Technology_in_Supply_Chain_Systems

Technology in Supply Chain systems With the current trends of technological boom and globalization, businesses are finding new ways to better satisfy consumer needs while cutting their own operating costs at the same time. Information Technology plays an enormous role in this never ending quest to improve efficiency at all levels of the supply chain of every retailer and service provider. “Supply chains include a company’s entire manufacturing and distribution process. They involve every step of the production from planning to manufacturing to handling defective goods. The overall goal of these chains is to keep the process running smoothly at all times and to keep all of the components (factories, warehouses, vendors, etc…) connected” (Epiq 2010). An efficient value-adding supply chain is essential to every organization who is seeking to gain a competitive edge over competitors. This paper will examine how current and future technologies are utilized to cut costs and streamline expenses. Advantages and disadvantages of implementation of such systems will also be discussed. Technology plays a very important role, and is largely responsible for success of most supply chain systems. “Even though the supply chain concept pre-dates the Internet, only through the use of web-based software and communication can it truly reach its full potential. Before the Internet, companies were limited because they were not able to receive or to send updates, feedback, or other important information in a timely fashion” (Epiq 2010). In the past, inventory had to be accounted for manually, by pen and paper. Orders had to be taken months ahead of time with a lengthy delivery process. This meant more pressure on placing orders for the correct quantity to meet market demand and making sure the product won’t be obsolete or replaced by another product the time it hits the shelves. “This translated into more stock outs, delayed response to market demand, and more costly methods of delivering and maintaining inventory. Additionally, companies were limited in their ability to work with global partners because of language barriers and time differences” (Epiq 2010). By using the Internet and other forms of information technology to handle the various aspects involved in supply chain management, organizations are able to adapt and globalize exchanging data much faster and with ease. In a retail supply chain system, transparency and information sharing through technology is key to success in relationships between supplier and vendor (Angulo, Natchmann & Waller, 2004). “One of the biggest benefits technology has given to the supply chain concept is the ability for companies to collaborate. These collaborations are designed for the mutual benefit of all parties. For example, a supplier of consumer goods may be linked up via the Internet to one of its distributors so that when the supply gets too low an order for more of those goods can be placed automatically. In this way, the distributor never has to worry about running out of a product and disappointing customers and the supplier doesn't have to worry about maintaining a large inventory in expectation of demand. Similar systems have also been constructed to send out multiple requests to vendors when an order is placed” (Epiq 2010). This collaboration through the use of information technology systems allow both vendor and supplier to reduce costs, respond faster to market demands, and ultimately increase profit margins. Although many smaller retailers are still using outdated methods to manage their supply chain systems, numerous large scale retailers have embraced technology and continue to use it as a competitive advantage. Wal-Mart is a well known big box retailer who has successfully implemented technology into their supply chain system to gain an advantage over other competitors. “Wal-Mart’s legendary supply chain technology has allowed them to break the three-day barrier that some economists in the eighties felt were largely unbreakable. In other words, Wal-Mart is often able to replenish items on the Wal-Mart shelf in less than three days – not from the central warehouse to the shelf, but from the manufacturer to the shelf. With quick and reliable 2-day turn around, Wal-Mart is able to maintain lower levels of inventory and still meet customer demand.” (ASA 2010). Wal-Mart is able to achieve this high rate of efficiency and low turnaround time by requiring all of their suppliers to update their inventory systems to be compatible with their own. This ensures uniformity and creates a vendor-supplier relationship that revolves around transparency and efficiency. In doing so, Wal-Mart electronically communicates with its suppliers as soon as an item is sold from a shelf, that way suppliers know when a restock is needed. Technology is also used to streamline expenses dealing with transportation costs and inventory holding costs of their products. Automated computer systems located at strategically placed shipping hubs automatically place the correct pallets onto the correct trucks for shipping (ASA, 2010). By using computer systems to plan efficient delivery routes and methods, Wal-mart is able to cut their operating costs, minimize the amount of inventory on hand at any given time, and at the same time reduce their carbon footprint. Although many businesses have implemented various technologies to better manage supply chain systems, one technology has the potential to change the way goods are tracked throughout supply chains. One specific, more recently integrated technology that will greatly benefit the supply chain concept in the near future is the use of Radio Frequency Identification, also known as RFID. “RFID is a system of small electronic tags (comprising a tiny chip plus an antenna) that transmit data via a radio signal to RFID readers and related hardware and software infrastructure. The transmitters can be placed anywhere to track the movement of goods that add value to the commercial process: on containers, pallets, materials handling equipment, cases or even on individual products. The information on tags is read when they pass by an RFID reader, and that movement is captured and managed by the infrastructure. In this way, organizations are able to keep track of every product without physically having to be there” (AME 2005). By being able to track individual goods electronically, supply chain managers are able to direct the flow of goods to all vendors/suppliers using one central computer system. This decreases the manpower involved and greatly increases