam-Sys is dedicated to an open systems environment that will not restrict RFID to one protocol or range of frequencies. This philosophy is based on the premise that many manufacturers and readers that will work seamlessly together (group exhibition).
Thing Magic was founded in 2000 by five MIT graduates. It has developed a low cost RFID system. Now, Thing Magic is developing and marketing protocol agile RFID tag readers (Thing Magic). In addition to Wal-Mart, Department of Defense (DOD) is a key player in RFID development and deployment. The Department of Defense has issued a new policy that requires all suppliers of embedded passive RFID chip in each individual product if possible, or otherwise deployed cases or pallets in January 2005. In February 2004, DOD hosted the summit for their suppliers discuss RFID plans (Broersma). To quote Colin Cobain Chief Technology Officer Tesco Stores: “The question is not will RFID change the way you do business question is will you be ready.” (Thing Magic).
synchronized ORGANISATION throughout the supply chain
“Synchronized planning, in the form of cooperation forecasting and replenishment, coordinated production, inventory and capacity plans, information integration, and the connections of the ERP system, is one of the most exciting developments in supply chain management in many sectors “(synchronous). Synchronized Planning involves basic steps (Lee).
o Information integration
o Planning synchronization
or Workflow coordination
o new business model
First, information integration requires information and transparency. It is the sharing of information between members of the supply chain. Information can be exchanged inventory levels, production schedules and shipment schedules. The benefits are better timing and reduction of the bullwhip effect. “The effect shows a lack of synchronization between supply chain members. Even a slight change in the sales of consumer ripple backward in the form of intensified fluctuations upstream, simulating the result of a flick of the bullwhip handle” (Chase 335).
Planning synchronization defines what to do with the information is shared. This may include co-planning and co-design. The benefits are lower costs and better service.
If planning synchronization, “what” is to have shared information, workflow coordination is the “how” it is done. Functions that can be coordinated purchasing, engineering and design changes and production planning. Benefits include early time to market, improve service performance and efficiency. Synchronized planning can lead to new business models. Not only can this new business models redefine workflow, they can lead to changes in the responsibilities of the various parts of the supply chain. A defining supply chain can work together to create new products and lead to expansion in new markets (Lee).
Compatible planning, however, can not be achieved without the tight connection of all companies in the supply chain. Channels of communication must be well defined and should monitor closely the performance of each entity in the chain. An integrated supply chain must hold members accountable for their part in the process. As product life cycles grow shorter and shorter, efficient synchronization of the supply chain grows in importance. To ensure that the supply chain is driven by consumer demand, and to reduce the bullwhip effect, synchronized planning is important (Lee).
SUPPLIER Performance Management
supply-chain different organizations will be tightly intertwined, it will be necessary to measure the performance of each member of the chain. Former Federal Reserve Chairman Alan Greenspan testified before Congress in February 2001 as companies were unable to see the decline of the last recession, over building supplies, despite strong supply chain automation (Fonstad). Even the use of the latest technology, it can not guarantee that the supply chain is operating efficiently.
One way to answer the question of how well the supply-chain is working to develop supplier scorecards. There are five steps in developing an effective scorecard (Golovin).
o Agree on what is important and how to measure it
o Use web based incident reports to communicate the problems they occur
o Participate in continuous supplier management
o Measure to prevent rather than react
o use web based software that all suppliers can take without making expensive investments in software and training
it is important that the buyer and seller agree on the beginning of what is important and how it is measured. This is important because once decided, a supplier will streamline its work designated criteria. If just in time delivery is a priority, the supplier may focus on these aspects to the detriment of other factors. In addition, a benchmark to measure supplier performance must be realistic and attainable.
Actual performance should then be continuously monitored against these criteria. Manufacturer and supplier should work together to develop standards that are consistent with industry performance and production. Using web based incident reporting is important to keep track of problems as they occur. Incident reports should not only be used to monitor the problem, but should be used to solve problems in real time. It is also important to measure the time it takes the supplier to correct the problem.
Continuous supplier management, sometimes referred to as engineering supplier, has become more important as manufacturers outsource more of their operations. A 90-day review cycle can be ruinous when you are manufacturing innovative products. “New products usually have a few months of life” (Chase 337). A 90-day review cycle can come close to going over the competitive advantage of innovative products. Effective continuous supplier management to be based on certain periods and tolerance. This is then restricted to web based incident reports that make alarm call when products or delivery, are out of the agreed tolerances.
Effective supplier scorecard should be set up to prevent the problem in order to deal with them. The sooner you know there is a problem in lower cost of solving it and more likely to avoid it completely. Best performance measures not only the events after they have happened, they constantly monitor performance in real time. The use of automation is the key to making this happen. For example, a system that matches invoices with purchase orders will cover pricing errors before the check is cut and money is a manufacturer out the door. Utilizing a web-based software not only reduces the cost of the supplier to integrate with the manufacturer, it speeds up the integration. Web-based software also enables suppliers both large and small to participate in the supply chain.
The four items listed above depend on the ability of a manufacturer and supplier to participate in the planning, sourcing, quality control and delivery of goods. The internet makes all members of the supply chain to work and work together as a team. Finally, by making supplier performance web-based, suppliers are able to participate in their own performance improvement of (Golovin).
Supply chain management is an interesting and complex subject. It goes to the core of new methods in business in the 21st century. The near universal availability of the Internet is enabling technology for a change in how supply-chain business is managed. The Internet also enables organizations to adopt new business and enter new markets. By harnessing the power of the Internet, supply chain management will continue to evolve the changes implemented today.
E-business has been a logical outgrowth of e-commerce. E-business adopts the power of the Internet to accelerate the growth of supply chain integration. While E-business has had a huge impact on supply chain management, it can also be adapted to both the front end and back end operations of companies (Lee). Improved inventory control and increased profits are two of the benefits of better supply chain management. As stated in the introduction, Nike miss 2001 earnings targets in part due to failed implementation of supply chain automation project. It has also been estimated that more than $ 30 billion dollars in excess inventory can be eliminated through improved supply chain management. These real savings can be brought directly to the bottom line.
Four new technologies and business practices that harness the power of the Internet, virtual market places, radio frequency identification tags, synchronized planning (RFID), and supplier performance. Virtual markets make buyers and sellers to come together 24/7 actually create a store that never closes. The additional advantages of virtual market are eliminated middlemen, access to product and vendor information and neutral market where all buyers and sellers are treated equally. Virtual markets provide both buyers and sellers the opportunity to re-engineer sales administration process.
As noted above, RFID has been since 1960, however, improvements in technology and RFID paring with the Internet has expanded this measurement method beyond the limited past their factories. Three factors RFID systems are antenna, a transceiver and transponder (TAG).
Compatible planning when applied across the supply chain consists of cooperation forecasting and replenishment, coordinated production, inventory and capacity planning, information integration, and direct links to ERP systems. The four key steps in synchronized planning, information integration, planning synchronization, workflow coordination and the opportunity to develop new business models. Key synchronize planning to use the Internet to share information. The benefits of concerted planning including better timing and reduction of the bullwhip effect. The bullwhip effect amplifies fluctuations upstream in the supply chain caused by the change in consumer sales. Synchronized planning also defines what to do with common information and how it will be done. As product life cycles grow shorter, efficient synchronization of supply-chain rewards companies that seize potential.
Supplier scorecards is a method to assess the members of the supply chain in the increasingly intertwined bodies. As Alan Greenspan noted in 2001, many companies were unable to see past the recession and continued over building an inventory despite having invested heavily in supply chain automation. This statement underlines the need to develop tools to monitor the performance of companies up and down the supply chain. Five steps to develop an effective scorecard is accepting what is important and how it will be measured, using a web-based incident reports, participation in continuous supplier management, measuring prevent problems and the use of web-based software. In rolling out these tools, it is important to both buyer and seller agree first on what is important and how it will be measured. Other steps flow from the first.
The Internet has had a tremendous impact on the personal and professional life businesspersons. On the business side, the Internet has brought new life to existing technology and offer companies the opportunity to participate in the world market. Harnessing the Internet company has made greater cooperation and exchange of information up and down the supply chain. The Internet has enabled firms to improve supply-chain by the way they manage inventory, place orders, and communicate important information with each other.
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