efficiency. “RFID has the potential to improve efficiency and visibility, cut costs, deliver better asset utilization, produce higher quality goods, reduce shrinkage and counterfeiting, and increase sales by reducing stock outs. Although these benefits may sound appealing, the implementation of RFID is costly” (AME 2010). Only a few retailers such as Wal-Mart and American Apparel have had enough funding to integrate RFID into their supply chain systems (Kazim 2010). While the benefits of integrating new technologies in supply chain systems are many, there are two main drawbacks to consider: resistance from vendors and resistance from employees within the organization. “Suppliers of goods are often hesitant to jump onboard because of the initial costs involved in setting up their own end of supply chain management system and because most vendors do not have a trusting relationship with their buyers. To overcome this obstacle, the strong relationship must be present and the seller needs to be able to see the profit potential on their end of the arrangement” (Epiq 2010). Although it is costly, implementation of new technology systems by suppliers would ensure their success in the long run by increasing vendor-supplier information sharing. As the popular saying goes, change is bad, especially when dealing with computer systems within an organization. In order to integrate a new technology system in an organization, employees must be trained and responsibilities will undoubtedly shift. This poses a problem as not many employees want to learn new systems and do more work. “Plus, software mistakes, which are inevitable at the beginning, may cause other employees to lose faith in the system altogether. Employees need to trust the system, the company, and their ability to use the program if they are going to adopt the supply chain management software/hardware” (Epiq 2010). Technology is a huge factor in supply chain management systems in the 21st century. With innovation in mind, every organization strives to minimize costs while maximizing profit and information technology is the number one tool to streamline supply chain systems. Every retailer has a supply chain, but not all utilize technology to their advantage. By using supply chain management software and updating their hardware systems, retailers would be able to communicate with suppliers quickly, share information more efficiently, respond quicker to market demands, and thus ensuring cost minimization and profit maximization. References Accounting Software Advisor (ASA,) Supply chain: wal-mart sets the standard for supply chain automation. (2010). Retrieved October 1st, 2010 from http://www.asaresearch.com/ecommerce/supplychain.htm This article provided information on Wal-Mart and the specific strategies implemented within their supply chain system. It explains how Wal-Mart uses technology in their supply chain system to reduce response time when restocking shelves on their retail locations. Uses of technology in shipping and other logistics functions of a supply chain are also discussed with Wal-Mart as an example. AME Info. (2005, August 21). How RFID can help optimise supply chain management. Retrieved October 1st, 2010 from http://www.ameinfo.com/66090.html This article gives basic information on the radio frequency identification technology and what its comprised of. Advantages of using RFID in supply chain systems are discussed with emphasis on retail stores rather than service industries. Cost and benefit of RFID integration are also analyzed. Angulo et al., 2004 A. Angulo, H. Nachtmann and M.A. Waller, Supply chain information sharing in a vendor managed inventory partnership, Journal of Business Logistics 25 (1) (2004), pp. 101–120. This journal article describes the role information sharing plays in specific partnerships where the vendor manages the inventory, instead of the retailer. It stresses how important communication is in a vendor managed inventory system in regards to market response. Also costs associated with holding and replenishing inventory are discussed with emphasis on information sharing via technology. Clark, T. H. and Lee, H. G., “Performance, Interdependence, and Coordination in Businessto- Business Electronic Commerce and Supply-Chain Management,” Information Technology and Management, 1, 2000, 85-105. This journal was useful in providing information concerning the importance of communication and its role in the success of supply chain systems. This particular journal did not focus on technology directly, but rather emphasized the role of transparency and coordination in supplier and vendor relationships, which in the end is improved by the use of information technology systems. Epiq, Tech. (2010). Supply Chain: Supply Chain Technology. Retrieved October 1st, 2010 from Supply Chain Technology: http://www.epiqtech.com/​supply_chain-technology.htm. This online article describes the relationship between technology and supply chain systems. It broadly examines the role technology plays in managing a supply chain for retailers. Ways of using technology are discussed with additional information on the benefits/drawbacks that come with technological applications. Kazim Sari, Exploring the impacts of radio frequency identification (RFID) technology on supply chain performance, European Journal of Operational Research, Volume 207, Issue 1, 16 November 2010, Pages 174-183, ISSN 0377-2217, DOI: 10.1016/j.ejor.2010.04.003. This paper provided basic information on RFID technology and what it entails. The larger part of the paper however, provides insight for managers of a supply chain system to determine the appropriate operational and environmental conditions under which investing in radio frequency identification (RFID) technology is more beneficial. RFID can be expensive to implement, especially in an already existing supply chain system and most times the cost of implementation can outweigh the benefits. Seidmann, A. and Sundararajan, A., “Sharing Logistics Information Across Organizations: Technology, Competition, and Contracting,” in Information Technology and Industrial Competitiveness, C. Kemerer (Ed.), Kluwer Academic Publishers, 1998. This book discusses how information sharing through technology is a large part of logistics planning in a supply chain system. It emphasizes the competitive advantage a good supplier-vendor relationship can bring to an organization striving to maximize profit. Information technology is viewed as a key tool in sharing information dealing with the planning and execution of logistics functions in an organization.